DAKAR (Reuters) - Gervais Djondo is a man with a dream.
The former industry minister of the west African state of Togo has set himself a mission to create a pan-African airline serving the continent, an elusive goal since a previous venture, Air Afrique, collapsed under a pile of debt in 2002.
Africa's aviation market is set to soar in the coming years, powered by the resource-rich continent's robust economic growth and burgeoning consumer market, which are multiplying business and leisure travel. Big airline manufacturers are eyeing potentially buoyant orders, as Africans increasingly turn to air travel.
Inspired by the memory of Air Afrique - a once proud name in post-independence Africa that combined the resources of a dozen or so former French colonies - Djondo has set up a privately financed Togo-based airline, ASKY, which made its first flight in 2010 and now flies to 17 countries in Africa.
"The plan in the short to medium term is to develop a strong airline for ... Africa in general, in an environment characterized by a multiplicity of small companies that appear and disappear within a few years," Djondo told Reuters.
But the challenge facing him and other African aviation entrepreneurs is how to make headway in a tough and unforgiving market, where a jostling herd of small national flag carriers and private companies struggle to compete with global airline giants that control 70 percent of air traffic to the continent.
"It is a savagely competitive business, especially on the supply side, so small is generally not good," said Mark Tierney, CEO of Dublin-based Crabtree Capital, which specializes in aviation and corporate finance services.
This means most African airlines lack economies of scale, face high unit costs and do not have adequate access to funding to finance fleet operations, Tierney added.
Djondo and others believe the way forward is for African carriers, instead of trying to compete with each other and jealously guard their national markets, to combine their resources and create a consolidated service or network.
This is the only way they can hope to take on the airline majors from Europe and North America, and increasingly Asia and the Middle East, which are using their reach and muscle to dominate African skies at the expense of local carriers.
"African airlines companies would benefit if they pool their fleets to create a large group with substantial resources and a significant market share to compete with the European giants," said Abidjan-based regional aviation analyst Moussa Diabate.
"The future is in consolidation," he said.
Djondo pointed to the examples of South African Airways, Ethiopian Airlines and Kenyan Airways, which have successfully expanded their presence on the continent and further afield, especially Kenyan Airways, through its partnership with Air France-KLM.
"Why would we not do the same in west and central Africa, with maybe two strong companies which cover Africa and international routes?" Djondo said.
FRAGMENTED MARKET, SAFETY ISSUES
But this is a difficult message to preach on an immensely diverse continent of more than 50 nations, where, since the demise of Air Afrique, most countries still prefer to have their own flag carrier out of national pride.
An agreement reached some two decades ago to liberalize African skies, known as the Yamoussoukro Decision, has not prospered because most nations guard their airspace to protect their national carriers. Even if they do not have one, they do so in the hope that one day they will.
This means that Djondo's Togo-based ASKY, whose fleet of five aircraft operates about 154 weekly flights in Africa carrying 8,000 passengers a week, finds it tough to make headway in a very fragmented market where it is mostly seen as a direct competitor rather than a partner.
In west and central Africa, it is already competing with Cameroon's newly relaunched national carrier Camair Co, Senegal Airlines, the Celestair group comprising Air Mali, Air Uganda and Air Burkina Faso, Nigeria's Arik and Air Nigeria.
Ivory Coast's relaunched Air Cote D'Ivoire intends to join the fray in July, partnering with Celestair group. But some feel this may be a quixotic exercise that will struggle to succeed.
"The fact that each country is trying to create its own airline is not the right approach because African states do not have the means to maintain a functioning airline," said a technical advisor at the Ivorian transport ministry, who spoke on condition that his name not be published.
He said most African airline initiatives had average lifespans of only three to five years.
"Most of the time, they are blacklisted and cannot fly to Europe, thus doomed to fail because they cannot make money on domestic or regional routes only," the official said.
Safety concerns remain a challenge for Africa, highlighted most recently by the crash of a Nigerian Dana Air passenger jet in Lagos on Sunday, with the loss of all 153 people on board. It was Nigeria's worst air disaster in 20 years.
African air companies top the list by far of air carriers banned within the European Union.
Although the International Air Transport Association (IATA) says Africa saw an improvement from 2010 to 2011, the continent's accident rate is still the worst in the world.
PLANE-MAKERS SEE RISING ORDERS
"The problems of Africa are complex and include both insufficient government oversight and lack of infrastructure investment," IATA's Director General and CEO Tony Tyler said in March, when he announced the industry's global accident rate in 2011 for Western-built jets was the lowest in aviation history.
But the potential of the African market is not in doubt. IATA has forecast Africa's total air traffic to grow by 7.3 percent in 2012 and stay over the 6 percent yearly growth range through to 2015, slightly above world average.
Africa is a treasure trove of the world's most prized resources, including gold, platinum, iron, oil, cocoa and timber, and this is attracting investments which in turn are galvanizing business and boosting air travel.
The world's plane-makers have the continent on their radar.
In its long-term market outlook for 2011-2030, Boeing forecast the total African airlines fleet will nearly double to 1,210 from 680 in the period, with about 64 percent of those new purchases being new planes worth about $100 billion.
"Africans are turning increasingly to air travel, as road and rail infrastructure remains underdeveloped," Boeing said in its forecast. "The resulting boost in demand for airplanes has generated firm orders ... and created a favorable climate for aircraft leasing companies."
European rival Airbus agrees, saying Africa will see 1,101 new passenger aircraft deliveries in the 2011-2030 period, representing a 4 percent share of world deliveries.
JOSTLING FOR A SHARE
With an eye on Africa's healthy growth, some international airlines are also ramping up their service to the continent.
Air France-KLM, the leading European carrier flying to Africa, said in March it planned to increase its available seat kilometers (ASK) - which airlines use to measure passenger carrying capacity - to the continent by 5.4 percent this summer, servicing over 40 destinations.
Brussels Airlines, part of Germany's Lufthansa group, has increased the number of flights to African destinations this year from 14 to 21.
In addition, several Middle Eastern and Asian carriers such as Emirates , Etihad, Cathay Pacific and Turkish Airlines now fly to the continent, as do China Southern, China Eastern, and Hainan Airlines, which all have plans to expand there, the African Airlines Association said in a report.
In contrast, Cameroon's newly relaunched national carrier, Camair Co, posted a 9 billion CFA franc ($17.15 million) loss in its first year of operation, which its CEO Alex van Elk attributed to difficulties in regaining passenger confidence amid the fierce competition from international carriers.
Djondo is determined to grab a piece of this African market and believes keeping his ASKY airline in private hands and mostly financed by the private sector is one of the ways to avoid the government interference and lack of financing that eventually knocked Air Afrique out of the skies in 2002.
Air Afrique was a partnership between Air France and about a dozen former French colonies in west and central Africa.
Djondo's group has raised an initial $120 million capital mostly through the private sector, with the participation of pan-African bank Ecobank , the West African Development Bank, investment arm of the regional central bank, and Ethiopian Airlines , which holds a 40 percent stake in ASKY.
"Our ambition remains unchanged," he said. "To establish a strong African airline company owned by Africans."
($1 = 524.9340 CFA francs)
(Additional reporting by Helen Nyambura-Mwaura in Johannesburg and Loucoumane Coulibaly in Abidjan; Editing by Pascal Fletcher, Alastair Macdonald and Will Waterman)
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Public release date: 15-Jun-2012
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