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Before ditching atcl take a look at gulf air

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by ByaseL, Jun 7, 2010.

  1. B

    ByaseL JF-Expert Member

    Jun 7, 2010
    Joined: Nov 22, 2007
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    If there is an airline that has recently undergone a complete metamorphosis, it is Gulf Air (GF). The 60 years old airline, once a beacon of success where similar multinational aviation regional projects failed, GF had all it takes to excel- money and the will. The former shareholders of GF are who's who of this world. Abu Dhabi, Oman, Qatar and Bahrain. These countries are filthy rich and no pushovers who can take World Bank's directives just like our Banana Republics do. But this is all history because GF, once a formidable international airline contender has been cut to size and now looks like a shadow of its former self. However, GF has somehow cheated death. Similar regional aviation projects collapsed. Examples abound. East African Airways, once a byword for East African renaissance collapsed in the bigger scheme of the East African Community political fallout. Air Afrique, also a joint airline of a cabal of some West African states crumbled amid acrimony amongst member countries.

    The going was very exuberant for the Bahrain based GF until late 1990s when some member countries started foot-dragging when GF came calling for additional funding. The shareholders were spooked by the way the airline was being run. Also the success of Emirates Airlines (EK) did not help matters as some GF shareholders started getting other ideas. Spendthrift Abu Dhabi rolled out its own "toy" namely Etihad Airlines while Qatar started grooming Qatar Airlines. Although Oman initially didn't quit from GF project, it nevertheless, went ahead to form Oman Air but has now formally withdrawn from GF venture leaving Bahrain to go solo. What is worth noting here is that all these financially nourished airlines are competing with GF and have actually rooted it out of many markets like Africa.

    With a wobbly airline, Bahrain has now gone back to the drawing board to re-define GF's mission within the Middle East aviation landscape. Under a new Chief Executive, Samer Majali, GF once a regional aviation powerhouse, is now positioning itself to become a regional player putting more emphasis on serving points in the Middle East and leaving EK, et al to tussle it out on the intercontinental arena. This boils down to GF becoming a feeder airline in the region. A far cry from what the "old" GF used to be or as one aviation pundit quipped ‘it is just like from being a king to a jerk."

    "Through the strategy we are serving secondary points that are not well served out of the Middle East. We think we can get in there and get a competitive advantage" says Mr.Majali in the Airline Business Magazine. He continues "The mandate is to make the airline commercially sustainable but without the price tag for the Bahrain government." In other words, it's not a blank cheque for GF.

    The aim is to provide key cities in the region with adequate frequencies geared at promoting business trips and in this regard Iraq is a key target. Since smaller routes need smaller aircraft, GF is already in the process of overhauling its fleet by reducing its wide body aircraft and acquiring single isle Airbus aircraft including leasing in two Brazilian made Embraer 170 aircraft and more still on the horizon. With this strategy the airline has been able to achieve 80% of its business originating in the Middle East and expects to breakeven and probably hit profitability by 2012.

    Although it is very difficult at this point in time to determine whether GF is home and dry as far as this strategy is concerned, the gut feeling, however, is that the airline is on the right track. The Middle East skies are crowed with many long-haul airline players and it is just right that GF has chosen to re-examine its strengths and weaknesses and position itself accordingly to be able to eke out a meaningful and sustainable role in the region.

    In my opinion, GF's experience is food for thought for Air Tanzania Company Limited (ATCL). Let us sober up. The Government of Tanzania's (GoT) objective to make ATCL an international airline like Kenya Airways is a bit far-fetched given the financial constraints especially in the short term. Under the current circumstances ATCL can at best function as a domestic-cum-regional airline and at worst as a long haul carrier. Previous attempts to go intercontinental have all but ended in futility. It is only logical that the giraffe-tailed airline change tack and for the next ten to fifteen years refocus its strategy purely as a domestic-cum-regional airline because of the following reasons;

    First, despite talks about getting a strategic investor, facts on the ground are that it is a very tall order indeed to get a serious investor with deep pockets to turnaround ATCL to an international hallmark. It is easier said than done. South African Airways tried and burnt its fingers and despite China Sonagol Holding Company's (CSHL) posturing, it is increasingly becoming crystal clear that it will not come to the party. Truth is, with the current aviation crunch there aren't many eligible suitors out there.

    Second, because of technological development, it is now possible to build a reputable regional airline with relatively low investment. The jet mania days of yesteryear are long gone as far as regional operations are concerned. New technology available now is that it is possible to have a turbo-propeller engine aircraft like a Bombardier Q-400 with extended range and almost same speed like a jet aircraft. Needless to say that the Q-400 is cheaper to acquire as well as cost competitive compared to new generation jet engine aircraft.

    In essence this means ATCL should rethink on the way forward and evolve a Phoenix plan and execute a strategic roadmap as follows; firstly, to consolidate its domestic network. With two Dash-8-300s aircraft currently in service and two more Dash 8-200s (30 seater) aircraft additions, ATCL would comfortably serve the whole country by spreading its tentacles to tertiary markets like Pemba, Songea and far-flung places like Bukoba.

    Secondly, on the regional scene ATCL should ditch the fuel guzzler B737-200 aircraft in favour of Canadian made Bombardier Q400s aircraft. Two of these will be adequate for an extended regional network including Nairobi, Entebbe (Juba, Sudan can be tagged on Entebbe), Comoros, Lubumbashi (DRC), Lilongwe, Lusaka, Bujumbura and Harare. This will entail swallowing its pride and foregoing Johannesburg for a while and put Dubai on ice infinitely.

    And where will the money come from? For starters there is about $2.9 million being held by Bombardier and Airbus as deposit for slots for new aircraft. Two Q-400, two A319 and two A330 aircraft courtesy of CSHL. Now that both deals seem to have fallen through, let the GoT engage CSHL to let go of this money and ask the manufacturers to release it to ATCL. GoT should then top up and go shopping for either new machines or used ones. After-all there are so many such aircraft parked in the USA deserts (eleven Q400 have been ditched from Republic's fleet) waiting for takers. ATCL should learn from GF.

    Byase Luteke

  2. G

    Geza Ulole JF-Expert Member

    Jun 7, 2010
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    you forget the fortunes can not turn around if the politician will keep nominating the CEOs let the company go privately with the GoT retaining a significant shares before floating them to public! acompetitive bidding process should choose who to run the company
  3. Safari_ni_Safari

    Safari_ni_Safari JF-Expert Member

    Jun 7, 2010
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    And the Arab rulers are not having 'stong hunger-njaa kali' like ours.......