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Will Somalia Airlines return?

BY Martin Rivers

A state-owned national airline is regarded as a physical demonstration of statehood, promoting national prestige, pride and a symbol of modernity. Somali Airlines seemed poised to make a triumphant return to the skies in November 2013, when a Boeing 737- 400 painted in the flag-carrier’s distinctive blue livery was photographed in the Hungarian capital Budapest. Somali government officials confirmed at the time that the national carrier, which ceased operations in 1991, was about to make a comeback.

Despite the encouraging signs, however, weeks gradually turned into months and the aircraft failed to make its much-anticipated debut in Mogadishu. It was subsequently purchased by Spain’s Swiftair and converted into a freighter, dashing any hopes of the flag-carrier’s imminent rebirth. While the false start was disheartening, Somali aviation experts continue to talk of resurrecting their cherished national icon. Mohamed Mohamud Guled, the airline’s longstanding Chief Executive, is the man overseeing these efforts.

Currently, Somali Airlines is looking for investors, “Three companies have expressed interest in being a shareholder. We are studying their proposals. There is a chance in the coming month or two something will happen. But we have to do it step-by-step and carve ourselves a niche. It is challenging and it will take time to make a comeback,” notes Guled.

Calls to resurrect the flag-carrier intensified after Kenya temporarily suspended flights between Mogadishu and Nairobi in June, isolating Somali travellers and exposing their dependence on foreign aviation airlines. With their own flag-carrier back in operation, Somalis would, in theory at least, regain sovereignty over their freedom of movement.

Guled was put in charge of Somali Airlines in 1983 during the flag-carrier’s heyday, when it employed 700 staff and flew to destinations as far afield as Rome and Abu Dhabi.

Italy’s Alitalia had helped found the company as a joint venture in 1964, later selling its shares to the government. During 1970s, a commercial deal was struck with Germany’s Lufthansa to provide maintenance services and turning Frankfurt into the main European gateway for Somali travellers.

According to Dr Joachim Vermooten, a South African transport economist, the flag-carrier needs to rekindlethis focus on international cooperation if it is to have any chance of success. Citing the limited scale of Somali traffic flows, he believes teaming up with a larger network carrier in the region would be the most prudent strategy.

“The development of large hubs in the Gulf countries provides an opportunity to link a smaller scale of operation into one of these hubs, which can then provide international long-haul connectivity for travellers to and from Somalia, as opposed to rolling out many direct services from a zero-support base,” Vermooten explains.

This implies a moderate scope of activity with lower financial exposure. In the past, contrary to today, it might have been possible to operate long haul direct flights with smaller equipment and still make economic sense. In the modern marketplace, only a handful of airlines have the economies of scale and financial wherewithal to operate large inter-continental networks profitably. Their massive fleets and route networks have set the standard for pricing, service quality and convenience, making it near impossible for smaller rivals to compete effectively.

The need for a big brother to lean on is underscored by the financial hardships facing many African flagcarriers. Kenya Airways posted its biggest ever annual loss at the end of July. South African Airways continues to lose money despite a series of turnaround strategies. Many others like Gambia Bird, Air Nigeria and Zambian Airways have closed shop in recent years.

A resurrected Somali Airlines must therefore tread carefully when building up its route network. Although sufficient demand exists for a nonstop Mogadishu- London service, for instance, the flag-carrier would struggle to make the route commercially viable. Its relatively high cost base would result in ticket prices that are uncompetitive with rivals such as Emirates Airline, Turkish Airlines and Kenya Airways.

Rather than going head-to-head with these regional goliaths, Vermooten believes Somali Airlines would be better off focussing on short-haul connectivity while maintaining one medium-haul trunk route to the hub of an overseas partner. Commercial agreements could spread risk on the trunk route, while the foreign partner could provide technical and operational assistance to Somali Airlines during its fledgling years.

“With so many excellent airlines in the region it may be advantageous to subcontract airline services to one of these airlines or develop new services on a contractual basis until volumes increase to a sustainable mass,” Vermooten says, acknowledging that the flag-carrier would relinquish some independence under this strategy.

Guled concurs on the need for caution, insisting that Somali Airlines should initially prioritise low-capacity, short-haul routes that are less costly to operate. “The aeroplanes that we think are most feasible now are 50-seater propeller planes for domestic services, not jets, and for regional services maybe 150-seaters,” he recommends. Aircraft should be leased rather than purchased in order to minimise capital outlays.

Although the long-term plan envisages the launch of European and possibly Canadian services, the airline boss further cautions, “We must first see how successful the regional flights are. Only then could they go international.”

It is a strategy that several other small airlines have adopted: Focusing on the regional footprint while developing a strategic inter-continental feeder service. Air Namibia, for example, operates entirely within southern Africa except for one long-haul flight to Frankfurt. In

Afghanistan, Safi Airways deploys four out of every ten flights to Dubai.

For Somali Airlines, the existing daily service flown by Turkish Airlines between

Mogadishu and Istanbul presents an obvious opportunity for long-haul penetration. The two flag-carriers could share commercial responsibility for the route, either by deploying aircraft on alternate days or by signing codeshare agreements whereby Somali Airlines markets and sells tickets for Turkish Airlines. As yet, however, Turkey has not shown interest in assisting with the re-launch of Somali Airlines. Ankara already has its hands full with several other projects in the country.

Before finalising plans for the route network, Guled must first secure investment, “At this time I don’t think the government has sufficient finances,” he admits, “We are working on a public-private partnership.”

Although these investors would need to finance the start-up in full, Guled left open the possibility of loan repayments further down the road. He singled out banks as the preferred partners, perhaps aware of the West African Development Bank’s stakes in ASK Y Airlines and Air Cote d’Ivoire.

Asked about the overall viability of the project, Vermooten maintains his cautious tone by emphasising the heavy financial burden of setting up an airline. Even with the best management team in the world, costs can quickly skyrocket.

“Apart from major start-up losses, airlines always require more funding for updating systems, in-flight entertainment, seats, newer aircraft, training, technology and expansion,” he says. These factors demand a direct access to capital markets that has to be weighed against other government funding requirements.

Somalis must ensure that their aviation dreams do not, inadvertently, trump more pressing economic priorities. Due care must also be taken not to undermine the private sector. Local operators such as Daallo Airlines have performed admirably during Somalia’s lost decades, keeping the country connected without eating up public funds. Any attempt to shield Somali Airlines from competition by restricting growth in the private sector or by blocking the entry of foreign carriers would be ill advised. In the long-run, such protectionism would dilute the positive contribution that civil aviation makes to Somalia’s recovery.

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