National Airways Corporation (NAC) is Africa's largest general aviation company. Ian Sheppard visited its Lanseria Airport base near Johannesburg and found that it is also one of Africa's most diverse aviation companies.
NAC has an illustrious history in African aviation dating from 1946, recounted JP Fourie, one of the company’s Executive Directors.
He told African Aerospace that Lanseria has become very expensive as a GA base, driven in part by the growing presence of low-cost carriers Mango and Kulula. “The airport has changed and its whole business plan has changed. It’s now around passengers and low-cost carriers,” he said.
Gary Phillips, Helicopter Sales Director said: “Historically we were a very strong aircraft sales company, but our main focus has changed to operations, including international contracts and charter flying. We are authorised sales partners for TBM Daher, dealers in aircraft from Eclipse Aerospace and Robinson Helicopters, as well as authorised distributors for Piper Aircraft and an independent representative for Bell Helicopters. Our relationship with Dassault allows us to sell their technologically superior Falcon jets to selected prospects across the African continent. In addition we hold resale relationships with several United States, and other international organizations, which give us a continuous source of the finest pre-owned aircraft.
“From an experience perspective we are one of the most versatile in Africa,” said Fourie. “And w have a very large and diverse fleet,” added Phillips. This includes several Beech 1900s but also helicopters, for instance operating in Brazzaville, in the Republic of Congo. These operate government flights under a contract with a local operator.
“But our business is not just based around the aircraft we own,” said Phillips, who added that NAC has 140 aircraft on its air operator’s certificate (AOC). Some are leased from owners, current examples being Embraer 120’s and 145’s, Gulfstreams, Challengers, Hawkers, King Airs and Learjets.
“Our contracts are of such a varying nature you can’t bind yourself into one aircraft type e.g Beech 1900Cs and Ds,” said Fourie. He added that NAC has over the years “bought, refurbished and redeployed” around 250 Beech 1900s – about one third of the aircraft ever manufacture NAC is indisputably the specialists in Beech 1900 sales and refurbishments, and this initiative was led by industry stalwart, Nigel Forrester.
Fourie noted that there were “two really different worlds” in African flying. “South Africa is largely first world in terms of infrastructure, but the rest is broadly third world, but quickly developing.”
He added that “Up the sides of Africa, you have pockets of significant air activity, invariably where the least infrastructure is and where our services are required.”
Ad hoc charter work is local or international, with the largest aircraft being typically something like a Gulfstream GIV”, said Phillips. A common use would be when a presidential flight from somewhere in Africa is “hiring in additional lift”.
So where will demand come from over the next few years? Fourie reckoned Nigeria was “really taking a beating” due to low oil prices but that Congo is “the rough diamond that will really be the place [where demand comes from].” However, they said that South Africa “remains the economic powerhouse [of Africa] with its banking and finance sectors.”
Fourie said that the sales market remains sadly depressed, compared to our previous ten years of trading – “even on smaller aircraft”. There were “very few sales at the moment, even on smaller aircraft.” All of us in the industry in Africa need to be more creative and offer bespoke solutions to conclude deals with reasonable margin, often assuming much higher risk than before.
He gave an example of the tough trading environment where a customer ordered an Embraer Legacy 500 which would have cost ZAR 147 million ($9.5 million), but now it is ZAR 250 million ($16 million). This is a customer that wants to upgrade from another Embraer product but they are reviewing their delivery position “because of the massive currency depreciation, and price impact.”
Another client purchased a Bell 407 but the cost of ZAR 50 million ($3.25 million) makes ita lot of money for a seven-place helicopter to a local buyer,” said Phillips. “It’s twice what it was a few years ago and the [US] dollar price hasn’t doubled in that time.”
Phillips said that NAC deals mainly in US Dollars and Euros, as many of its aircraft were “operating internationally”, and had a Rand cost base as crews and other employees were mostly resident in South Africa. Thus the company has not been so exposed and has seen relief on costs.
“But one thing we’ve struggled with”, said Fourie, “is that the cost of new aircraft, even in dollar terms, is increasing and the Rand currency depreciation rate is increasing too – so it’s a divergent curve,” “It’s a problem all the Brazil, Russia, India, China and South Africa (BRICS) economies are facing.” “What can make it even worse again”, he added, “was when costs were denominated in dollars too, which is the case in countries such as Gabon, where they also operate.
He said that the drive to lower costs in the face of strong currencies overseas and increasing prices was seeing “lots of old aircraft ending up here in Africa”. In the Rand, the depreciation over the past five years has been 100% - similar to the Brazilian Real. “Manufacturers don’t fully realise this dilemma” said Fourie, “they are pushing fewer aircraft out and putting prices up and we don’t think this is sustainable in these markets where they hope to see growth off a low base.”
He also pointed out that it was even harder to make things work when interest rates were 10.5% rather than the 2-3% it is in the US. And, for the likes of NAC, it is harder as more manufacturers are trying to sell direct and bypass dealers in an attempt to recover much needed margin.
Another issue in Africa is how few people can afford aeroplanes anyway. “It’s a miniscule number. So irrespective of all the economic factors, there are very few potential buyers,” said Fourie. The continent’s average gross domestic product (GDP) per capita is $1,200 and there are fewer than 100,000 USD millionaires on a continent with more than a billion inhabitants. “So countries are coming off a very low base with less than 0.01 percent of the population being realistic owners.”
“If I had to characterise our customers, they are mostly successful entrepreneurs rather than large corporations, and the individuals tend to be in aviation anyway, and are enthusiasts.”
Another issue with Africa is its enormous size, said Fourie, and the fact that people from outside don’t realise this. “The US fits inside it three-and-a-half times,” he explained. “Suppliers and manufacturers don’t realise how vast the distances and associated challenges are.”
Fourie said that NAC was one of the founding members of the African Business Aviation Association (AfBAA) and that AfBAA has done a fleet study unique to Africa using the JetNet database. “Everyone says that Africa is this massive growth market but there were only six African registered new business jets delivered in the whole of Africa in 2014, out of 685 worldwide. That’s a tremendously low number.” He added that there were only 12 new helicopters delivered – although some aircraft came in on foreign registers or were leased. “But it’s hard to see a real market at this stage,” said Fourie.
On the flip side, he admitted that “aircraft are essential to operate in Africa – although the cost of deploying these assets is unheard of.” Comparing this to the commercial airline side, he said: “Those guys will grow,” as there is demand to move more people.
“But the business aviation market is not there yet. If oil goes to $75-80 [a barrel] we’ll see a splurge again but it won’t be in massive numbers.”