in Air Transport / Features

The rise and rise of Asky Airlines… with more to come

Posted 6 September 2016 · Add Comment

Five years after launching operations, Asky Airlines made history last year by recording its first profit. Now the airline is unveiling exciting future plans. Kaleyesus Bekele met CEO, Henok Tefera, to find out more.

 

Henok Tefera is a man of true ambition. As CEO of what is, arguably, west Africa’s most successful start-up airline, he might have been forgiven for wanting to rest on his laurels just a little.

Not a bit of it. When I spoke to him at the company’s HQ in the Togolese capital of Lomé, I found a man inspired, not only by what had been achieved, but also by the possibilities for the future.

“We have a five-year plan, which takes us up to 2020,” he explained. “Last year we carried about 500,000 passengers, this year we hope to carry 600,000 and, by 2020, we want to double that number.

“Today we have eight aircraft; by 2020 we plan to operate 12, including long-haul fights to Europe and the Middle East.

“By 2020, along with our strategic partner, we plan to make Lomé a hub, not only for air service but also for aircraft maintenance and aviation training.”

It is a big, ambitious plan but if any company can achieve it, it is Asky.

The pan-African airline was established by the west African private sector, in collaboration with its strategic partner, Ethiopian Airlines, in 2008. It launched operation in 2010.

Already it serves 23 destinations in west and central Africa, operating more than 100 flights per week. In Africa many start-up airlines cease operation within a few years but Asky has broken that mould, reaping its first profit in 2015.

“We are essentially a sixth freedom carrier connecting the people of west and central Africa through Lomé, our main hub,” explained Tefera. “Over the course of the last six years we have proven that we are a reliable air service provider for the region. There was a need for this after the demise of Air Afrique in 2002. We have managed to fill that air connectivity gap.

“In this region, air connectivity is critical because west and central Africa is highly integrated. You have more trade and more business-to-business relationships; you have more social interaction and, generally, you have more movement in this region than elsewhere in Africa.

“On average, trade within African countries is around 12-15%. Here it is more than 20%. There is free movement of people. Anybody who is a citizen of the region can travel throughout the Economic Community Of West African States (ECOWAS) countries. So there is high degree of mobility.

“After the demise of Air Afrique, people often had to go to Europe to connect to their African neighbours. In order to fill that gap Asky, with its pan-African vision, based on a solid business model and supported by Ethiopian Airlines, was established.

“Now, after six years of operation, we can say that we have attained all our goals. In 2015 we became profitable for the first time for this region – an airline able to drive a profit margin. We do not know any airline that has managed to become profitable. So it is a big milestone for us, and also for aviation in west and central Africa. It proves that the business model was right and that the strategic partnership established with Ethiopian Airlines was the right one.”

That partnership with Ethiopian has been critical to Asky’s success.

“The airline’s founders were inspired by Ethiopian’s pan-African vision,” said Tefera. “Basically, Ethiopian is an equity stake owner in Asky. We have aircraft maintenance agreements with them as well as our commercial cooperation. We are a small airline and you need a strong partner, both with financial muscle and technical capability, in an industry that is capital intensive and scale driven.”

Asky currently serves as a feeder for Ethiopian for flights to Sao Pole, Brazil.

“In July, Ethiopian will start operations to New York through Lomé and we will bring the full force of our 23 destinations in the region to connect with them,” said Tefera.

A new state-of-the-art passenger terminal has been built in Lomé. “Our long-haul passengers will benefit from this modern airport terminal. The facilities are there and our network has been synchronized with Ethiopian’s, so that passengers coming from west and central Africa to Lomé will have a minimum one-hour layover before they can connect to the New York flight.

“It will give Togo a boost because it will have a connection with New York and, by so doing, we will be facilitating trade and tourism investment flows between west Africa and North America. There is huge west and central African community in the New York metropolitan area, so it will also enable a faster, more reliable and affordable access to people’s countries.”

In addition to its Ethiopian links, Asky also has numerous agreements – both internal and codeshare commercial – with many other airlines.

“We are always seeking to expand,” said Tefera. “We have more than a dozen agreements in place.

“We don’t consider other African carriers as competitors because the market in Africa is under served and, if you look at the long-haul market to and from Africa, it is dominated by non African carriers. So, we believe in creating synergy and working together, harnessing each-other’s strength. That is what we are doing with a number of African carriers.”

Another big boost for the airline was the receipt of the International Air Transport Association (IATA) operational safety audit (IOSA) last year.

“This is a testimony to the safety and reliability of our operation. It was a big plus factor in terms of passenger and customer confidence – especially institutional customers. It has been a significant boost to our commercial operation,” said the CEO.

Currently Asky operates a fleet of Boeing 737-700 and Bombardier Q400 turboprop aircraft, but it is soon to introduce a new B737-800.

“The B737-800 would be much bigger capacity and would enable us, not only to serve the growing demand in the region, but also to tap into the long-haul market, because we have a plan to start services out of the region,” said Tefera.

“The African market in general may be thin and fragmented but we have the strongest markets in this region. Remember that you have Nigeria, which is the biggest market of all, and you have big economies such as Ghana, Côte d'Ivoire, Senegal and the Democratic Republic of Congo. So this is the region where west and central Africa is a big chunk of the African market.

“There will be traffic and growth because these countries are growing. There is a direct relation between gross domestic product (GDP) and passenger growth. Air connectivity is essential to fulfil this growing need, both in terms of the people movement and because of increasing tourism trade and investment ties.

“We have now established an extensive regional network with 23 destinations. These are served with a daily flight service. Our plan is to have non-stop daily destinations to all the markets we serve in the region.

“Route deepening is one critical element and, secondly, we want to open routes to destinations we do not serve like Praia on Cape Verde and Mauritania.

“After we cover the west and central region, the next phase would be long-haul flights outside of the region to the main markets, mainly in Europe.

“Paris and London are the big markets. Johannesburg and Beirut are in the second phase. Paris is big for French speaking countries and London for the English speakers. So, as we move on, we will go to these markets, because it is important as a carrier with a pan-African vision to provide an affordable and reliable service outside of the region.”

Asky’s success story has not been without blips along the way. For example, its progress was slowed by the recent Ebola outbreak.

“Ebola is now history,” declared Tefera. “It happened in 2014 and, back then, it affected travel both to the region and within the region, so it had an impact. We bounced back through the right strategy, matching capacity and demand. We increased productivity and efficiency and, with the support of our partner, we managed to overcome the difficulty of that period.”

However, despite 2016 looking like another bumper year, there are still a number of problems for Asky to tackle.

“There is an economic slow down, not only in this region but all over Africa in general because of the decline of commodity prices – oil in particular,” said Tefera. “Many countries in the region are reliant on the export of oil for revenue.”

However, he remains bullish. “We still see 4% GDP growth, which is robust when compared to other parts of the world, so we still expect air travel to continue to grow.”

Possibly bigger worries are the problems in obtaining traffic rights to some countries in the region, as well as issues like high operational costs and punitive taxes.

“The Yamoussoukro Decision is now 30 years old but it has been painfully slow in terms of implementation,” said Tefera. “Through Yamoussoukro, states have committed themselves to enabling all African carriers to enjoy full fifth freedom traffic rights. However, that doesn’t yet happen. There is progress; the situation for us is much better than it used to be, but there is still a long way to go.

“There are situations where African countries give better treatment or better traffic right conditions to non African carries, which is unfortunate because it should be the other way round.

“Europe adopted a single market policy in 1992 and, since then, the freedom that was given to European-based carriers to operate freely within the European airspace has enabled the emergence of strong carriers such as Ryan Air. It has been beneficial to the European travelling public by creating accessible and affordable air tickets.

“Unless African governments open up their markets and allow African carries to compete on the same footing as non African carries, which are currently dominating the market, the industry in general will have a serious problem.

“It is essential that the Yamoussoukro Decision is fully implemented and that we further create a single African air service market for an African airline industry to be able to compete. That will generate economic activity, increase growth and facilitate travel for the public in the region, so it is win-win situation. But we are not there yet.”

Turning to operation costs, Tefera admitted: “It is the major challenge we face here. It is twice as expensive to operate than in east Africa.

“If you look at fuel cost, although the price has been in decline in the international market, that is not reflected in many of the markets that we serve. Some markets even leave the fuel prices the same as they were a year ago, which we cannot understand.

“Jet fuel is our main cost driver as it accounts for 40% of our total expense. That is a challenge. You also have higher navigation fees, which are much more expensive than in other regions.

“Then there are monopolies in the ground handling and catering services in most of the airports we serve, so we are not able to get competitive prices.

“For reasons that we do not really understand, the industry is heavily taxed. Maybe it’s because it is considered as a luxury but we are trying to change that perception. It is, in fact, a critical industry enabler to economic development and integration and it needs to be viewed as such. But it takes time to change this mind-set and government policies. Things are improving but not moving fast in that direction.

“We lobby governments directly or with the African Airlines Association (AFRAA) and also the African Civil Aviation Commission (AFCAC).

“We continue lobbying but we also try to have a sensible cost structure for our operation by increasing efficiency and productivity so that we are able to have some flexibility on the ticket prices because, as purely business-based organisation (Asky is not a subsidised carrier) we have an obligation to cover our cost and drive profit. So the only way we can do that in the high-cost environment is to control our cost, to increase our productivity and to undertake intelligent revenue management so that we can create a profit margin to our shareholders.”

Tefera also pointed out that there were airport infrastructure limitations in the region. “Governments are trying to improve the airport infrastructure but it is still lacking behind and the challenges remain,” he stressed.

Turning to the future, the CEO revealed an ambitious plan to build a maintenance, repair and overhaul (MRO) centre and an aviation academy in Lomé.

“We are planning to establish an MRO centre, not only for Asky but also for the whole region,” he confirmed.

“There is a tremendous demand for MRO service in west Africa and we are looking at the possibilities of setting up a regional MRO hub with Ethiopian Airlines.

“We also want to establish a pilot and technician training centre, as well as a facility to train commercial staff, cabin crew and finance experts. This type of training for the region is essential for French speaking countries in particular.”

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