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How poor business model ruined African carriers– Christian Folly-Kossi, Secretary General/Chief Executive, African Airlines Association
Monday, October 1, 2007

The Daily Sun, Nigeria

When the story of aviation and airlines’ metamorphoses in Africa will be told, Mr Christian Folly-Kossi will certainly merit a prominent mention.

The Secretary General of African Airlines Association (AFRAA) is one of the few men on the continent, who is literally prepared to give up everything he owns for airlines in Africa to thrive and assume full control of the lucrative aviation market where the European airlines are currently calling the shots.

Though he sees better days ahead for the aviation sector, he is not ignorant of the fact that rescuing African carriers from the jaws of death is tantamount to trading in the enemy’s camp because the mega international carriers will be glad to see African airlines close shops to give them a 100 per cent control of the market.

With this tall order of rescuing African airlines from the "humiliation" of the Western world, the Togolese-born business administrator-cum-economist has become an airline prosperity and safety crusader, going to various governments and urging them to strongly support the aviation sector for the continent to grow.
In this exclusive interview with Daily Sun in Lagos, the AFRAA chief executive tells a moving story of how big African airlines died, his challenges as the secretary-general of AFRAA, how African airlines can prosper, safety issues and many more. Enjoy it.

I’m from Togo. I was born there in 1953. Traditionally, we’re farmers who grow cocoa and coffee. May be because of this background, we grew up to know the impact of international trade on African economy. I schooled in Togo, both primary and up till junior secondary as you would put it here. After that, I took advantage of a programme that was implemented then by the Catholic Mission which was sending young students to Europe for their higher education. So, I went to France, the School of Business Management precisely for my higher education. I completed my MBA there. But alongside my management studies, I also read Sociology. I further went for Doctorate programme. I also read Economics. It’s with this background that I began working as a consultant in Paris.

Referring to the airline business, I’ll say that before joining AFRAA as the secretary-general, I was serving Air Afrique, the defunct multinational airline of West Africa. Air Afrique has about 11 countries coming together to form it. I served Air Afrique for 21 years in various management positions including Director of Finance, Finance Controller, Area Manager and the highest position I concluded my career with was that of Special Adviser to the Executive Chairman of Air Afrique. Actually, I was proposed by some states to take over the management of Air Afrique.

My friend from Senegal was preferred to me at the elections and at the same time, there was a vacancy at AFRAA and they found that I can serve and contribute to the progress of the organization. I was elected in December 1999 in Khartoum and took office in March 2000. I was waiting in Cote’Ivoire to take office when the Kenya Airways crashed in Cote’Ivoire. The accident occurred early February 2000. I was able to assist them and luckily, I was in a very good relationship with the Kenya government in those days and so it helped to facilitate the contacts needed by the Kenyan authorities. I would say that the crisis gave me the opportunity to start my work as the secretary-general by tackling serious issues related to safety.

Why most big African airlines died
Well, it’s a very bad habit in our countries when it comes to explaining the demise of any company, we often refer to corruption, mismanagement and all of that as the cause. But the question here is, what is mismanagement? I’ll tell you, having been a Business Administration student, my view of what mismanagement is. Mismanagement is not the one who is taking money from the coffers of the company. Mismanagement is when you don’t have a clear vision, when you don’t analyze the market forces on ground, you don’t analyze the strategies of your competitors and define accordingly, the winning strategy for your company.

If you don’t anticipate the trends and the actions to be taken to meet the future needs of the market and your company, then, you don’t qualify to manage and that’s what we can call mismanagement. And I can tell you that most of our airlines went down because of that mismanagement. When there was a paradigm shift and the business model was changed, many of our airlines didn’t adapt to the new business model. Let me be specific. We started the airline business by flying from point to point, that is, from one city to another.

But now, the business model has changed. It has become a hub and spokes system. You mop up travellers from various countries around yours, bring them to one point, that is, your platform (hub) and fly them away and vice versa. That’s how you can afford to increase your load factor. The question now is-how many of our airlines moved quickly to that business model? Very few of them. Most of them were still flying from their capital cities to the capital city of the colonial power and when they’re even flying to the neighboring countries, they don’t organize the flight schedule to connect to the long haul flight. What I’m saying still applies today.

And when you look at thriving airlines within Africa and outside, they’ve departed from that old operational model long time ago. Kenya Airways, South African Airways and Ethiopian Airlines will take all the passengers that are connecting to other cities via their hubs. On the Lagos-Addis Ababa flight, for instance, you’ll see passengers going to Dubai, China, Paris, Washington, London etc. That’s how you can increase your load factor.

And at that platform we call the hub, you feed the different flights exchanging passengers. As long as we don’t move to that type of business model, we’ll be weaker, while the European carriers will be stronger. Why the other carriers of the world are doing better than African airlines in our own countries is because they have global network and they adopted the latest business model of hub-and-spokes system. Because we failed to do this, that’s why Air Afrique, Nigerian Airways, Ghana Airways and other big carriers went down. And let me warn that if those who are emerging don’t understand this, they’ll also go down. So, forget about corruption, forget about mismanagement of the funds, these are minor factors.

And also, I want to address another misleading idea. People think Air Afrique comprising 11 countries went down because the various governments were intervening and they were not paying. No! This is not the reality. What was more killing than any other factor is when we started liberalizing our skies, thus putting the strong and the weak on the same scale; when we opened up our skies to all the mega carriers that are operating daily flights to our countries and so on.

That certainly did not help matters. If you have five of such mega carriers, it means that you have five airlines that can take the passengers you ought to have taken to all parts of Europe and all parts of the world. These are the ones who are now controlling your airline business and take the place of your national carrier in the negative form. How do you want your own airlines to compete with them even against less financial muscle, less equipment and so on? So, if you take this two argument that I’ve given you which is one, lack of adaptation to the new business model change and at the same time, the saddening liberalization which brings into our markets very powerful airlines to compete with our weak ones, then you’ll understand better why all our major airlines went down at the same time.

European Union’s blacklist of African airlines
I’ll illustrate the implication of the blacklist in a very clear way. Imagine we’re in London and all the big brains of Britain gathered to improve on safety of road traffic within London and the only recommendation they come out with is the ban of all the molues of Lagos from the traffic in London. Will that make any sense? No, because the molue operators have no reason to go to London and carry out business there. They’re separate entities doing business in separate environments. The other result that might come out of this decision is that any time that a passenger sees an African car or bus or taxi being driven by a black man, he or she might scream and say ah!

This might be the molues they have warned us against and as such they’ll refuse to enter it. More or less, that’s what happened with the initiative of the blacklist of the EU which we stood strongly against. They listed almost 100 airlines of the world. The first time, they listed 100 airlines and they said out of this 100, 95 of them are from Africa. From the Democratic Republic of Congo, 50 airlines were banned. We never knew there was any airline operating from this country to Europe. In Sierra Leone, where people don’t know how to cross borders, they listed 12 airlines, in Liberia, the same. Same went for Sao Tome and Principe, Equatorial Guinea etc.

So we went to the website of these countries to check on the schedule of airlines operating within Africa and from Africa to Europe. We didn’t see any of these airlines. So, we’ve come to the conclusion that these airlines are mere paper airlines on the list or they were dead airlines or in any case, if at all they exist , they operate within the boundaries of their country. So, if that’s the case, do we need to ban them from the skies of Europe? We said there is a deliberate attempt to give airlines in Africa a bad name, giving African airlines that are operating to Europe a bad name to stand them wide apart from their European counterparts.

There are about 25 African airlines operating into Europe on a daily basis and on equal safety standards as those ones in Europe. None of the 25 was on this list. So, the question now is-what is the use of this list? The list has misled people. A common man who wants to travel to Africa and he’s told that a 100 of African airlines are on EU’s blacklist. He would not take the pain to really know those who are there and those who are not. He won’t know whether Virgin Nigeria, South African Airways, Ethiopian Airlines etc are on the list. The only message he would get is that if you want to travel, only British Airways, Lufthansa, KLM, Air France and so on are what he should fly because you’re safe and you don’t run any risk of flying the airlines on the blacklist.

This is unfair. If we opt for globalization and liberalization, if we open our markets to all the carriers to come, and if on top of this, they’re stronger than us, then we cannot survive the competition. Most of the individual European carriers are stronger than all the African airlines put together. Yet, do we need to compete by giving bad names? So, we’ve called upon the European authorities to review that message. What is clear and what they keep saying that is right is that some of our countries, especially the war-torn ones, are having their civil aviation authorities completely disrupted. So, they need to be urgently re-organized.

We cannot rely on their air operators certificates, their air transport licences and other licences of competence as it relays to safety that qualifies an airline to operate. If they want to address that issue, we support them. Let’s go and see what is wrong and how to re-organize those CAAs and together, we can complement that with expertise from Africa and funding from them. And together, we can achieve that purpose. Having said this, in the last two years, we have come out with another message. We shouldn’t allow the affected CAAs to give them the stick they’ll use to beat us. In our registry, we have 1,436 airlines in Africa registered since our respective independence days. The airlines that are dead are still there in our registry.

The paper ones that have never worked are still there as well and they are there alongside those who’re still operating. This is what I call the stick we’re giving the Europeans to beat and hit hard on our good airlines. So, we’re calling on our CAAs to clear the registries of all dead and paper airlines, so as to keep only those that can truly be referred to as schedule airlines there. The registries should only have those who’re operating modern equipment. This is because the equipment has to be mentioned because most of the accidents that occurred in Africa involved old generation aircraft of former Russian Soviet countries like the Antonov and the Ilushin.

They are causing about 95 to 98 per cent of the accidents in Africa. We’ve come to the conclusion that the importation of these old categories of aircraft should be banned. Yes! An aircraft is never old as long as it is properly maintained according to the manuals. But even then, we don’t recommend the use of old aircraft because mostly, operating is very costly. They’re usually fuel consuming and require more frequent and expensive maintenance. So, what’s the point keeping them? Perhaps, it may keep you happy because you boast yourself of being the owner of an aircraft bought less than one million dollars. So, should we continue accepting that the world comes here and dumps old aircraft just like old lorries and say we have equipment.

These are main questions from which I must praise the government of Nigeria which has realized the issue very early and took the decision to ban importation of old aircraft that are above 22 years old. Many good things are happening in Nigeria. We’ve not been having many accidents involving Antonovs and Ilushins, but those countries concerned like the DR Congo, Angola, Sudan etc, we’re preaching the ban of the importation of these equipment. Angola has done it some years ago, four years, we haven’t got any accident. At least, we don’t have any accident of Antonov and Ilushin anymore in that country. I think this is an edifying example that others need to emulate.

AFRAA’s role in helping dying airlines
You mean AFRAA’s role is assisting ailing airlines from going down like NAL, Air Afrique did? Let me illustrate it this way, you can take a horse to the river but you cannot force it to drink. All the preaching that I’m making today were made in those days. I was in charge of AFRAA when NAL and Air Afrique, my mother airline, went down. I came and spent many days and weeks coming to Nigeria to rescue and advise the airline’s management and the government on what to do but it still amounts to taking the horse to the river because it chooses to drink or not. I had many discussions with the then Minister of Aviation, Dr Kema Chikwe.

I also had discussions with the former President Olusegun Obasanjo. When it came to a matter of necessity, we supported the idea of South African Airways having a deal with Nigeria to put in place another NAL but the deal failed for many other reasons. It’s for this reason that when we couldn’t find any solution apart from sacking the chief executives regularly. We also supported the idea of the partnership with Virgin Atlantic, at least, for this country to have a carrier and play its leading role in the industry. Our mission for the country is yet to be met but I look at it that something good is happening in Nigeria for now.

As for ADC, I’m happy that you raised that airline. I had a meeting with the chief executive of the airline. I wanted to be updated on the result of the investigation, if any, but I wanted to be updated with the situation in general and see what AFRAA can do. And he made it clear for me that we needed to discuss with the government and find out where responsibilities laid and what should be done. Then take us to foreign authorities. AFRAA will urge the government to play its role. Behind the scene, we do play a big international diplomatic role, but as the traditional saying goes, the dog never gives birth in public and so some of the issues will not be dealt with publicly.

In the area that the airline is yet to pay compensation to the crash victims, it’s important to state here that compensation payment to passengers in such a situation is not the responsibility of the airline but that of its insurance companies. We should check if the airline pays its premium to the insurance companies regularly. If that is the case, then the liability is that of the insurance companies who should compensate the passengers because it is for that reason that we pay premium. Apparently, the carriers are paying and if we have real evidence of this, then the government should back the operators to face the foreign insurance companies. Government should talk to their counterparts in foreign countries to seek ways out.

We support that justice must prevail.
For Sosoliso Airlines, it was on the list as one of our potential members because we never exclude any operator from membership list unless we’re convinced that you’re not qualified. In this particular situation of theirs, I’m holding talks with them. I spoke with the managing director of the airline but unfortunately, he’s in the eastern part of the country. But we’re communicating and we’re keeping tabs on the airline to know where and how AFRAA can give support. We’re not encouraging non compliance with safety standards. But we’ve come to consider that accident is also part of our business. When it happens in other countries, it’s dealt with in a fair manner. Any mistake must be sanctioned. But if the responsibility is not that of the airline, that must be recognized and chance must be given for them to operate, especially if they have not neglected any of the fundamental rules. We’ll conclude all our discussions with the airlines and if there is any place we have to pass a message to the government, we’ll undertake to do it.

The secretary-general of AFRAA is in the position of a religion minister who preaches because he’s seeing the future looming ahead. He preaches how we should anticipate and most of the time, the pace at which he’s listened to pains him. In this era of globalization, when Air France that is bigger than all the airlines in Africa put together and KLM that is equally bigger than all the airlines of Africa put together considered that they were too small and saw the reasons to merge. Yet, when you talk to our operators who’re operating one and half aircraft about mergers and consolidation, they listen with one ear. So, this is a cause of a bit frustration.

But like a mountain climber, you have to keep striving to reach the zenith and even when forces throw you down, you don’t need to be discouraged, you simply begin again. That’s what we’re doing. When I come to a country like Nigeria, I see 20 airlines. But I said to all stakeholders that we should consolidate. We better have four airlines of 10 or 20 aircraft than 100 airlines of one and half aircraft. We should depart from this business model where each individual must be the owner of the company and have all the money of the company in his agbada. Business does not work today on that model. And what we’re saying about Nigeria applies to the whole of Africa.

We should go for across border investment. We don’t need to have airlines in each and every individual country of Africa. It’s difficult to make good profit in airline business in a country where you have two, three or five million people as their population. Such countries are many around us here. So why don’t we find structures in which we can put in place big airlines that can float shares in stock exchange that people from all countries can buy from. We can also take the advantage of regional economic communities to put in place such regional carriers in which the private sector can be strong investment. And also put pressure on the various governments to give support.

When you’re in such dreams, sometimes you get frustrated because many people are not thinking along that line. More so, when you dream for economic integration in Africa, you discover that there’s no point in going for continental government when you don’t have economic foundation and this foundation like I said in Accra during the 13th Annual Aviation and Allied Business Leadership Conference, include transport (road, rail and air) and air should be well emphasized because it’s the easiest means of transportation. And then, energy, ICT and telephone are added to it. If we build on these pillars, then integrate African countries .

Then, we can give a base for inter-African trade and tourism. Failing to do that, I don’t see any future political union or government at the continental level. It’ll be tantamount to start building a house from the roof before you get to the foundation. Obviously, that’s not possible. I recommend what the masons do by getting the foundation in place, then the walls and finally the roof. It’s on all those aspects that as a dreamer for African renaissance, we can be frustrated but at the same time, we’re excited because I prefer listing among the doers, than among the spectators.

Ways out
I like the market of Nigeria and I like to be fair to this market. Some years ago, there was no Nigerian carrier because we were divided, but then, at the same time, there was no clear option, either to kill Nigeria Airways (NAL) or revive it. But the position was that as long as we’ve not taken any decision concerning NAL, we were not going to encourage any other initiative. Then, we departed from that. Today, I’m very happy to see carriers like four or five emerging now. The biggest mistake we were also making was that we were accepting multiple designation from the European countries. At the same time, we were preventing our airlines from going there.

But the good news here is that in Nigeria, the government has fought to get traffic rights and slots for many of her carriers to go, for instance, to London. This is a good step. This should apply to other countries because if we’re small and yet go in disorder, we cannot fight the big ones. I believe there is a new concept in business, which is a combination of cooperation and competition, which is now co-petition. We can have some routes on which we can cooperate and others where we can compete. But let’s have this togetherness spirit prevail in the first place. We must consolidate and merge where possible. I spoke of the Air France/KLM merger.

We can’t dream of being competitive against the big airlines of the world without coming together. Let South African Airways, Ethiopian Airlines, for instance, that operate into the United States, Canada, Latin America and so on to cooperate with airlines from West Africa because the direct route passes through West Africa. If we do that, passengers will stop transiting from Europe to come to some African countries. West African airlines can also cooperate with Ethiopian Airlines, Kenya Airways and co to fly their passengers to the Middle East and Asia. If we do that, then we can sustain competition with the big carriers of the regions coming into our markets.

We should establish air routes and links between us and big economic continents of the world. We don’t trade with them because we don’t have air links them. And the people who go there, fly up to Europe and go all the way down. If you look at the map, you’ll see that they’re completely detached from us, so why must we pass through Europe to go there? We should put together the route and then call them because we need to make the money.

They’re already making money and because we don’t put the routes, they have to pass through long routes to access the market. Imagine how much of goods from China are being sold here and ask yourself, how many African airlines are going to China. Tomorrow, if we put a new route to Brazil, Argentina and the likes, you’ll see a new trend of trade. But then, can we afford to do it alone? No, if we create hubs in Angola, Abidjan, etc, then the other carriers of Africa can go, drop their passengers in those hubs and continue and vice versa. We don’t need all countries airline flying to Asia. We can have African hubs.

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