Ahead of the AviaDev conference coming up in Kigali Rwanda in October, 2017, Jon Howell (JH), MD, AviaDev spoke to Sylvain Bosc, the Chief Commercial Officer of fastjet about the airline's future plans:
JH: There has been a huge change in almost everything fastjet have done since Nico Bezuidenhout was appointed CEO and implemented the Stabilisation Plan and the financials are showing signs of recovery. Can you outline your fleet and network expansion plans over the next 12 months?
SB: You’re absolutely right, the Stabilization Plan saw us leaving no stone unturned in the past few months in order to bring the airline back to financial stability, which we are on track to achieve by Q4 2017 as committed to our shareholders.
Over the next 12 months, we will prudently approach growth in our “historical” markets, Tanzania and Zimbabwe. In Tanzania we will deploy 2 Embraer E190 from October to offer more frequencies at the right gauge on all our routes; in Zimbabwe, we’re adding a second aircraft from July 31st and will be looking at up-gauging if market response continues to be as good as it is today. We will also investigate introducing more low-cost domestic services on turboprop aircraft if we obtain the necessary route rights.
In fact, there are many routes all over Africa that demand turboprops (either because of short runways or short flight time) to offer the lowest possible cost for everyone, which is a fundamental principle in the fastjet value proposition. We are currently looking at three new African countries in which we could allocate a combination of jets and turboprops, mostly on domestic services. We noticed that domestic traffic flows are much easier to stimulate through low fares than international ones.
JH: fastjet has moved from 156 seater A319’s to Embraer E190 and ERJ145’s with lower seating capacities. Some would argue you need a certain size of aircraft to make sufficient cost savings to be a truly low-cost airline. How would you respond to this?
SB: There is no denying that higher density aircraft reduces unit cost. This is simple maths of low-cost aviation. The true low-cost model also requires high aircraft utilization; so high utilization with high seat density means a substantial number of seats to sell, and that’s where it starts to challenge financial or commercial viability. Very few African city pairs have got large enough point to point traffic flows to sustain this type of seat supply, and price elasticity (the amount of traffic you stimulate for each price decrement) is not as high as the one we can count on in Europe or the US for example. Therefore, applying the “standard” low-cost model to Africa results in flying lots of empty seats around… a situation which investors will not appreciate very much!
We believe in a gradual approach to traffic flow building. We can start routes on ERJ145s, with a relatively low utilization in the beginning (given the low ownership cost of these units) and gradually increase frequencies as we manage to stimulate the market through affordable prices and most of all regular, dependable and on-time services. When we see that we have generated enough traffic to sustain higher gauge we can then move to bigger aircraft. One might argue that this strategy doesn’t enable us to benefit from economies of scale through fleet commonality, but we believe that a mismatch between supply and demand eventually costs much more than the savings that can be achieved through standardized fleet procurement.
JH: High levels of taxation, fuel prices, and airport charges have always been pointed to as barriers to operational success in Africa. Is this starting to change?
SB: It’s true that operating costs are sometimes staggeringly high in Africa and even if we are seeing some positive changes in this respect, it’s going to take a while before those costs normalize. Yet those adverse conditions are the same for all operators, so it doesn’t change the validity or efficacy of our business model; it is surely challenging if at all possible, to offer the same product and price that operators such as easyJet or JetBlue propose in mature, competitive markets. But we are still able to achieve significantly lower costs - and therefore fares - and greater convenience than existing full-service African competitors, and that’s what counts.
JH: Finally, how much difference would a liberalised air transport market in Africa make to your business and do you think this will ever become a reality?
SB: People have been talking about the liberalization of air transport in Africa for decades. There are two options. One can either lament about its slow progress, to little effect, or, work within current constraints and still achieve benefits for the travelling public in those markets where a level playing field is more or less in place. We’ve chosen the latter. Africa is a huge continent with a vast mosaic of different situations and circumstances in each of its markets; it will not liberalize at once nor overnight and we’ve built this reality into our business model already.
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