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RwandAir - Daring to dream

May 3, 2017

 

 

 

Rwanda has come a long way since rising from a troubled political past, and the poster child of the country’s resurrection is its flag carrier, RwandAir.

Rwanda’s bustling capital, Kigali, was the host city for the second annual Aviation Africa 2017 conference organised by the UK’s Times Group Aerospace, and was hosted by the Rwandan government. Discussions at this conference and exhibition ranged from the potential that the aviation sector in Africa holds to some of the internal and external challenges it faces.

Unlike some other parts of Africa, Rwanda’s receptive nature to aviation development is drawing much attention to the country, and the star attraction is RwandAir.

After the 1994 genocide, there were several attempts at establishing a vibrant airline in the country, but several factors hindered that process. For instance, the lack of confidence in the country from lessors and other financial institutions meant that insurance premiums were extremely high, putting pressure on financial performance from airlines.

Following the collapse of Air Rwanda, the national carrier at the time of the genocide, the government took over the airline, and re-branded it so as to allow continued operations. RwandAir began operations on 1 December 2002 as the new national carrier for Rwanda, under the name Rwandair Express. In 2016, RwandAir received the IATA (International Air Transport Association) Safety Audit for Ground Operations (ISAGO).

ISAGO is an IATA standardised and structured audit programme for Ground Service Providers (GSP) that was modelled on the success of IOSA (IATA Operational Safety Audit). The audit uses internationally recognised ground operation standards that are aimed at reducing risk and cost, as well as minimising damages and incidents.

The airline began to expand regionally, and by 2009 the network grew to included Dar-es-Salaam, Nairobi, and domestic destinations. In March 2009, the airline registered a new trademark ‘RwandAir Ltd’, and in June that same year officially re-branded from Rwandair Express to RwandAir.

In July 2010, the first of RwandAir’s Boeing 737-500s arrived; the second 737-500 was delivered later that year. Both of the 737s were leased from GECAS in a two-class configuration.

Then in August 2011, the airline took delivery of its first aircraft purchased directly from an airline manufacturer – a 737-800. All prior aircraft were purchased in the secondary market or leased. A second new -800 arrived in Kigali in October 2011.

By January 2012, the airline disposed of its two CRJ200s, and orders were placed for two CRJ-900NGs.

The airline became an official IATA member in 2015, and signed a lease agreement with Aircraft Lease Corporation, an American lessor, to acquire a further two new 737-800s. The first delivery of the two aircraft, named ‘Kalisimbi’ and ‘Muhabura’, was in November 2016; the second unit is scheduled for delivery in May 2017.

RwandAir was the first airline in Africa, and second globally, to acquire a 737-800NG equipped with inflight connectivity on a line-fit programme. The 154-seat 737s are configured in a dual class layout, like the previous two 737-800s, and are also fitted with Boeing’s signature sky interiors.

Expanding into the widebody market, RwandAir took delivery of two A330s with the second example, an A330-300, arriving in November last year (the first delivery was a -200).

RwandAir’s fleet expansion is in line with its ambitious long-haul route expansion plans for 2017, which began with a new link from Kigali to Harare via Lusaka in January. Other planned routes include Mumbai, London, Lilongwe, Bamako, Conakry and New York. The London route will signify the carrier’s European debut – a key aspect of its growth strategy. The three times weekly service to Gatwick will commence at the end of May, and be operated by the A330s. 

Currently, the airline operates services to Harare, Lusaka and Johannesburg in the Southern African region; Entebbe, Nairobi, Mombasa, Juba, Dar es Salaam, Kilimanjaro and Bujumbura in East Africa; Brazzaville, Libreville, Douala, Lagos, Accra and Abidjan in West Africa; and Dubai in the Gulf.

Despite the rise of RwandAir, the airline is yet to make money. Going forward, its management needs to ensure that the operation is commercially viable.

There are a number of other challenges as well. For example, obtaining fifth freedom rights is proving to be a slow process. Unfortunately, African governments often block airlines from operating fifth freedom routes, even when a market is under-served and additional competition would be a boost to the local economy.

Rwanda has a refreshingly liberal approach and does not go out of its way to protect its flag carrier where wider benefits can be gained. For example, flydubai was able to secure approvals from Rwanda, as well as Uganda, to pick up passengers between Kigali and Entebbe. flydubai became the first LCC to serve Rwanda and Uganda in September 2014, when it launched three weekly 737 services on a Dubai-Entebbe-Kigali routing.

RwandAir’s cautious regional expansion contrasts with its bold long-haul, widebody expansion. RwandAir will have six 737s and four regional jets/turboprops feeding the two A330s in what is already a fragmented and price sensitive market. RwandAir’s expansion in 2017 with 787s was already high risk. Lower fuel costs over the past few years – for the short term only – has provided some help, but the proposition remains risky. It is an exceptional and long term bet on transforming Kigali into a new hub for Africa.

But there are many reasons to support the ambition. After a traumatic history, Rwanda has emerged to be one of Africa’s relatively safe and corruption-free countries. However, because it is small, it is necessary for it to be a hub if it is to support significant air services. There is a well-trodden path of small economies taking on disproportionate size by becoming a hub.

Nevertheless, the short term opportunities remain within Africa. This is a huge continent but liberalisation has been incoherent, impacting route development. As already mentioned, Rwanda has taken a refreshingly liberal approach (both for Africa and globally) in securing liberal agreements, including allowing fifth freedom services. Although the country feels it is giving away more than it receives, this could benefit RwandAir.

As the analysts at CAPA suggest, the Rwandan government must be prepared to stomach the costs of long haul services. Operating them may diminish foreign carrier appetite in taking a strategic stake in the carrier.

RwandAir still expects that it will break even in 2018. Most African airlines, however, have encountered severe difficulties – and even collapsed – when establishing long haul routes. If the Rwandan government is committed to a long term plan of building an aviation hub in Kigali, it must be willing to sustain the losses of these initial long haul routes.

While writing this article, in April 2017, the airline’s CEO, John Mirenge, was ‘relieved’ of his duty, following a Cabinet meeting chaired by President Paul Kagame. Mirenge had been at the helm of the national carrier for seven years. During his tenure, the company has grown its fleet to 11 aircraft, serving 21 destinations.

The exact circumstances behind Mirenge’s departure remain sketchy. However, he seemed in good spirits at the handing-over ceremony, at the airline’s head office, to new CEO Col. Chance Ndangano. Other appointments include Lt Col. Sylvere Munyaneza, who has been named the deputy CEO in charge of operations, and Makolo Manzi, who will now serve as deputy CEO in charge of corporate affairs.

In front of a group of journalists, Ndangano briefly outlined his plans, saying the carrier would continue its growth cycle.

“The airline will continue improving its capability in terms of acquiring more assets [aircraft] and training. Also, in terms of building the capacity for maintenance, and expanding our routes, both to Africa and the world,” he affirmed.

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