African Aviation: Emirates Establish A Foot Hold in Africa With TAAG
By Friday Nwosu
Emirates Airline, the largest carriers in the Middle East is establishing a foot hold in Africa with its partnership with TAAG Angola Airlines. This is similar to what Qatar Airways is planning to do from Morocco.
TAAG Angola is the state-owned national airline of Angola based in Luanda. The airline operates an all Boeing fleet on domestic services within Angola, medium-haul services in Africa and long-haul services to Brazil, Cuba, China, Portugal and the United Arab Emirates.
The strategy being implemented by TAAG Angola following its partnership with Emirates represents a model that perhaps can be emulated by other ailing airlines in Africa.
In late 2013 TAAG and Emirates forged an agreement to establish a strategic partnership with the African carrier.
In late 2013 TAAG and Emirates forged an agreement to establish a strategic partnership. The partnership was initially slow to materialise, but over the past year Emirates has begun helping TAAG to restructure, and prepare a new business plan that aims for profitability by 2019.
TAAG has been consistently unprofitable over the last several years, including losses totaling approximately USD220 million over the past two fiscal years. It now faces extremely challenging market conditions since Angola’s oil-based economy has been significantly impacted by the sharp decline in oil prices. Despite the challenges TAAG is expanding rapidly in 2016, with the delivery of two 777-300ERs in 1H2016 that were ordered when market conditions which were much more favourable.
The Emirates partnership gives TAAG a much brighter long term outlook. A codeshare is now in the process of being implemented, which will extend TAAG’s network globally. Having dropped services to Dubai in 2015, TAAG is using the partnership to learn from Emirates and raise its standards. Emirates took over management of TAAG in Oct-2015, appointing industry veteran Peter Hill to serve as CEO and lead the transformation efforts.
TAAG aims to improve its profitability by cutting costs, renegotiating costs and reducing staff levels through attrition. TAAG should be able to improve its efficiency significantly – efficiency being a systemic problem across Africa – and reduce unit costs.
The two additional 777-300ERs represent a 15% expansion of TAAG’s fleet and an even higher rate of capacity expansion. TAAG is initially deploying the additional capacity to Brazil and Portugal – its two main long haul markets.
In early June 2016 TAAG increased its Portugal operation to two daily flights, including 11 weekly frequencies to Lisbon and three weekly frequencies to Porto. In July 2016 TAAG is increasing its Brazil operation to one daily flight, including four weekly frequencies to São Paulo and three weekly frequencies to Rio de Janeiro. Portugal and Brazil will account for approximately 55% of TAAG’s international seat capacity once the increases are implemented.
TAAG is also now looking at expanding in China, which is currently served with two weekly Beijing flights and is its only other long haul market. The new business plan being implemented with the help of Emirates also envisages turning Luanda into a hub.
“In the past it has never been used as hub. It now could be used as quite a significant hub for South and Southeast Africa”, Mr Hill told CAPA TV in Mar-2016. He added, “We are taking advantage of that. We are working with immigration, removing visa restrictions. There is a lot of positive things there. So I think our growth will come from not from traffic terminating or originating in Luanda but more from the surrounding countries in South and Southeast Africa”.
TAAG currently serves 12 regional international destinations in Africa along with 11 domestic destinations, according to OAG schedule data. However, none of its regional international routes are served daily. Even Luanda-Johannesburg, a key and historically highly lucrative business route, is only served with four weekly flights.
TAAG deploys 777s to Johannesburg and also has three weekly 777 flights to Cape Town, making South Africa its largest regional international market by a wide margin. Namibia is TAAG’s second largest regional international market: served with four weekly 737 Luanda-Windhoek flights and three weekly 737 Lubango-Windhoek flights.
TAAG will expand its regional network, which is operated with a fleet of 737s, as it restructures and reduces its reliance on its home market. More destinations in South and Southeast Africa are likely, along with more frequencies to increased destinations, which will provide passengers more regular connections in markets such as Cameroon-China, Zambia-Brazil and Namibia-Portugal.
Emirates is beginning to use Luanda as a hub for secondary destinations in South and Southeast Africa.
Improved regional connectivity is also key to the Emirates partnership as Emirates is beginning to use Luanda as a hub for secondary destinations in South and Southeast Africa.
Emirates currently operates daily 777-300ER flights to Luanda, making it the largest foreign airline presence in the heavily regulated Angolan market. Combined, Emirates and TAAG currently account for approximately 66% of total international seat capacity at Luanda.
A transit hub will be necessary if the airline is to be successful at fulfilling its goal of achieving more than triple its annual revenue stream by 2019. The hub strategy is also important for Angola as it would allow the government to leverage its investment in a new airport, which is expected to open in Luanda in 2017.