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West African optimist

Plagued by debts, short of aircraft and without a strategic partner, the outlook remains tough for Air Afrique. But chairman Sir Harry Tirvengadum is banking on a new privatisation plan.

It is difficult not to be impressed by how calm and collected Sir Harry Tirvengadum has remained since his arrival as chairman of Air Afrique. With the financial and political headaches besetting the carrier, he could have been forgiven for regretting that he ever ventured beyond the calmer waters surrounding Air Mauritius, the stable and profitable airline that he left early last year.

By contrast, the West African airline he inherited is heavily laden with debts, now standing at some CFA180 billion ($330 million). It was recently forced to hand back four Airbus A310s, representing a third of its passenger fleet. The carrier has also been open to political interference from its 11 state owners in West Africa, with Air France (and therefore the French Government) making up the dozen.

Yet Tirvengadum's optimism remains remarkably intact. He asks only for a little time to put things right. "Just give me a few years. It's going to take a few years that's all," he says. It is a gigantic task, but Tirvengadum is putting his faith in the new five-year strategic plan which he has already begun to assemble.

At its centre is a move towards privatisation, which itself is no mean ambition. If successful it would make Air Afrique one of only a tiny band of African flag carriers to extract themselves from state control. Air Afrique may then also get the chance to re-emerge as a force in African aviation. Most observers believe that once the region's upheavals subside, only three or four sub-Saharan airlines will remain as serious international players. With a fair wind, Air Afrique has the potential to claim its place among them.

For their part, Air Afrique's state owners were already poring over details of the plan at meetings held in October. Approval for the first stage of privatisation is already in place. The 11 state shareholders have agreed as a first step to see their holding cut from 70% down to 51%, says Tirvengadum. "We've already obtained clearance from our board of directors and the General Assembly for this to go ahead by the end of the year," he adds. Although this first stage will still leave state owners in control, the intention is to privatise the rest by 2000, representing a two-year advance on original plans for a sell-off in 2002.

Rumours are running rife that if and when the sale does go ahead, Air France will be among the first looking to raise its stake and snap up an African partner. As an existing shareholder, with 12.7% of the airline, the French flag carrier would clearly have first refusal in any share offer, but Tirvengadum is characteristically relaxed. "It is true that Air France is interested in increasing its stake, but we've yet to finalise anything with them," he says. As part of the plan, Air France's own government owner may purchase and lease back to Air Afrique the A310s seized by creditors in July after debt defaults.

The privatisation plan replaces a rescue proposal by Tirvengadum's predecessor Yves Roland-Billecart. He had asked the 11 Air Afrique states to provide CFA1 billion each, with another CFA20 billion due from Asecna, the interstate agency which oversees aviation safety and navigation among the French speaking states of West Africa. This would have rid the airline of its CFA31 billion in back payments, after which the intention was to set up a new company. But while Asecna had the funds, the member states did not and the plan failed.

Besides privatisation, Air Afrique is also talking to Air France about a commercial alliance. "Air Afrique is looking at some kind of codesharing agreement to France and other parts of Europe. This hasn't been finalised yet but it's definitely in the pipeline," says Tirvengadum.

Although codesharing would be a benefit, Air Afrique's primary need is for a strategic equity partner that would provide some badly needed funds. The debt-ridden carrier lost nearly CFA7 billion last year and some CFA23 billion the year before. It has not been helped by a 50% drop in the value of the CFA franc against the USdollar over the past few years. Nor by the war in the Democratic Republic of Congo (the former Zaire). That meant the suspension of services to Brazzaville for nine months last year, costing Air Afrique an additional CFA13 billion.

Fleet pressures

Results had been looking more positive for 1998, with a profit of CFA1.2 billion for the first quarter. The airline was optimistically forecasting that it would end the year with over CFA4 billion. That will have to be downgraded "slightly" says Tirvengadum, saying that the airline has been forced "to lease aircraft at a higher price".

The loss of the four A310s has clearly been a considerable handicap. The chairman claims that Air Afrique is managing to maintain 95% of its services, by decreasing aircraft down times, raising utilisation rates and increasing pilot flying hours.

The airline has also been leasing in additional capacity to fill the gaps left by the repossessed aircraft, including a A310 arriving from France's Crédit Agricole. Head of services, Cyrill Agbemohevi Komlan, adds that the airline has also reduced frequencies on selected routes including services from Dakar to New York (down from seven to four a week) and to Paris (from seven to six).

The remaining fleet is based around a core of three A300B4s, with two newer longer-range A300-600Rs and additional regional Boeing 737-300s leased in from ILFC. On the cargo side, Air Afrique has been leasing in three or four freighters at a time, depending on demand, currently including Boeing 707s and an Antonov An-12.

The longer term shape of the fleet has yet to be determined, but it will depend on network changes. The airline is looking principally at US routes. Air Afrique operates four to seven services a week to New York Kennedy from Abidjan and Dakar, with frequencies changing according to seasonal demands. The airline uses its A300-600s or A310s at present but this imposes constraints on capacity. Tirvengadum says that the "ideal"' aircraft for the route would be an Airbus A340 or Boeing 767.

Network expansion is planned for the second half of next year, with hopes to expand within Africa, primarily on the east coast where it has identified "potential for expansion". Europe is also a target and Tirvengadum admits that European partnerships may be on the horizon to back up such ambitions. "We're always talking with potential partners and any new partnership will take concrete form in 1999," he says.

Expansion can, of course, only go ahead once the airline's debts have been paid and fleet problems rectified. Discussions are taking place with the creditors, but there is more negotiating to come "-before we reach a solution", says Tirvengadum.

All this is enough for one man to contend with, but Tirvengadum also has to juggle with his fair share of politics. It is difficult enough handling one state owner. Air Afrique effectively has a dozen. Moreover, there is a risk of some cultural sensitivities encroaching. Unlike his predecessors, Tirvengadum is not French, a fact believed by many in the industry not to have over-impressed some in France or several French-speaking African politicians.

"Sir Harry manages the airline well and has won the support of his staff but he is not supported by the state," comments one senior insider. By contrast, predecessor Roland-Billecart was a top-level French civil servant who ran the country's development agency.

Tirvengadum, however, hastily dismisses any talk of a lack of state support. "This is the first I've heard about this. Besides, I come from Mauritius so I feel I'm half French and half African. Mauritius is heavily French influenced. I'm bilingual, equally at home speaking French or English," he says.

As the airline struggles under its increasing debt burden and lack of aircraft, it is easy to be impressed by the chairman's optimism and to be convinced that he is the man to steer the airline out of trouble. "Give me a chance! You've got to remember that British Airways took over 10 years to become really successful, and I've only been chairman of Air Afrique for 18 months," he points out. Time, however, is one luxury the airline can ill afford.

AIR AFRIQUE Base: Abidj Financials 1997 Revenues: CFA267 billion Net Loss: CFA6.6 billion Passenger traffic Passengers: 940,700 Revenue pas km: 2.6 million Load factor: 62.3% Ownership Majority 70.4% CFA zone states: Benin, Burkina Faso, Central African Republic, Chad, Congo, Ivory Coast, Mali, Mauritania, Niger, Senegal and Togo. Remainder: 12.2% Air France; 13.7% with French and African development banks; 3.2% DHL.   In-service fleet:
No Aircraft Ownership
4 A300B4 One leased
2 A300-600R Lease ILFC
2 A310 Leased
2 737-300 Lease ILFC
2 707-320C Leased
1 An-12 Leased
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