Kigali has thrown down the gauntlet in its plan to expand its national carrier RwandAir across the continent, and challenge the dominance of regional leaders, Kenya Airways and Ethiopian Airlines.
The airline has recorded sharp growth reaching 29 destinations across the globe at the close of last year; but the icing on the cake for Kigali has been the Qatar government’s recent fixation with Rwanda’s aviation sector.
Having signed as many as 101 Bilateral Aviation Safety Agreements (Basa), Kigali has laid the foundation on which the airline can plan to open up more routes without rigorous bureaucratic complications.
“The Basa agreements give us flexibility and ease the process of starting new routes. If the decision is made to look at opening a new route, we do the business case and decide whether it makes commercial sense to start that route,” RwandAir CEO Yvonne Makolo, told The EastAfrican.
“This is good and with all this goodwill for Rwanda, this is the right time to get all these agreements in place and then make a decision when we are ready to open up more routes.”
Competition for airspace in Africa is becoming tighter by the day with many airlines – some recently revived like the Ugandan and Tanzanian airlines – plying the same routes.
Comparatively, Africa’s largest airline – Ethiopian Airlines known by the codename ET— flies to 105 international destinations while the financially troubled Kenya Airways serves 55 destinations.
Even so, the continent remains acutely underserved, which gives plenty of room for more airlines to compete favourably by opening routes to virgin territories.
And as competition for routes goes, many airlines on the continent are now seeing each other not just as competitors but as partners in several aspects.
For RwandAir, much as Ethiopian Airlines is a huge competitor, they are also partners when it comes to aircraft maintenance.
“Competition is good and I am a big fan of it because it keeps us on our feet and forces us to do things properly, to benchmark ourselves and to keep improving. The African market is underserved; so there is potential and room for all of us to play,” said Ms Makolo.
The government has largely financed RwandAir’s expansion using external debt. The airline’s long-term debt largely contributed to Rwanda’s net external borrowing growth to 5.1 per cent of GDP, up from 3.8 per cent of GDP in 2017, according to the World Bank.
The World Bank also estimates that between 2013 and 2017, close to $1.5 billion in public resources were invested in RwandAir and the Meetings, Incentives, Conferences, Events and Exhibitions (Mice) strategy, regarded as government’s leading strategic priorities.
But RwandAir continues to register significant growth supporting the country’s export and tourism strategies.
In 2010, RwandAir was transporting about 300,000 passengers a year, but that is projected to substantially increase to 1.2 million passengers by June 2020, the company said.
There is an increasingly strong demand for the airline’s cargo and passenger services due to its aggressive expansion to new routes even as some airlines are seeking to cut down their flights.
Rwanda’s services sector recorded tremendous growth in 2019, with retail and wholesale trade growing by 23 per cent, transport by 17 per cent – all boosted mainly by RwandAir.
However, the World Bank recommends that although RwandAir’s expansion has offered considerable opportunities for improved connectivity, it needs to be balanced with the potential financial risks for the government and the opportunity costs of the public resources currently being channelled to sustain the carrier.
The government recently agreed to sell a 49 per cent stake of the airline to Qatar Airways, with a lot of optimism that RwandAir’s push to profitability will be boosted by working with one of the world’s biggest carriers.
“This is a win-win situation for both Qatar Airways and RwandAir. They’re taking a stake in RwandAir because they see the opportunities in the partnership,” said Ms Makolo.
“The African market is untapped and you can see that when, for example, you have to fly to West Africa via Paris.
Some areas are really underserved. So for us, partnership with Qatar Airways is a really good idea because it will improve our service offering, building skills and more.”
The Asian giant carrier also bought a 60 per cent stake in Bugesera International Airport, which is currently under construction and billed to become Rwanda’s biggest airport.
RwandAir’s management is concerned about profitability, but it maintains that it is focused on supporting the country’s long-term strategic plan.
“It very much depends on that national plan. We can see that for some routes we are very profitable and for others, we need to develop them further.
They are serving their purpose, be it for exports or other reasons, but in the next few years, we are looking at breaking even and becoming profitable on those routes,” said Ms Makolo.
By The Eastafrica