Libya's air transport sector is being reshaped through government investment, mergers and privatisation in a series of moves aimed at throwing off the yoke of a quarter century of economic sanctions against the North African country
Five years after the re-admittance of Libya into the international community, the country is still feeling the effects of the long years of embargo, and bitterness persists over sanctions that appeared specifically targeted at the air transport sector, effectively isolating Libya from the rest of the world. But a $4.8 billion government investment in airport and airspace infrastructure and a planned merger and privatisation of its airlines aims to revitalise the industry and bring the country back up to international standards.
The first steps to resolve the anomaly of two state-owned airlines - Libyan Airlines and Afriqiyah Airways - have now been taken. Both airlines, together with business jet operator United Aviation and the handling, maintenance and catering companies, have been grouped under an umbrella organisation, Libyan African Aviation Holding Company, created to oversee a co-ordinated development of Libya's air transport sector. The handling, maintenance and catering organisations had previously been separated from Libyan Arab Airlines, with the flying activities refocused under the name of Libyan Airlines. LAAHC is owned by four government entities: the Libyan National Social Fund (30%), Libyan National Investment Company (30%), Libya-Africa Investment Fund - previously the owner of Afriqiyah Airways - (25%), and the Libyan Foreign Investment Company (15%).
"These investors are financially strong and will be able to take care of this sector and improve it," says LAAHC and Afriqiyah chairman . "But the ultimate goal is to have the private sector fully control such companies. We are working on this, trying to improve their financial position and getting them to a state where they become attractive targets for private investors. At the moment they are not."
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"The airlines will be taken out of government control last. No one is investing in airlines anywhere"Sabri Saad Abdallah Shadi |
Although privatisation is the ultimate aim, the immediate priority is to concentrate on preparing the two airlines for a merger. "From day one of the operation of Afriqiyah Airways [in 2001], I knew that the time would come when we would have one airline," Sabri Shadi says. "I also knew that for the first five or six years we would both have room to grow without much overlap or conflict, and that one day this would have to change. That time is now. We need to expand our network, and for Libyan Airlines to do so also it will need to fly where we fly. The codeshare set to be implemented on all flights of the two airlines from June this year is the first step towards a merger."
Sabri Shadi is convinced that such a merger will almost certainly take place in 2009, although he admits that there may be political obstacles to overcome first. Whose name will survive, or whether a new name will be created, remains open for discussion. In all probability, he says, there will be one international flag carrier and one domestic airline.
So why was a new airline established alongside flag carrier Libyan Arab Airlines in the first place? Shadi explains: "At that time the Libyan government was asked to bail out struggling West African multinational Air Afrique. Also Libyan Arab Airlines [of which he was then chairman] was not in a good shape and was suffering badly from the consequences of the sanctions, but it was then politically unacceptable to shut it down.
"So, many elements came together. The government, therefore, decided to establish a new airline specifically to link Libya with Africa, and ultimately connect Africa with the rest of the world. This was the thinking behind Afriqiyah Airways. It was possible that Libyan Arab Airlines would not recover and in such a situation, Afriqiyah was in place to serve as the state airline." Afriqiyah Airways started operations on 1 December 2001 and Sabri Shadi was appointed chairman.
Afriqiyah has been expanding steadily and with new services being introduced this summer to Dubai, Delhi, Istanbul and Beirut, and frequencies increased on the busiest routes, the airline expects to carry 655,000 passengers in 2008. The delivery of three Airbus A330-200s next year, together with new routes to Johannesburg, China (destination has yet to be decided), and five or six new destinations in East and Central Africa will bring passenger figures to 1 million by the end of 2009, says Sabri Shadi. The airline serves 14 destinations in Africa, seven in Europe and one in the Middle East. It also provides a link between Tripoli and Libya's second city of Benghazi.
Libyan Arab Airlines (now Libyan Airlines) survived and now flies to 10 destinations in Europe, five in North Africa and three in the Middle East. The only destinations served by both airlines are London, Rome and Cairo. Madrid and Athens will be added this summer, with Mumbai targeted for next winter, as well as one city in China. "France is also in our plan, but the bilateral allows for only seven flights between our two countries," says Libyan Airlines marketing director Abdalla Amed. "We have asked for 28, but were offered only two additional flights from winter 2008/09, and only from regional airports."
Libyan Airlines has also been tasked with maintaining the domestic service, but, says Amed, with the airline being forced by the government to keep domestic fares low, it is impossible to make money. However, with distances great - Libya is the third-largest country in Africa after Sudan and Algeria - road conditions variable and no railways, strengthening and developing the domestic network remains a priority. Libyan Airlines carried 885,000 passengers in 2007, of which 40% travelled on its domestic services. It expects to carry 950,000 passengers this year.
Having been prevented for 25 years from buying new aircraft, a turning point was finally reached in 2006 when Afriqiyah was able to place a first order with Airbus for six A320s, three A319s and three A330-300s, following up in June 2007 with a further five A320s. At the same time, it signed a memorandum of understanding for the acquisition of six A350 XWBs for delivery from 2017. On the same day, Libyan Airlines also signed a MoU for four A350 XWBs, as well as for four A330-200s and seven A320s. These orders were the first for the A350 from African carriers. Sabri Shadi emphasises that these two similar orders placed during the Paris Air Show were no coincidence and were designed to pave the way towards a single airline.
Afriqiyah will take delivery of two of its ordered A319s in August and September, and they will be deployed on the new Dubai route in a two-class configuration. Two of the A330s will be delivered this year and the third next year. They will be used to inaugurate the new routes to South Africa and China. The airline now operates six A320s, of which it owns two. Two are leased from Nouvelair Tunisie and two from Adria Airways.
Libyan Airlines' operational fleet includes two owned A300-600Rs, two A320s leased from Nouvelair Tunisie plus three owned Bombardier CRJ900s which were delivered last year. Two more CRJ900s will arrive in Tripoli by the end of this year. Sabri Shadi says three or four CRJ200s, and perhaps CRJ700s, will probably also be leased to boost domestic services. Delivery of the new A330s and A320s are scheduled to start in 2011 and Libyan Airlines' new A350s will begin arriving in 2017.
While Libya's air transport sector is dominated by the restructuring of the state-owned sector, the country's only private airline - Buraq Air - has quietly progressed, building a business and reputation. Founded in November 2000 by a group of Libyan pilots, the airline is based at Tripoli's other international airport at Mittiga and began operations in November 2001. Its scheduled network links eight domestic points, as well as Aleppo in Syria, Istanbul, and several destinations in neighbouring Egypt. Its fleet is headed by two Boeing 737-800s, which were the first new Boeing aircraft in Libya for 30 years when they were delivered to the airline in October and November 2006. A third remains on order. Buraq Air also operates one 727-200, two 737-200s, three Let L-410 UVP-Es and one Bombardier Dash 8-300. The turboprops are used to provide a logistics service to the oil industry.
Further progress of Libya's aviation sector in the immediate and near future is, however, being hampered by an infrastructure that still bears the scars of forced neglect and the inability, over a long period, of the civil aviation authority to obtain the necessary parts for systems and equipment. "There is significant demand, but we do not yet have the infrastructure to handle large numbers of flights," says CAA chairman Mohamed Shlebik. "So we have introduced some capacity restrictions at Tripoli airport."
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"There is high demand but we do not ahve the infrastructure to handle large numbers of flights"Mohamed Shlebik |
Shlebik adds that all shortcomings are being addressed and work on rebuilding the air navigation system, including full radar coverage of Libya's Flight Information Region, for which a near €100 million ($160 million) contract has been placed with Spain's Indra Sistemas, will be completed by September 2009.
Work also started last October at Tripoli International Airport on a new passenger terminal and new runway in a revamp of the entire airport. The initial capacity will be 6 million passengers when the first module comes into operation in September 2009. The eventual total cost of the project, contracted to a joint venture between Brazil's Odebrecht, TAF Construction of Turkey, Consolidated Contractors Company of Lebanon and Vinci Construction of France, is LD2.54 billion ($2.1 billion). Preparation is also underway for a second terminal, which will bring total capacity to 20 million passengers. In 2007, the airport handled just 2.6 million passengers, still short of the total throughput before sanctions.
Preliminary work and site preparation has also started at Benghazi and Sebha. A new terminal with a capacity of 5 million passengers will be developed north of the existing runway at Benghazi under a LD720 million first-stage contract awarded to Canada's SNC-Lavalin. The final cost is estimated at LD1.1 billion. A LD600 million contract has been signed with a joint venture comprising Lebanon's CCC and a new Libyan investment and development company for a new passenger terminal at Sebha in central Libya. It will have a capacity of 3 million passengers, and, like the new terminals at Tripoli and Benghazi, was designed by Aéroports de Paris Engineering. Shlebik says a LD360 million contract package is due to be signed shortly for the upgrade of the country's 10 other commercial airports.
All airports in Libya are owned by the CAA, but Shlebik says operation of the airports will be assigned to independent companies, most probably on a concession basis, although no final decision has been taken. However, he adds that the operator will be a joint venture between a Libyan company and a foreign strategic airport investor. He says interest has been expressed by three undisclosed international airport management/operating companies. The Libyan part of the joint venture could be a private company, says Shlebik.
"We are hitting back," he explains. "We have had average growth of 22% since 2004, and our conservative projection for the next few years is an average annual growth of 25-30%. If the hoped for relaxation of visa requirements is implemented, and once the new cargo and maintenance facilities are on stream, growth could be much higher."
Libya's economy has improved dramatically over the last few years as trade links with the rest of the world have been revitalised. Much also rides on a successful conclusion of negotiations between the European Union, whereby the requirement for visas of EU nationals would be removed and Libyans would require only a single visa for travel to EU countries. Furthermore, taking advantage particularly of the impressive Roman remains on Libya's north coast (see picture previous page), the government is developing a strategy for cultural tourism, which it hopes will attract up to 1.5 million tourists.
If all these strands come together, Libya's ambition to serve as a bridge between Europe and Africa, and between Africa and the rest of the world, may not be too far in the distance. The effects of the long, dark years of ostracism may then finally be consigned to history.
How Libya Survived in Isolation
Although United Nations economic sanctions against Libya for its refusal to hand over two government agents suspected of the 1988 bombing of the Pan Am Boeing 747 over Lockerbie, Scotland, did not come into force until 1991, the national carrier, Libyan Arab Airlines, began to suffer as early as 1980. This was the year when Boeing was refused an export licence for three 747-200 Combis the airline had ordered for its long-haul network. From that time on, Libyan Arab Airlines was no longer able to purchase any aircraft with more than a 10% US content. Obtaining spares and other equipment from the West was also becoming more difficult following a general trade embargo imposed by the USA in 1983 and ceased almost totally after the UN sanctions.
The airline was then prevented from all external flights, only managing to sustain a skeleton domestic service with just four airworthy aircraft out of a total fleet of more than 30. Libya's airports were equally strangled by the total absence of international traffic and the inability to update and renew equipment and systems. It was expected that following the lifting of the UN embargo, the USA would follow suit, but this did not happen until four years later. Still prevented from obtaining new aircraft, Libyan Arab Airlines and newcomer Afriqiyah Airways were, however, able in the interim to slowly re-enter the international arena on the back of lease deals. The real breakthrough was made in 2006 when first Afriqiyah Airways and then the newly restructured Libyan Airlines embarked on a wholesale renewal of their fleets. Given the USA's antagonism over a 25-year period, it came as no surprise that the orders for new aircraft were placed with Airbus, rather than Boeing
For more on Afriqiyah Airways, read our web chief executive interview with Sabri Saad Abdallah Shadi at: flightglobal.com/shadi
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Source: Airline Business
