JUSTIN WASTNAGE / JOHANNESBURG AND CAPE TOWN
South Africans own just under half of the continent's corporate aircraft, and charter companies are enjoying a boom as investors move in and local businesses expand
South Africa is the centre of corporate aviation in sub-Saharan Africa, with almost half of the continent's fleet of 587 jets and turboprops*. Johannesburg's private aviation airport, Lanseria, is the hub, hosting over 100,000 movements last year, or 80% of the country's total.
Lanseria is 30km (18 miles) north west of the central business district, but closer than Johannesburg International airport to Sandton and the northern suburbs that now accommodate many corporate headquarters. It also lies on the Pretoria corridor, close to government departments. As a result, Lanseria recorded a 20% year-on-year increase in traffic during the six years to 2001, although the economic downturn kept the figures flat in 2001-2. But with a runway only 23m (75ft) wide, Lanseria has been losing super-large international business jets to Johannesburg International. The strip is now being widened and lengthened under a R100 million ($16 million) programme scheduled for completion in April.
European connections
The success of private aviation in South Africa, which has the world's third largest fleet per head of population, is related to the country's economy, history and geography. Much of its wealth comes from minerals and agriculture, necessitating air links. In addition, South Africa's trading partners in the rest of Africa often lack sophisticated infrastructure, making air travel the only way to reach various cities. Finally, the country is plugged in to the European and global financial systems, with executives flying frequent long-haul trips.
Since 1993 and the end of apartheid, corporate aviation in South Africa has almost doubled as local businesses have expanded into Africa and foreign businesses have entered the previously taboo marketplace. Many foreign businessmen prefer to enter the country via Cape Town, and Peter Bouwer, managing director of Cape Aviation Business Centre, the second busiest business aviation airport, says: "If, as a result of foreign investment, local businesses become self-sustaining, the growth will lead to more short- and medium-range jets."
Cape Town is also the centre of the country's helicopter charter industry, with the first majority black-owned aviation company NAC Makana, a joint venture between National Airways & Finance (NAC) and Makana Logistics, founded by former political prisoners. Activity is centred on the unlicensed four-station heliport at the city's Victoria & Alfred Waterfront that is home to three other operators, all offering tourist and business flights.
During white rule, trading sanctions and fear of bad publicity kept many global business aviation companies out of South Africa. As a result, strong local companies developed in parallel to the international scene. Of the three largest charter operators in the country, ExecuJet is perhaps the best known as it has expanded from its initial South African base into Asia Pacific, Central America and Europe, where it now has its headquarters. As the Bombardier distributor for most of Africa, it has also carved a comfortable niche for itself as the region's long-range VIP aircraft supplier.
Heads of state
ExecuJet South Africa manages 20 aircraft, mainly long-range VIP machines. "There is a large client base drawn from African governments, large corporations and wealthy individuals across the continent needing to fly to Europe or transcontinentally," says managing director Ettore Poggi.
Roads in most African countries are inadequate, trains are few and rivers are largely not navigable, leaving little alternative but flying to reach smaller cities, he says. "In contrast, almost every city has a pretty well-maintained airfield, even if there is no fixed-base operation or fuel," Poggi says.
In the past 10 years, South African companies have looked to the rest of the continent for expansion; additionally many foreign companies have chosen Johannesburg as their African base. "When global corporations look at the airlines in other parts of Africa, they start to have questions about safety, availability and route networks, so they end up chartering their own aircraft," says Dennis Crossley, operations director of ExecuJet South Africa.
ExecuJet South Africa earns half its charter revenue from international missions, with 15% coming from non-South African residents. It has drawn up a plan to double this figure over three years (Flight International, 18-24 November). There is also a growing business serving mineral and energy companies in countries such as Angola, Congo and Mozambique.
ExecuJet's dominance of the top end of the market is being challenged by NAC, which secured the Gulfstream dealership in February and expects to have finalised the first of seven active African campaigns for G500s and G550s by the end of the year. Although there is now a fight for the lucrative top end, NAC has established its own hold over the turboprop market. A closer look at the country's fleet statistics shows that turboprops and pistons account for two-thirds of all South Africa-registered aircraft.
NAC says this end of the market is growing, as small- and medium-sized businesses expand into neighbouring southern African nations and either replace or refurbish older aircraft. Its sales have tripled to over R1.1 billion since 1999, with a tenfold increase in profit over the past four years, says Graeme Conlyn, NAC executive director.
One reason for strong domestic sales has been the volatile and generally depreciating Rand. Many companies have bought aircraft as a hedge against currency fluctuations, as the value is retained in dollars. Since assets are depreciable by 20% a year, aircraft are usually resold after five years, during which time they are chartered to provide income for the owners.
Refurbished older types still account for a large proportion of aircraft sales, especially to other African nations. NAC claims a 20% premium is earned on each refurbished aircraft and has started importing ex-US Beech 1900 C/Ds to resell.
Many of the company's managed fleets run leisure flights, an area that has seen enormous growth. Tourism to game lodges, hunt lodges and neighbouring countries accounts for around 30% of private aviation traffic, with VIP-outfitted turboprops able to land on unpaved air strips the preferred option.
Africa has its own operational peculiarities. Sudan, for example, prohibits any US personnel or US-registered aircraft flying into its airspace, while the Eritrean/Ethiopian border area is a no-fly zone because of the danger of missile attacks. Keeping track of the geopolitical issues in the continent is the job of a company's flight operations departments, liaising with local agents. "It's a constantly changing landscape," says Teresa du Plessis, aviation services director for ExecuJet South Africa. Flying in Zimbabwe, for example, is becoming more difficult, with the imposition of 24h flightplan filing requirements, a lack of fuel and failure to issue invoices, she adds.
Beating corruption
Corruption also remains a major barrier to aircraft sales. As a signatory to the US Foreign Corrupt Trade Practices Act, the South African government punishes companies that use bribes to win contracts. "It can be very difficult to actually find the decision maker, and there are several levels of officials in the way, who usually request payment of some kind," says Martin Banner, NAC chief executive. The solution is to find a local aviation professional acting as an agent.
Around 90% of corporate aircraft operating in Africa come to Lanseria at some stage, says airport manager Gavin Sayce, as the airport is the continent's maintenance hub. While 100,000 aircraft flew into or out of Lanseria in 2002, there were only 160,000 passenger movements, most flights entering the airport with pilots only, often for maintenance checks.
NAC is also strong in the maintenance market. Besides holding the Pratt & Whitney Canada PT6 agency, it is the principal supplier of Goodyear tyres and the sole approved Rolls-Royce Allison overhaul shop in Africa, handling around 40% of all corporate turboprop maintenance at its 500m2 (5,380ft2) Lanseria workshops. "South Africa is a little different from Europe or North America, where suppliers have exclusive arrangements with maintenance facilities. Lanseria is the one place for private aircraft maintenance, repair and overhaul for Africa," says Conlyn.
Corporate aviation companies are diversifying their product lines and follow ExecuJet in overseas expansion. NAC, for example, already operates in the UK and plans to expand its aircraft sales and flight training operations into Australia and the Middle East by 2005, says Banner. Rossair too has offices in Europe.
"Globalisation is vital if we are to maintain the 25-30% profit growth per annum that we have enjoyed over the past 10 years," Banner adds. The company is also likely to represent additional general aviation manufacturers in South Africa and elsewhere and is in negotiations with Diamond Aircraft and US Eclipse Aviation.
Liberalisation threat
Ironically, liberalisation is threatening the sector's future. Under a declaration that was signed by a number of African nations in Yamoussoukro, Nigeria air-service agreements will be opened to secondary airports and private airlines. Sayce predicts a decline in corporate traffic as more routes to neighbouring states open.
It is likely that the star performer of Africa will continue to hold its crown for some time yet. As more and more opportunities open in central and eastern Africa, the demand for medium-haul business aviation will grow, says Sayce, and the increasing acquisition interest from global business aviation services companies prove the attractiveness of Lanseria businesses.
*Source: Flight International/Buchair Corporate Aviation Census 2003, available to subscribers at www.flightinternational.com
Source: Flight International
