One year ago, a grounded Air Botswana pilot broke into and stole one of the company's three aircraft. After circling Gaborone airport for over an hour, he intentionally crashed the craft into the airline's other two ATR 42 turboprops, wiping out the carrier's entire fleet.
The effect was devastating. Botswanans joked that the company's motto had been changed from "Going your way" to "Gone away". Industry experts wondered if the company would recover. But in the event, Air Botswana once more illustrated why it has a reputation for rebounding from adversity.
In 1994 Air Botswana was a deeply troubled concern. It had been taken over by the government in 1988 after consistent mismanagement had required regular bailouts of the airline's private owners. Initial government management, however, was scarcely better.
The end of 1994 saw the company record a loss of 14 million Pula ($2.5 million), plus 68 million Pula of accumulated losses since its foray into airline management. But the government then did something few African states do to their historically loss-making, if prestige-enhancing, flag carriers: it admitted its shortcomings and completely removed itself from management at the airline.
Make money or close
As chief executive Cornwell Muleya recalls, the government brought in a new management team and gave it free reign over the airline's running. Most importantly, it told the team that the carrier would either have to cover its cost of operation or close its doors. This demand set in motion a series of moves seldom witnessed in African aviation.
The first step was to put the company's financial house in order. Upon looking at the books, the new team saw that the company had been grossly abused by all manner of suppliers, who accurately gauged that Botswana's mineral wealth and limited experience in airline management made it an easy mark. This perception was no doubt aided by the fact that the carrier used cash to purchase its aircraft.
Seeing that its predecessors had overpaid in such areas as insurance, maintenance, aircraft servicing and warrantee administration, the management team introduced contract-monitoring positions. According to Muleya, who previously served as head of finance at the carrier, this event was a watershed of sorts - for the first time Air Botswana was asking itself and its suppliers "are we truly getting what we paid for?" The company earned itself a reputation as a real customer, ending the practice of being over-charged and under-served.
The next step was determining what role Air Botswana should play in the region's aviation sector. At one point the carrier served all the capital cities in Southern Africa and conducted flights as far afield as Nairobi and Entebbe, Uganda. As recently as 1994, the company seriously entertained purchasing an Airbus A340 to enable it to fly between Gaborone and London.
The new management team quickly saw that the size of the airline's home market made it best suited to serve as a regional feeder carrier. The network was retooled to focus on connecting Gaborone and Maun (the gateway to the Okavango Delta - Botswana's key tourism attraction) to the important regional traffic and business centres of Johannesburg; Harare, Zimbabwe; and Windhoek, Namibia.
The carrier then rationalised its fleet, getting rid of its two BAe 146 jets. Muleya estimates that moving to an all-ATR fleet cut 30% off the company's operating expenses, as fuel, crew training and maintenance costs were sharply reduced. Next came the necessity of cutting back Air Botswana's bloated work force. Once 447-strong, the staff number was cut to 250 (it is currently around 285). Maximising under-utilised infrastructure, in particular the company's office building and hangar, was the next effort.
The company's office is a large, modern and purpose-built structure near the airport. When the new team arrived, the airline was its only tenant - a state of affairs Muleya recollects as "an embarrassment". The team quickly converted it to a source of revenue. Vacant offices were rented out and others emptied to make space for companies such as Air France, SITA and local tourism outfits.
Air Botswana then seized on its large hangar and maintenance expertise to offer contract maintenance to other airlines in the region that fly ATR aircraft. In conceiving the programme, the company gauged that it had a comparative advantage in this area by virtue of its relatively low labour costs, ability to turn aircraft around quickly and its physical location. Equally important was the dearth of competition in Africa - with Ethiopian Airlines concentrating on the more lucrative jet repair market, only inaccessible Air Mauritius offered ATR maintenance services.
The company recruited former deputy director of technical services at Ethiopian, Abebaw Engida, to head the division, then put together a sales presentation. Their visits to several African airlines resulted in four maintenance contracts and an on-going programme that enables Air Botswana to recover approximately 50% of the costs of its own maintenance operations.
By 1996/1997 these initiatives had resulted in the company's first year of profitability, something it has achieved every year since. This progress, however, easily could have been lost in the wake of last October's disaster. But the day after the crash, Air Botswana struck an agreement with South African Airways to honour its tickets on the vital Gaborone-Johannesburg route. Several months later it leased aircraft from Air Littoral and was back in the air.
Finally, in September, the company took delivery of three ATR 42-500s, for which it holds a 27-month lease. In addition to affording Air Botswana an opportunity to showcase its new, zebra-striped livery, the new ATR also brings with it two more seats and improved operating performance. Whereas intensive heat in Maun meant the predecessor ATR 42-320 often had to leave up to 15 of its 46 passengers behind, the new aircraft typically carries full passenger and cargo loads.
The size dilemma
One major obstacle remains for Air Botswana - its size. Although the airline's management realised that its small market effectively limits it to a regional role, Air Botswana believes its lack of size makes it vulnerable in numerous ways.
Muleya explains that, in addition to being hobbled in its ability to channel passengers onto its flights (especially passengers originating outside of the region), the company has no leverage in its dealing with other carriers. "We want to achieve better commission-generating power, both in terms of the tickets we are selling for other carriers and the traffic we are feeding them," he says.
Whereas, under previous regimes, the realisation that its small size was hurting it would have likely led to an expansion programme, today's management has elected to use another carrier's size to its advantage. Privatisation is how it will achieve this end.
Air Botswana has engaged the World Bank-affiliated International Finance Corporation to assist in the privatisation programme. The first phase is tentatively planned for next summer and will see the government maintain a sizeable stake in the company, although it intends to divest itself after a few years. The balance will be divided among a strategic partner airline, the general public (via a flotation), Botswana's pension funds and the company's employees. The strategic partnership is the most important element of this process. Muleya is hoping to follow the lead set by Kenya Airways' privatisation, which saw 26% ownership assumed by KLM.
And of the prospective dance partners, who is the preferred candidate? Muleya will only say: "We'll have to wait and see who comes to the party." He does allow that the ideal partner will have a regional as well as intercontinental presence, although he is quick to add, "the regional presence can be developed by us." In any instance, the chief executive is not worried that his carrier will not generate a lot of attention amongst the international airline community. "We have a lot to offer," he states.
In addition to a well-run airline with an improving bottom line and untapped cargo potential, Air Botswana offers an enviable set of bilateral air service agreements, most vitally including that between Botswana and South Africa.
The agreement between the two places no restriction on seats or frequencies, but it does say that each country's carriers can only serve one point in the other nation. This clause keeps local behemoth South African Airways out of the lucrative Johannesburg-Maun route, a route so profitable for Air Botswana that it wet-leases a 75-seat Fokker F-28 jet for the ever-expanding high season. So long as the new ownership remains 50% local, Air Botswana will continue to enjoy protection under the agreement.
To be sure, many challenges remain for Air Botswana, many of which they cannot control. The devastating role AIDS continues to play in decimating the corps of qualified personnel and the effects external factors will have on enthusiasm overseas towards its privatisation are only two examples. However, if this carrier's management team has shown nothing else, it surely has exhibited an ability to cope with adversity.
Source: Airline Business
