Chinese airlines return the favour with expanding East African presence

In Summary

But Uganda still way-off direct China flights   After years during which Ethiopian Airlines and Kenya […]

But Uganda still way-off direct China flights


AirChinaET777After years during which Ethiopian Airlines and Kenya Airways dominated lift between Eastern Africa and the Chinese mainland, Chinese carriers are returning the favour with services to the region’s major hubs.

Coming close on the heels of the August 2015 launch of services to Nairobi by Guangzhou based China Southern Airlines, stable mate Air China on November 2, launched a tri-weekly service between Addis and Beijing. The service comes just a few days after Air China launched a similar link between Johannesburg and Beijing.

Air China is one of three state owned Chinese airlines alongside China Eastern Airlines and China Southern. Addis is Air China’s second landing point in Africa after Johannesburg where the Chinese major took over the route exited by loss making SAA.

It is anticipated that far from spurring competition, Air China, which like Ethiopian is a member of the Star Alliance will instead want to leverage this relationship to access the latter’s extensive African network. This view was vindicated by remarks made by Ethiopian Airlines Group Chief Executive Officer Tewolde Gebremariam, during ceremonies to welcome Air China to Bole International Airport.

“Air China flies to 225 destinations in China domestically; and Ethiopian Airlines flies to more than 50 destinations in Africa. So, we have a lot of synergy and complementality; so, we are going to cooperate in that line. But, at the same time we are going to compete. So, it is competition and cooperation,” Tewolde said.

However, the presence of the Chinese duo in the region increases travel options out of Eastern Africa to the Chinese mainland. Though each will be depending on its respective alliance member (Kenya Airways and China Southern are members of SkyTeam) for onward connections beyond the main hubs, on particular days, travelers will have the option of a daytime departure and early morning arrival to the Chinese mainland. Under the present schedules, departures out of East Africa have been afternoon or late night but with corresponding late afternoon arrivals into, Beijing, Guangzhou or Shanghai. Besides offering choice however, Air China’s arrival will boost Addis’s status as a major African gateway to Asia, after the launch in April of flights to Tokyo by Ethiopian.

According to analysts, the coming of Chinese carriers to mainland Africa, is an indicator not only of the maturing of the routes pioneered by Ethiopian and Kenya Airways years ago, but the expanding trade between Africa and China that crossed the $200 billion milestone in mark during the first 11 months of 2014.

“Ethiopian and Kenya Airways have seen their services to points in China quickly graduate to a daily service and load factors were bringing the industry to a point where double daily frequencies are viable. That is when the principle of reciprocity kicks in and if you notice, the Chinese carriers are offering daytime departures,” commented one industry player.

Sino-Africa trade between January and November 2014 reached$201.1 billion, up 5.4percent year on year. Technical equipment and infrastructure services dominate China’s exports to Africa while commodities, especially minerals give Africa the upper hand in this relationship.

Africa has also become an emerging destination for China’s outbound investment with Chinese enterprises making a non-financial direct investment of $3.5 billion in Africa during the same period.

More than 2500 Chinese enterprises did business in Africa in areas such as finance, telecommunications, energy, manufacturing and agriculture, creating more than 100,000 jobs directly for Africans according to the Chinese ministry of commerce.

The ministry adds that Africa is Chinese enterprises’ second largest contracted projects market overseas with a total contract value of $70.8 billion between January and November 2014. The contracts covered various fields like electric power, communications, water conservation, railway, and bridge and port construction. The Mombasa-Nairobi Standard Gauge Railway and the Ethiopia-Djibouti railway easily come to mind.

China – Uganda direct still a while away

Short of decisive movement on the re-establishment of a national carrier and dependent on how its route network will be configured, it will be sometime before a Chinese or any other airline mounts direct flights between Uganda and China.

The major challenge is that Entebbe lacks the “hub effect” that both Nairobi and Addis offer any foreign carrier terminating flights there. With Ethiopian’s 90 destinations, Addis is fast emerging as Africa’s largest hub by number of flights, offering convenient connections to onward destinations. Though smaller, Nairobi has Kenya Airways extensive African network to offer the Chinese majors.

In the absence of a national or other home-based airline with a reasonable regional feeder network, direct flights to Entebbe would require strong O&D (origin to destination)) traffic. That requires a population significantly larger than Ethiopia’s 90 million or at the very minimum, a level of economic prosperity three times the current per-capita incomes.

But even if Uganda were to set up a national carrier, it could come a while too late. For one, Rwandair’s planned foray into the Asian mainland next year means Uganda’s already thin Asia bound traffic will be further dispersed between the incumbents.

With the correct mindset however, the coming liberalization of airspace in the Northern Corridor could be an opportunity depending on the extent to which Kampala makes sensible decisions about its planned national carrier.

Ethiopia to expand further in Asia, America

Meanwhile the Centre for Aviation – CAPA- reports that Ethiopian is planning further long-haul network expansion in 2016 with new destinations in Asia and North America. The expansion is made possible by the delivery of Ethiopian’s first batch of 343-seat A350-900s along with additional 270-seat Boeing 787-8s.

New York is in line to become Ethiopian’s fourth destination in North America in Jun-2016, joining Toronto, Washington Dulles and recently launched Los Angeles. Ethiopian is also looking at Chicago and Houston, which could be launched in 2017.

In Asia Ethiopian is planning to launch services to Chengdu, Ho Chi Minh, Jakarta and Singapore. East Asia has been the main driver of Ethiopian’s rapid expansion in recent years – with two destinations added in 2015 for a total of nine – and will continue to be a focus as Africa’s largest airline doubles its fleet over the next decade.

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