Air Namibia bemoans market saturation

by Edgar Brandt

Air Namibia bemoans market saturation

Windhoek

Air Namibia has expressed concerns over aviation authorities’ decision to allow bigger foreign airlines to enter Namibian skies – almost defeating the purpose of the national airline’s strategic plan, which Cabinet recently approved.

The entry of big airlines KLM, Qatar Airways and Ethiopian Airlines into the relatively small Namibian market could see Air Namibia elbowed to the periphery – a situation the airline fears would lead to an unsustainable growth rate at Air Namibia.



What most irks the national airline is that Ethiopian Airlines has among its routes the Windhoek-Gaborone-Durban route.
This is the very route that Air Namibia has just identified in its strategic plan as part of turning around its annual earnings.
The strategic plan recently received Cabinet approval, which identified the airline’s route network for the next five years.

This network was developed at a cost of about N$5 million by consultants who prepared a bankable strategic plan for Air Namibia.
The consultants looked at more than 17 000 possible routes and eventually identified five routes that could prove profitable for Air Namibia. “The new airlines could result in market saturation and what we may call growth at an unsustainable rate,” Advocate Mandy Samson,

Air Namibia’s Acting Managing Director, expressed concern in an interview with New Era yesterday.
“This could lead to the collapse of the market and the impact could be adverse or negative for the consumer as well, also on participating airlines, on regulators, government and other suppliers in the value chain. Ultimately the Namibian taxpayer will be negatively affected.”

The national airline is more specific that the granting of permits to airlines to operate routes that Air Namibia had identified as strategic could have severe repercussions on its profitability.

Namibia’s Directorate of Civil Aviation (DCA) would not comment on the issue of granting an operational licence to foreign airlines, with the Deputy Director: Aviation and Navigation, Tobias Gunzel, referring New Era to the Permanent Secretary in the Ministry of Works and Transport, Willem Goeieman.

The secretary to Goeieman said he was in a meeting and asked to be emailed the questions. His office had not responded to the questions by the time of going to press.

Nevertheless, Air Namibia yesterday maintained that it is not afraid of competition. It is however concerned that certain bilateral and reciprocal protocols need to be observed to ensure fairness and competition amongst different participating airlines.

Samson said that some of the new carriers coming to the country have revenue figures higher than Namibia’s annual national budget.
“So you can really imagine what Air Namibia is up against! The playing field is unfortunately not level and the potential market share the airline stands to lose is likely very high,” said Samson.

“We understand that with new occurrences we will have to refine this and to include our reactions on how we will have to slightly tweak the (strategic) plan with these new carriers operating in our space.”

“We also have to be clear that we will need to improve our service offering and luckily for us this was already on the cards anyway. We will have to shape up and improve on our efficiency levels, productivity and operating costs,” Samson added. She said that one of the biggest risks in the aviation industry is competition.

“Competition is inherent in this business. There are a lot of airlines out there with growth ambitions which are above the average industry traffic growth rates. What they do is bring excess capacity into the market. This, undeniably, impacts heavier than normal with regard to how things would be under a normal competition regime.”

In the past Air Namibia has faced competition from Lufthansa and other carriers who regularly flew to Windhoek.
Eventually these competitors pulled out when various economic realities settled in terms of how they would ultimately perform and what their profit levels would be compared to a seemingly small airline like Air Namibia.

However, Samson sees the national airline’s relatively small size as an advantage. “We believe this [small size] brings flexibility and this ensures we will be able to adapt, and we can use this as a plus. As Air Namibia we have our strengths. We will see where opportunities lie and we will pursue growth opportunities where maybe in the past we were a little bit slow,” she stated.

For consumers the increased competition of course means more competitive airfares in the short term. However, Samson says Air Namibia is not willing to engage in a price war, meaning consumers will not really see a radical reduction in prices by the national carrier.

“That is not the name of the game and we are a traditionally full-frills carrier, which means we need to maintain certain standards which come at a certain cost,” Samson explained.

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