A new direction

Published: 01-FEB-01

Air Afrique has emerged from some turbulent times and is now preparing itself for privatisation

After a financially turbulent year, Air Afrique is slowly turning itself around and is in the process of being prepared for privatisation

The bidding process for a strategic partner has been delayed to allow for further financial restructuring as part of the pre-privatisation process.

Says Chamsou Deen Andjorin, General Manager - Southern Africa, Eastern Africa and Indian Ocean Islands: "The Ministers of Transport have decided on the privatisation. The question now is how the privatisation will proceed."

The 11 member states which own the airline will have their collective share- holding reduced from 68.44 percent currently to 33 percent. While new shares will be issued, increasing the overall number available, they will not be available to these countries. Air Afrique was founded as a multi- national airline company in 1961 after an original 11 states - Cameroon, Central African Republic, Congo, Cote d'lvoire, Benin, Gabon, Burkina Faso, Mauritania, Senegal, Niger and Chad - gained independence.

They were later joined by Togo and Mali but Cameroon and Gabon left the arrangement during the 1970s.

The founding agreement granted the airline exclusive rights to the international traffic of the signatory states while retaining autonomy at the domes- tic transport level.

Says Andjorin: "The main question is how to undertake this privatisation while maintaining the multi-nationality of the airline." The strategic partner will have a 33 percent shareholding, with the rest split between the member states (33 percent), employees and other share- holders, with the remainder floated on the regional bourse in Cote d'lvoire.

Currently the shareholding is broken down as follows: member states 68.4 percent, Air France 11.8 percent, French Agency for Development 8.8 percent, the West African Development Bank 4.4 percent, Abidjan Catering 3.3 percent and DHL 3.11 percent.

The bidding process for the privatisation was scheduled to be opened in October. However, this has been delayed to allow the airline to be financially restructured as part of a pre-privatisation process.

At a meeting in November between the World Bank and the airline's stake- holders, the Bank agreed to support the restructuring and privatisation programme.

Air France, which has a 11.8 percent shareholding in the airline, has already put in a proposal and will be one of the bidders. The airline has slowly been reducing its serious debt problem. The debt currently stands at $123 million, down from around $300 million a year ago. "We are working hard to bring it down," says Andjorin.

The arrangement with member states is one of the factors affecting the air- line's potential profitability. In terms of the arrangement, it is required to pro- vide a service between all member states and between them and the rest of the world. This has led to it having to operate a number of unprofitable routes.

"We cannot only consider the profit criteria although it is taken into consideration. If we had to only look at profit, this would lead to some of the states being isolated. In some countries the road system is not adequate and there are no rail or sea facilities," says Andjorin. He says the airline works on the principle of cross-subsidisation.

This may prove to be a thorny issue in negotiations with potential strategic partners. Andjorin suggests that member states will need to be considered in any new arrangement even if it is just a reduced service on loss-making routes

Abidjan, where the airline is head- quartered, serves as its main hub and other hubs are being developed in Dakar, Senegal, and Bamako in Mali. Consideration is also being given to Brazzaville in Congo as a future hub.

Air Afrique has set up a code-sharing agreement with Kenya Airways between Abidjan and Nairobi and it is in the final stages of setting up a code- sharing arrangement with Air France between Paris, Abidjan and Dakar.

This was due to be operative from November 1 but has been postponed to February 1. Air Afrique has bought a new Airbus A 330-200, which displays its new livery, to serve the route.

The airline, which has 13 aircraft, provides 450 weekly connections across 23 destinations in Africa and 86 weekly flights to the Middle East and Europe. It also has a growing cargo business.

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