Air Afrique: the African dream that never reached cruising altitude
As a child, I didn’t have a clue on how airlines operated. I simply knew that people sat in those flying machines and they traveled very far and very fast. But the first time I heard about Air Afrique, it ignited such a strong sentiment in me. I didn’t even know who owned the firm, but the name reassured me that it was truly African. I was captivated by Air Afrique because whenever I watched their commercials on T.V., I saw pilots and crew members who looked like me.
And I found their posters fascinating because they depicted an Africa that I was familiar with. I was so infatuated with Air Afrique that at that age, I thought it was a much bigger airline than Air France and KLM, the only other carriers I knew. Each time the engines of an aircraft roared through the skies, I pictured a black pilot in command with the beautiful flight attendants whom I loved.
Was Air Afrique that glorious or was it a fantasy that I had as a child? Indeed, most Africans who knew Air Afrique would agree with me that it was an airline that made them proud. A truly multinational firm owned mostly by African states. Nevertheless, the 41-year lifespan of Air Afrique wasn’t that splendid in many aspects. Besides its early years when the company quickly grew its operations, Air Afrique’s history was underlined by a visionless leadership, an opaque management, and constant power-plays.
A Francophone Affair
Air Afrique was principally owned by a consortium of francophone African countries that interestingly, were also either former French colonies or protectorates. Sierra Leone was the only anglophone country shareholder and it joined much later in 1978.
During the Treaty of Yaoundé on March 28th, 1961 in Cameroon, 11 African countries established Air Afrique. The countries that signed the treaty were: Congo, Central African Republic, Cameroon, Côte d’Ivoire, Gabon, Benin, Burkina Faso, Mauritania, Niger, Senegal, and Chad. It wasn’t until in 1968 that Togo and in 1992 that Mali, officially held a participating stake in the firm. The African countries had a 66% share in the venture while Air France and Union Aéromaritime de Transport (UAT) held a 16% stake each.
Over the years, Gabon, Cameroon, and Sierra Leone disposed of their equity in the firm, leaving 11 members. The table below from an AfDB report, lists the shareholders of Air Afrique in 1999. The states increased their shares to 70.40% after the other members exited.
The impetus for a pan-African Airline
Air Afrique was established during a period when African countries — mostly colonized by the French — were gaining their independence in a rapid sequence. From 1957 to 1961, out of the 24 African countries that gained their independence, 15 were former colonies or protectorates of France. Hence, the firm was born from the heydays of the independence years in those countries.
It was clear that the Air Afrique project was driven by a strong desire of some African leaders to have a common identity. They found this identity in an airline they would own, and which would ensure the transportation of their people within their borders and beyond; an airline that could eventually compete against the airlines of countries that just yesterday, besieged them.
Some people argue that Air Afrique was less of a pan-African dream — as depicted — and more of an opportunity that the leaders identified to exploit a commercial activity for the benefit of their newly independent countries. I disagree. Given the period in which the company was launched, leaders in the newly independent countries were looking to make a statement that, united, they could accomplish great exploits. Furthermore, the Organization of African Unity (OAU) was also created in 1963 and it is a strong indication of the pan-African sentiment that was present in Africa during that period.
The early years
Despite some internal disagreements among member states, Air Afrique was off to a remarkable operational start. The firm scaled rapidly by leasing new aircraft, opening new agencies, and flying new routes. In October 1961, it began its first long-haul flights between Africa and France. By April 1965, Air Afrique had a fleet of nine aircraft and it managed 2,500 employees. At its height, Air Afrique employed over 5,000 people and served 30 destinations in Africa, Europe and North America.
The company even flew Pope John Paul II from Ghana to Côte d’Ivoire and from Côte d’Ivoire to Rome in May 1980 when the Pope toured Africa.
What went wrong?
In retrospect, the fate of Air Afrique was inevitable from the get-go. Besides the disappointing leadership, one can also point to a few other external factors that contributed to the firm’s downfall. But in my opinion, all these reasons were simply the consequences of a leadership that lacked vision and a bad operational execution. Although internal conflicts and inadequate management were present since the inception of the pan-African airline, the outcomes only began to manifest in the operations of the firm during the 1980s.
Internal battles
The visionless leadership that I refer to extends beyond the leadership of the firm. It included political leaders who wanted to have things done their way at Air Afrique. Remember, Air Afrique regrouped 11 countries and political leaders quickly saw an opportunity to reward allies through nominations and promotions and punish foes through layoffs. Leaders also manifested their ego. For example, there was a bitter debate between a few state leaders regarding where the headquarters of the pan-African firm should be. It was finally inaugurated in Côte d’Ivoire, but the tussle had already damaged the comradeship among the political leaders. Many countries had even established their own airlines with a couple of planes. They eventually went bankrupt.
In another example, some country leaders were quite upset that there weren’t many people from their countries in management roles within the firm. As trivial as this may seem, this caused some countries such as Cameroon and Gabon to exit Air Afrique.
Conflicts of interest and management oversight
Political leaders weren’t the only guilty ones. At the operational level, executives, branch managers, and other decision-makers engaged in behaviors and decisions that one could only qualify as a suicide mission for Air Afrique. There are first-hand accounts that some high-ranking executives were suddenly struck with the urge to run for top-level political positions in their countries. They were emboldened because they were running a pan-African firm which was also very political. As a result, they focused more on nurturing their political ambitions and less on sustaining the airline. This also put them in conflict with their country leaders who were not to be challenged by people they nominated.
Air Afrique became an “everything-goes” company
In the past, I had the opportunity to speak with a few people who were either related to or knew people who had worked at Air Afrique. They narrated stories of family members and acquaintances of high-level personnel of the firm who flew regularly for free with Air Afrique. Some housewives became business women overnight and started selling fresh vegetables and African food in Europe.
A few years ago, during a conversation with a friend, he revealed to me that he knew a woman who regularly traveled from Togo to France to sell okra and other spices. She didn’t hide the fact that she traveled gratis. The Air Afrique segment of her business was so lucrative that she began to neglect her other activities in Togo. There were reports of Air Afrique flight attendants who were involved in commerce and they stuffed their luggage with merchandise. Business was booming for many people because of Air Afrique.
Evidently, there’s no such thing as free lunch and somehow, someone had to pick up the tab. In this case, it was Air Afrique who was liable for the expenses. The company struggled to pay its creditors and the African states desperately injected cash on multiple occasions to keep the company afloat.
The situation only worsened with cancelled flights and excessive tardiness. Some flights even reportedly departed earlier than scheduled, leaving passengers stranded and confused. To top it all off, between 1987 and 2000, there were six reported incidents with Air Afrique’s flights. Clearly, in a highly competitive industry, customers would begin to choose alternative airlines whenever they could.
CFA Franc devaluation: an important external factor
In 1994, France devalued by 50%, the value of the common currency that 10 of the 11 African countries used: the CFA franc. Mauritania had its own currency. Regarding Sierra Leone, it didn’t use the CFA franc and I couldn’t find data on this, but I believe by 1994 the country had already exited Air Afrique because the civil war began in 1991.
I published an article which explains the history of the CFA franc currency and why France even had the right to devalue a currency that African nations utilized.
The consequences of the devaluation were quite damaging to Air Afrique. The firm earned in local currencies but paid for the lion’s share of its expenses in dollars. It also affected the firm’s customers in the countries which used the CFA franc. Their purchasing power decreased as a result of the devaluation and planes tickets became theoretically 50% more expensive for them. I reckon that traffic from Europe to Africa increased on the other hand, helping to offset some of the losses in domestic flights.
The effects of the CFA franc devaluation could have been mitigated
It is my view that too much weight shouldn’t be given to the devaluation of the CFA franc in Air Afrique’s demise. By 1990 and 1991, it was clear to all decision makers — therefore to Air Afrique’s executives as well — that the CFA franc would soon be devaluated, and that it was the only option that France and the Bretton Woods institutions expected. Had Air Afrique maintained strong financial results during the prior years and implemented very efficient operations, it could have weathered the storm. Unfortunately, by 1994 the firm’s financial health had already deteriorated and the devaluation simply put it into a coma that it was never able to recover from.
Air Afrique was debt-ridden
By the mid-1990s, the firm’s debt almost doubled in the wake of the currency devaluation. In 1993, total debt was about 142 billion CFA francs. In 1994, this amount ballooned to 237 billion CFA francs. It did however manage to reduce the total entity debt to 176.49 billion CFA franc ($229 million) by 1999. It was reported that by the beginning of 1997 with a new CEO, Air Afrique was paying off 300 million CFA francs (> $500,000) of debts every week.
By reducing its debt, Air Afrique significantly reduced losses in 1997, but this came at a very steep price. Firstly, Air Afrique handed over four of its Airbus aircraft to creditors, significantly reducing the number of international routes (Africa-Europe-Africa-North America) that they served. Secondly, the company was paying off so much debt that it didn’t have much retained earnings left to invest into revenue-generating activities. Consequently, the firm’s finances were still in the red and by 2001, Air Afrique had accumulated 332 billion CFA francs ($431 millions) in debts.
Below is an image of Air Afrique’s P&L statements from 1989 to 1997. It’s in French, but you can see the negative net income starting from 1993. Also, note the significant increase in expenses starting from 1994. Most likely due to the devaluation of the CFA franc.
There were plans to save Air Afrique
Multiple meetings were held between heads of state, ministers, shareholders and finance institutions, all in the goal of saving the pan-African airline. Many emergency plans resulted from these meetings. In my opinion, whenever an organization begins to initiate many emergency plans, it means the organization was too late in implementing strategic plans that would have helped it to avoid emergency situations in the first place.
Efforts to save Air Afrique were unsuccessful. Even the World Bank tried its luck. With Air Afrique’s board of directors’ mandate, in January 2001 the World Bank designated the former CEO of Trans World Airlines (TWA) Jeffrey Erickson, to become CEO of the firm during its restructuring efforts in the hopes of privatizing it. His tenure was marked by many layoffs, strikes, and misunderstanding with his team. He didn’t speak a word of French. The antics lasted for nearly a year before the World Bank threw in the towel.
Discussions for a new pan-African airline
The most serious attempt to revive Air Afrique occurred in August 2001. Air France discussed with the states its plan to increase its stake to 35% in Air Afrique by injecting fresh capital (€19.06 million) and re-branding the new firm Nouvelle Air Afrique, meaning the New Air Afrique. Consequently, African states were to reduce their share to 22%, giving Air France a controlling stake in the firm and giving it more flexibility to implement restructuring plans. Why was Air France adamant in keeping a doomed airline alive? The African countries maintained the rights to the routes in their countries and this constituted an asset that Air France did not want to lose.
In any case, this plan was scraped like many other ones for a couple of important reasons. Air France wanted to acquire the rights to Air Afrique’s routes. The states didn’t want this because some of the countries had already established their own airlines and they didn’t want Air France to have exclusive rights to their routes. Also, at that point the member states were simply exhausted from the challenges that the airline faced, and they no longer had the initial urge to run a unified enterprise.
After 41 years, the pan-African airline became history
On February 7th, 2002 news agencies around the world reported during an extraordinary board meeting in Côte d’Ivoire, that the 11 states decided to file for bankruptcy, unable to find a viable solution for the $464 million debt that the firm owed to creditors at the time. Overnight, 4,200 Air Afrique employees became jobless. The debt chapter was over, and it was simply the end of the Air Afrique novel. Most of the employees were left to fend for themselves and for many of them still, the book remains because they’re still fighting for their severance packages.
Following the liquidation of Air Afrique, the African state shareholders tended to their airlines and others established their own. Toumaï Air Chad, the flag carrier airline of Chad, was established in 2004; Compagnie Aérienne du Mali launched in 2005; Senegal Airlines was relaunched in 2009.
The African flag carriers are not sustainable
The newly-created and revamped airlines didn’t last for a few reasons. Firstly, they transposed the same bad management and visionless leadership to the state-owned airlines in the hopes of a different result. Secondly, the airlines industry is a historically competitive industry where margins are quite low. As a result, profitable airlines rely on economies of scale and operations efficiency to stay afloat.
The state airlines hurriedly leased a few planes and they were in service. Some even had only a couple of aircraft in their fleet. Clearly, they weren’t going anywhere far. Air Togo for example, was only in service for two years with two aircraft before it finally went bankrupt. It was a similar fate for the other airlines. The firms that survived over many years were dependent on constant cash injection or they ceded much of their capital to bigger western airlines.
Finally, although Africans increasingly traveled by air over the years, air travel still represented a small portion of transportation mediums for Africans. Airlines which found success in Africa used hubs to increase capacity on their flights because the market is so fragmented. The state-owned airlines didn’t have the scale to establish these hubs and they struggled with empty seats. The situation hasn’t changed significantly today. This wasn’t the case during the early years of Air Afrique because there were 11 shareholders and by pooling their capital together, they could add many more aircraft to their fleet. They also shared routes, reducing some of the regulatory obstacles that smaller airlines faced.
A new pan-African airline with a different approach
When you observe the airline industry in Africa today, the best regional airline is arguably Asky Airlines. The firm is based in Lomé, the capital city of Togo. Interestingly, Asky received a lot of political backing from most of the states that were shareholders of Air Afrique. The main difference was that most of the shares were owned by private investors. I think the states and other investors learned a lesson from Air Afrique and they wanted to avoid states’ interference in the new airline.
Maybe a pan-African airline wasn’t a bad idea
When you analyze Asky Airlines further, you’d realize that Ethiopian airlines has about a 40% stake in the firm. Ethiopian airlines is in turn wholly owned by the Ethiopian government and it is the best and most efficient airlines in Africa and one of the best in the world. This is to say that a partial ownership of governments in an airline is not intrinsically a bad strategy. In fact, most flag-carrying airlines have as shareholders, countries or investment vehicles in which countries have a sizable share.
This means Air Afrique didn’t fail simply because African countries owned shares in the firm. It failed because of bad management and a lack of vision. Ethiopian airlines is a government entity, but with a clear vision and a sound management, the firm has become the poster child of successful African airlines. Perhaps though, a single government has more flexibility to dictate policies for a state entity whereas multiple countries would result in many more conflicts of interest. Maybe single-party systems work better than multi-party systems in state entities (parties denoting countries).
What’s the future of the national airlines of the “11”?
In the next few years, competition will intensify in the air transportation industry in Africa. Regional airlines such as Asky have a better chance of surviving or even thriving than most national airlines. In the recent past, countries such as Senegal and Côte d’Ivoire have relaunched their airlines. It’s important to remember that all the national airlines of the “11” have all went bankrupt. The ones that are currently operating have been through at least one bankruptcy proceeding and are new airlines created from the ashes of the old ones.
Even with a resolute management, the industry is a lot more competitive than ever and these national airlines will struggle to survive. I envision that to stay afloat, some of the airlines will sell a bigger portion of their shares to private and institutional investors. They will also collaborate more than before, with their technical partners. In this case, Ethiopian airlines would be a great technical and strategic partner for these state airlines. It’s even possible that Ethiopian airlines sometimes in the near future, creates another entity which will acquire, merge, or own majority shares in some of the smaller state airlines which are strategically located in order to create more regional hubs.
