SA Airlink Madagascar Air Services MOU. Memorandum of Understanding between the parties: Madagascar Ministry of Transport, Tourism, and Meteorology

Transcription

1 SA Airlink Madagascar Air Services MOU Memorandum of Understanding between the parties: Madagascar Ministry of Transport, Tourism, and Meteorology SA Airlink (Pty) Ltd And witnessed by: The South African Embassy in Madagascar Page 1 of 6

2 Contents Purpose...3 Background...3 Wherefore the parties agree...4 Franchise System and how the JV will operate...4 Proposed JV Network...4 Business concept...5 Conclusion...5 Execution...6 Page 2 of 6

3 Purpose To institute an understanding between the parties in order to enable the establishment of a Malagasy Joint Venture airline business, including participation by SA Airlink (Pty) Ltd. ( Airlink ) together with a Malagasy partner, which would engage in the air services markets within Madagascar for the purposes of providing improved quality and quantity of air access to the travelling public to key destinations within Madagascar and to and from Madagascar intra regionally. Background Airlink has provided reliable and punctual daily services between Johannesburg ( JNB ) and Antananarivo ( TNR ) for over nine years and has in the past also serviced routes including JNB to Tolagnaro (Fort Dauphin) ( FTU ) and JNB to Nosy Be ( NOS ). Airlink is presently the only designated South African airline operating services between South Africa and Madagascar. The current Bilateral Air Services Agreement ( BASA ) between South Africa and Madagascar accounts for fourteen weekly frequencies between the States. Airlink is the unique South African designated airline. Airlink has historically held ten of the available frequencies allocated as to seven on the route JNB-TNR, two on the route JNB-FTU, and one JNB-NOS. The South African Department of Transport recently allocated the remaining four frequencies to Airlink for deployment on the JNB-TNR route and additionally reallocated the two frequencies previously allocated to the JNB-FTU route to the JNB-TNR route. Thus all fourteen frequencies have been allocated to Airlink such that Airlink is designated to operate thirteen frequencies on the route JNB-TNR and one frequency on the route JNB- NOS. The Madagascar economy has been set to stage a recovery pursuant to the emplacement of a new stable democratically elected Government in Q after an extended period of political instability. However,Madagascar s economic recovery has been inhibiteddue torestricted access to key destinations within Madagascar,as the road infrastructure within Madagascar is poor and air access is limited. The Madagascar Government, through its Ministry of Transport Tourism and Meteorology ( Ministry ), has identified Airlink as having the ability to assist in addressing the country s airlift shortcomings. Airlink has the appetite and the resource to work closely with the Government of Madagascar in installing improved quality and quantity of air services within Madagascar, in de-feeding and re-feeding longhaul flight arrivals and departures, and in connecting Madagascar more comprehensively with the world and within the Southern African Region. The Civil Aviation Authority of Madagascar ( ACM ) sees the mechanism of a Joint Venture ( JV ) between Airlink and a local Malagasy airline as the possible means to better addressing the country's air travel needs. Such JV would preferably be corporatized and may include the participation by Airlink in the shareholding of a local airline business. Airlink currently operates a daily flight on the JNB-TNR route and will be increasing frequency on this route to double daily by May Airlink has committed to recommencing services on the JNB-NOS route with effect from 20 th March 2016, initially with a single weekly flight on Sundays. The planned additional daily frequency between JNB and TNR will facilitate an increase in frequency and capacity on the route and thereby an improvement in the quality and Page 3 of 6

4 quantity of services, and will serve as a gateway for access to domestic destinations beyond TNR. Wherefore the parties agree Airlink will implement a Madagascan domiciled air transportation system by way of a JV with an establishedmadagascan Airline. The Madagascan partner to the JV will be referred to as MadCo and it is possible that Airlink may become a shareholder in MadCo together with local Malagasy partners. The JV would take the form of a commercial relationship between MadCo and Airlink. The JV would have its financial, administrative, commercial and operational functionalities vested in Airlink by way of a Technical Support Services Agreement ( TSSA ). The JV would then establish a network of domestic destinations and a schedule of flight activity designed specifically around coordination and synchronization with intercontinental and intra Africa flights arriving at and departing from key Madagascan entry points such as TNR. Flight seat inventory would feature within the Global Distribution System ( GDS ) such that it would be available for interlining and inclusion in single contract multi sector itinerary ticketing. The business of the JV will operate using MadCo s Air Services License ( ASL ), where aircraft operated in the JV will remain on Airlink's Air Operators Certificate ( AOC ) and be the subjects of a wet lease arrangement between the AOC holder (Airlink) and the ASL holder (MadCo). The trading name of the business would be Airlink, conveyed by Airlink's visible brand intellectual property, marketed and sold in the IATA Global Distribution System in conjunction with the South African Airways ( SAA ) invisible brand intellectual property that Airlink is entitled to use in terms of its Franchise and License Agreements with SAA. Any local Malagasy branding as deemed required by the JV will be included in the visible branding. Concerning the exploitation of domestic flights, the partnership program between Airlink and MadCo will operate using MadCo s ICAO flight designator. Franchise System and how the JV will operate The JV will operate using marketing intellectual property from both parties to the JV. MadCo will provide its ASL, and Airlink will supply aircraft on a wetlease ACMI basis where the aircraft are operated in accordance with Airlink s AOC. All JV flights will operate using MadCo s ICAO flight designator.airlink will provide marketing intellectual property, including;iata sales designator (by way of franchise or code share), network and scheduling, inventory hosting, revenue optimization, and marketing and sales. Additionally Airlink will provide financial and administrative support including revenue accounting, management and financial accounting, and human resourcing. The services that will be provided to the JV will be contractually committed by way of a TSSA as part of the Commercial Agreement between the parties to the JV. Proposed JV Network The proposed JV network is depicted in the diagram below. Page 4 of 6

5 Business concept For the purposes of the business of the JV, Airlink would wetlease aircraft to MadCo(either Avro RJ85 with 83 seats, or Embraer ERJ135/140/145 with up to 50 seats), and the seat capacity produced in terms of the wetlease would be sold to the JV. In turn the JV would purchase the seat capacity in whole and it would market and sell the inventory. Marketing intellectual property ( IP ) for use by the JV is negotiable between the parties to the JV. The Airlink scheduled flights JNB-TNR-JNB and JNB-NOS-JNB would not be part of the JV. All other flights operated by the JV will operate in terms of commercial arrangements (code share or franchise) as agreed between the parties to the JV. Conclusion Airlink is willing and ready to commit to the improvement of the quality and quantity of scheduled air services within and to and from Madagascar Intra-Regionally and thereby provide enhanced air access to points within Madagascar. Accordingly, Airlink is willing and ready to work with MadCo in a JV for the purposes of delivering on this objective, and is willing to participate in the shareholding of MadCo together with local Malagasy partners. MadCo is (or will become) a duly licensed (ASL) Madagascan airline with a valid transportation certificate (AOC). The JV will operate the aircraft needed in terms of carrying out its business on MadCo s ASL. The aircraft will be provided by Airlink by way of an ACMI wetlease arrangement between Airlink and MadCo, operated on Airlink s AOC, and incorporated in the commercial agreement and TSSA that gives effect to the JV. Once the JV business has been established and balance sheet equity permits in terms of normal financial covenants, it is intended that the JV will acquire its own aircraft assets. Page 5 of 6

6 The JV would avail of the established infrastructure and expertise within and available to Airlink as the strategic airline partner, in particular as regards visible and invisible brand intellectual property. As such, the JV would trade as Airlink and market and sell its seats via the GDS using the IATA marketing IP associated with Airlink in conjunction with any local branding deemed required by the JV. Subject to compliance with Civil Aviation Regulations and Technical Standardsof both Madagascar and South Africa, the Malagasy Government as represented by the Ministry does not object to: The formation by Airlink of a JV in collaboration with a local Malagasy airline, in which Airlink may procure shares. The MOU between AIRLINK and the Malagasy JV partner being negotiated by both parties to the JV. Airlink increasing the frequency of regional flights between South Africa and Madagascar to 14 flights per week instead of 07. Domestic flights to be operated in terms of the JV being determined on the basis of a subsequent market analysis All flights operated by the JV will bear MadCo s ICAO designator. Execution This MOU was signed in acceptance in Antananarivo Madagascar on March 2016 By: Madagascar Ministry of Transport, Tourism, and Meteorology Honourable Minister Ulrich Andriantiana SA Airlink (Proprietary) Limited Chief Executive and Managing Director Rodger Foster And witnessed by: The South African Embassy in Madagascar Ambassador Maud Dlomo Page 6 of 6