Air Namibia A Regional Carrier Transformation Presented by: Theo Namases Managing Director 04 September 2012 1
Welcome to Namibia! Some facts about Namibia 2
The Airline business is a difficult one subject to frequent external cost and demand shocks Deterioration in developed world economies has led to lower growth forecasts. There has been an erosion in confidence due to: Euro Zone crisis Most serious threat to the global economy. Weak economic growth in the United States Political gridlock and stalled job creation. Political unrest in the Middle East and North Africa. Slowing economies in Asia Oil prices remain high Volatile currency markets. All of this has a negative impact on air travel. 5
Africa has its own set of challenges as well as... An over-regulated, fractured market Promise of liberalization from Yamoussoukro (2000) still not realized. Lingering economic/political problems Low average incomes, political instability, corruption. Infrastructure problems and rising costs High taxes and airport charges are a problem in many parts of Africa. Airports infrastructure is uneven and lags behind growth. Under-capitalization Sourcing attractive financing, both debt and equity, is difficult. Lack of capital may prevent adequate fuel and forex hedging. Human Resources Need for Pilots, Engineers, and skilled managers. 6
However, Africa also offers opportunities With more than 1 billion people, the African market represents enormous opportunities for airlines. Booming natural resource sector Especially the energy and mining sectors. Sub-Saharan Africa has healthy economic growth rates (5.5%). Over next 5 yrs, 7 of the world s fastest growing economies in Africa. (IMF). Growing middle class with purchasing power. Over last 10 years average annual RPK increase of 6.4% (ICAO). Major opportunities for reliable airlines to take traffic West Africa is the most notable,but all parts of the continent offer opportunities. Potential for Alliances and Joint Ventures. Demand for greater intra-africa connectivity. 7
Air Namibia was previously not well-positioned to seize these opportunities due to... A small airline operating to domestic, regional, and long-haul destinations often against much larger competitors. A largely point-to-point carrier with a small home market an a strong reliance on international points of sale. Isolated geography. Small economies of scale and scope. An outdated product and fleet. Weak operational and commercial performance. A customer mix weighted towards leisure passengers. Strong competition in key markets.... but is now going forward with its 5-Pillar strategy to transform itself into a more competitive airline. 8
Vision Where are we going? A safe, reliable and profitable airline helping tourism to thrive and encouraging business investment in Namibia. The current Business Plan s Five-Pillar strategy is designed to make our mission statement a reality. 9
Building a strong Business... Air Namibia 5 Pillar Strategy Carrying the Spirit of Namibia... A safe, reliable and profitable airline helping tourism to thrive and encouraging business investment in Namibia....with Operational Integrity... Investing and planning for the future Transforming our network, fleet, and infrastructure....commercially nimble & proactive... Make operational performance a competitive strength Operational initiatives to deliver safe, on-time, reliable performance efficiently....truly Customer focused... Compete smartly and swiftly Improving our pricing, revenue management, sales, and distribution....delivered by a confident Team... Bring the Brand to life by demonstrating the warmth of Namibia The basics done well, consistently - and with a smile! 10 An aligned and engaged organization New organisational structure to improve efficiency, accountability, and effectiveness while reducing complexity.
A new network strategy has been introduced A geographically focused network that efficiently serves traffic flows to/from and within Southern Africa. Develop a WDH hub to build route density by providing connections among domestic, regional, and international markets; Connects markets that cannot sustain direct point-to-point service; Results in more destinations and more frequencies. Customers benefit from an expanded choice of destinations and frequencies. Creates more opportunities to develop partnerships with other carriers. Creates economies of scale to decrease costs and simultaneously increases economies of scope from more destinations, frequencies, and timings. Contributes to Namibia s economic development by increasing direct flights to Namibia, making the country more appealing as a regional business centre and helping the nation achieve its Vision 2030 goals. 11
FRA Air Namibia Network October 2012: Weekly RT Frequencies WDH-FRA (7) WDH-CPT (21) WDH-JNB (21) WDH-LAD (6) WDH-ACC (3) WDH-GBE (4) WDH-HRE (4) WDH-WVB (7) WDH-MUB (4) WDH-LUD (3) WDH-OMD (3) MUB-VFA (4) VFA-WDH (4) ERS-NDU (6) NDU-MPA (6) MPA-ERS (6) ERS-OND (14) WDH-OND (3) 12
A young, fuel efficient fleet is being rolled out Narrow-body Aircraft Two A319-100s recently acquired. Two new A319-100s to replace B737-500s at the end of 2012. Regional Aircraft Four ERJ-135s have been introduced over the past year replacing wellworn Beech-1900s. Wide-bodies The two A340-300s will be replaced in mid-2013 by two new A330-200s. By mid-2013 Air Namibia will have a modern. flexible fleet consisting of: Four ERJ-135 regional aircraft. Four A319-100s Two A330-200s 13
Air Namibia is currently embarking on a wide-range of initiatives including: Fuel program, contract review, website developments; Working with the Namibia Airports Company to improve airport facilities; New revenue accounting and financial reporting systems; Next generation operations control and flight planning centre; Cost leadership by pushing forward productivity improvements and cost cutting initiatives (fuel, maintenance, ground handling; Targeted investments in operations New Ground Service Equipment IOCC 14
With the new roadmap, Air Namibia aims to increase its passenger volumes by about 60% in the next five years. (introduced in October 2011). Majority of this growth will be by market capture, through the following streams; Destination marketing initiatives. Air Namibia is actively promoting Namibia as a prime destination, be it for leisure, conferencing, sports and business. People who previously went to other countries in Africa or Europe will be coming to Namibia. Direct routes into Namibia: Previously with a limited network, people visiting Namibia had to travel via intermediate points on other airlines. With new and direct air transport linkages introduced, Air Namibia becomes the obvious and preferred choice, capturing this market from others. Transfer Traffic: With new destinations linked to Windhoek, Air Namibia offers alternate routings for travel between a number of Southern African cities, offering a safe, congestion or hassle free experience. 15
Majority of this growth will be by market capture, through the following streams Improved customer service standards: we are bringing the brand promise of carrying the Spirit of Namibia to life, Namibia being a safe, peaceful and friend country, diverse and rich in culture and tradition. Namibia is synonymous with endless horizons and unpopulated spaces, which all translate into comfort. In line thereof, our aircraft entering the fleet offer generous legroom for passenger comfort, and we are using this as a unique selling point we believe will help us win market share. Alliances and strategic partnership: we believe that no airline can survive in this highly competitive environment if it opts to operate in isolation. However, such relationships should be carefully selected. 16
Initiatives across a range of areas are being pursued Cost Leadership Fuel Efficiency Programme (integrated approach analysing every activity that has an impact on fuel consumption (largest cost item) Maintenance, Ground Handling, Catering and other contracts are currently being reviewed and renegotiated. Operational Efficiency Revenue Generation An Integrated Operations Control Centre responsible for overall network performance is being established. Ground Service Equipment is being renewed and turnaround coordinators appointed to improve airport performance. AirNamibia.com is to be re-launched soon. Distribution partnerships being pursued. Attention is now being focused on Revenue Management. Organisational Effectiveness New revenue accounting and financial reporting system Organisational structure and performance management system being introduced to break down barriers and improve accountability. 17
Thank you! 18