SPECIAL REPORT:AVIATION

The Changing Skyline of

Somalias Air Transport

Growing competition inspires merger between two main airlines

BY MARTIN RIVERS

he steady rise of foreign

airlines into Somalias skies is
a positive proof of growing
optimism
about
the
countrys
prospects. But while Turkish Airlines,
Ethiopian Airlines and Fly Dubai
have only recently seen opportunity
in Somalia, its home-grown carriers
have been keeping vital air corridors
occupied for decades.
Daallo Airlines, for instance, has had
a firm footing in the region, servicing
the Somalia market even at the height
of instability.
Daallo, together with the two other
local
operatorsAfrican
Express
Airways, and Jubba Airwaysstill
account for about three-quarters of all
scheduled flights in the country. With
competition heating up, Daallo and
Jubba Airlines have now joined forces
to create the Africa Aero Alliance
(AAA).
Competitive pressure is there,
but more than that, its a matter of
maturity, explains Mohammed Yassin
(Olad), the Chief Executive and cofounder of Daallo, which also serves as
the official flag-carrier of Djibouti.
We have been operating for the last
24 years. We have realised that Africa
really needs a different way of playing
the game. Its not that easy to finance
an aircraft in Africa, but by mobilising
resources locally among the people,

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THE SOMALIA INVESTOR JUNE-AUGUST 2015

by putting our forces together, we can

have an alternative way, he says
Daallo started operations in 1991
with a tiny Cessna Caravan capable
of carrying just 14 passengers. It
exploited the glut of Russian-made
aircraft after the collapse of the Soviet
Union to rapidly expand its fleet.
By first acquiring an Ilyushin Il-18
and later a Tupolev Tu-154, the airline
extended its reach beyond the Horn of
Africa to Middle Eastern points such as
Jeddah, Dubai and Sharjah.
European
expansion
followed
around the turn of the century, with
flights to London Gatwick Airport and
Paris continuing until 2009.
A
strategic
partnership
with

The objective of
this merger is to create a
bigger alliance for African
airlines. Daallo and Jubba
are the first members, but
we are looking to expand
the alliance across Africa
Mhammed Yassin, CEO of
Daallo Airlines

Istithmar World Aviation, a subsidiary

of Dubai World, was also formed in
2007, but it quickly broke apart during
the global financial crisis.
While Daallo has had its fair share of
problems (two apparent terror attacks
were foiled in 2009), the airline has
overcome the difficult situation
in Somalia, and has continually
modernised its fleet. Its success has
been mirrored by Jubba, which was
founded in 1998 and is considered by
many to be the de-facto national flagcarrier of Somalia.
Yassin says that both airlines were
profitable in 2013 and 2014. He expects
this year to be even better, as
foreign interest in the country grows.
But with Doha-based Qatar Airways
also eyeing Somalias air space, the
two local carriers are mindful of the
need to boost efficiency. The best
way of doing this, they decided after
careful consideration, is to synchronize
operations under the banner of holding
company AAA.
Its a complete reform, Yassin says
of the merger, which took effect on
March 1, 2015. Now we will have the
ability to raise aircraft utilisation, so
we can get better equipment. Also,
instead of each airline doing some
flights which are not profitable, when
you put them together the situation
immediately changes.
At the start, it will be business
as usual from the passengers

SPECIAL REPORT: AVIATION

perspective. Daallo and Jubba will
continue to offer distinct products
under their own brand names, albeit
with the AAA logo also appearing on
the aircraft.
But, behind the scenes, financial
synergies should start accruing from
day one. Codeshare agreements now
allow the two carriers to sell tickets for
each others flights, thereby sharing
traffic and building economies of
scale.
By combining their networks in this
way, the former competitors can avoid
cannibalising demand on key routes.
Shared procurement should also
strengthen their negotiating hand with
industry partners, further improving
the bottom line.
The
groups
fleet
currently
comprises two Airbus A321s, two
Boeing 737 Classics and one BAe 146.
Talks are underway to acquire a pair
of 70-seater ATR 72-500s, while one
of the 737s may be retired. The BAe
146 will largely be reserved for charter
flights.
Expansion is firmly on the agenda,
with Addis Ababa and Entebbe top
of the target list for connectivity from
both Mogadishu and Hargeisa.
We have to cover our home
market adequately, Yassin says. That
includes Djibouti, Somaliland, Somalia,
Kenya, Ethiopia and Yemen. These are
the countries we have to serve well.
Plans to add the Yemeni cities of
Aden and Taiz to the network may
be delayed given the deteriorating
security situation in that country,
but Yassin stresses that the group
is steadfastly committed to its Arab
neighbour.
After optimising domestic and
regional flights in 2015, Daallo will next
year turn its attention back to Europe.
We have to resume our previous
operation to London and Paris, but
that will not be this year, Yassin says,
noting that longer-range aircraft such
as the 757, 767 or A330 would be
required for those routes. We expect
that next year, he adds.
The AAA management board is
headed by the existing bosses of both
companies, with Jubba Managing
Director Abdullahi Warsame becoming
Chief Executive of the group, and
Yassin becoming its Chairman.
Asked about the countrys third
major playerNairobi-based African
Express, which was founded in 1986
Yassin leaves the door wide open for
an expansion of the partnership. A
formal approach has already been
made, he notes, though the groups
aspirations in truth stretch far beyond

Bora Isiner, the general manager of Favori, the company managing the facility.
the Somali market.
The objective of this merger is to
create a bigger alliance for African
airlines. Daallo and Jubba are the
first members, but we are looking to
expand the alliance across Africa,
Yassin explains, singling out Chad and
Uganda as two countries under review.
The company will expand to some
countries, which dont have national
carriers, or are under-served There
is already interest coming from small
carriers from different places.
Amid ambitious plans for an alliance
spanning central and eastern Africa,
it is only natural to ponder what
prospect Somali Airlinesthe former
flag-carrier, grounded since 1991now
has of returning to the skies.
The government has repeatedly
urged local operators to club together
and resurrect the brand through a
public-private partnership. Although
Yassin is really excited about this
project, he cautions that the concept
of a flag-carrier has changed over the
years. It doesnt necessarily have to
carry the name of the country, he
notes.
AAA is therefore focused on
consolidating and revitalising the
private sector, before looking to the
State for equity partnerships. It is an

approach that reflects how industries

generally now function in Somalia,
following two decades without
governance.
In Mogadishu, everything is being
done by the private sector, Yassin
concludes. So the way that the
government can develop things is
to set a proper and sound economic
development strategy, and empower
the private sector to implement the
strategy. Thats the proper way of
doing things with the way Somalia is
right now.

List of
international
airline companies
either already
operating in
Somalia or are
soon to start

Air-Arabia
Turkish Airlines
Qatar
Fly Dubai
Ethiopian Airlines

JUNE-AUGUST 2015 THE SOMALIA INVESTOR

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