Chinese Aviation Gambits – The Somalia Shuffle

A Chinese-financed airline initiative in Mogadishu would support Belt & Road in Africa

The tiny Tanzanian fishing port of Bagamoyo is being turned into one of Africa’s largest ports and will handle 20 million containers a year by 2045. The Sultanate of Oman, which has close historical links with Tanzania, is funding the project with a $10 billion investment. And China, which has no such history with Tanzania, is taking care of the construction.

When complete, Bagamoyo will be an important staging post on the New Maritime Silk Road, the “road” part of China’s Belt and Road programme. And it is not the only Belt and Road investment in Africa – Chinese businesses are busy building and developing in Africa at a rapid pace. As the relationship between the two regions develops more air links will be required to get people to and from where they need to be.

Last time on Airline Revenue Economics we danced the Port Moresby two-step. We explored how Chinese investment in Pacific aviation through the Belt and Road initiative and via Papua New Guinea could help island economies in the Pacific connect to the world and grow their economies.

Click here to read that article.

Next time we do the Taklamakan Tango. But today we continue the theme and consider how China should invest in African aviation, should they decide to do so. For reasons I will explain, I think their best bet would be to build a new airline with a hub connecting from all major Chinese cities to all major African cities at Mogadishu in Somalia. I call this the Somalia shuffle.

But before we continue, an apology. Some readers may have received my last article twice – this seems to have been a platform issue. Sorry about that.

Assuming that China wishes to support aviation in Africa, these are their options.

Option 1: Invest in existing airlines, most likely either Ethiopian Airlines, Kenya Airways, Rwandair or Egyptair

Option 2: Send wide-bodies from the “big three” Chinese hubs at Beijing, Shanghai and Guangzhou straight into Africa

Option 3: Use a western Chinese city as a hub into Africa with wide-bodies

Option 4: Fly via a hub in east Africa from the big three Chinese cities

Option 5: Fly via a hub in east Africa directly to Chinese cities, including but not limited to the big three.

I think that option 1 is unlikely because these businesses, while successful in their own way, come with a lot of legacy processes and relationships.

Option 2 is unlikely too as Beijing is 4,721 miles from Alexandria, Guangzhou is 6,851 miles from Brazzaville and Shanghai is 7,275 miles from Yaoundé – these flights would be extremely expensive to operate and the necessary demand is unlikely to materialise.

Option 3 is not much better than option 2. For the same Alexandria, Brazzaville and Yaoundé destinations, Chengdu, Ürümqi and Changsha are 4,306, 5,342 and 6,846 miles away respectively. These flights are just too expensive to be economic.

Option 4 is interesting but inefficient. Passengers originating in Chengdu, Ürümqi and Changsha have to go back on average 967 to reach one of the big three hubs, adding more than two hours flying time plus connecting time to the journey.

Option 5’s only challenges are that it will require cash and government support. Assuming that China does not try to enter a market where the government has already invested in it’s incumbent carrier (Ethiopia, Kenya and Rwanda in particular) the necessary rights to fly should be forthcoming. Cash will not be a problem.

As countries on the east coast of Africa, Eritrea, Djibouti and Somalia are the closest to China. They would all be good bets. Eritrean Airlines has some single-aisle Boeing 737s which it currently moves around in Africa and the middle east. Air Djibouti is similar, although even smaller.

Somalia’s Daallo Airlines and Jubba Airways are focused entirely on the middle east. These carriers are not members of airline trade association IATA.

The key difference between Somalia and Eritrea-Djibouti is that the Somalian government actively prefers to leave aviation to the private sector rather than owning an airline themselves.

According to a recent government report, five Somalian airlines have applied to the Somalian regulator for Air Operator Certificates and are preparing to launch. To the best of my knowledge none are owned by the Somalian government.

1. Wibdi Express Somalia

2. Salam Air Somalia – Omani owned

3. Hala Airlines Somalia – private jet operator

4. Freedom Air Somalia – Kenya HQ

5. Daallo Airlines Somalia – Dubai HQ

Mogadishu airport currently has 40 domestic and international flights a day, carrying around 6,600 passengers. Most passengers are Somali nationals or of Somali heritage. In comparison, Ethiopian Airlines next door serves around 150 cities from their hub at Addis Ababa and carried 33,261 passengers a day in 2018/19 (see article).

However their passenger services only serve the big three hubs plus Chengdu. Kenya Airways and Rwandair only serve Guangzhou.

The maps below show that Somalia could serve most Chinese cities with cost-efficient A321neo or A321XLR (neo = New Engine Option, XLR = Extra/Extended Long Range).

Many African cities could use the Comac 919, a forthcoming Chinese-produced aircraft, potentially offering the new Chinese manufacturer a promising international customer. Flights to China could, if Airbus would take too long to deliver A320neo family aircraft, use forthcoming Chinese-produced wide-body Comac 929s.

So we have:

1. There is clearly a gap in the Somalian and African markets for a new international airline

2. Many cities in China currently have inconvenient connections into Africa

3. The Somalian government have no reason as far as I can see to turn down an overseas investor

4. Mogadishu is conveniently located for flights to China

5. A new Somalian airline could buy aircraft from new Chinese manufacturer Comac.

Game on!