PPRuNe Forums - Air Afrique Seeks Another French Bailout

Another "empowerment" airline comes down to earth...

_________________________________

Air Afrique's Fall to Earth
Politics Has Bankrupted the Soaring Dream of 11 African Nations

By Douglas Farah
Washington Post Foreign Service
Tuesday, July 31, 2001; Page E01

ABIDJAN, Ivory Coast

In a year when restive airline unions have tormented many a manager, Air Afrique employees have been unusually forceful in getting their message across.

Twice in recent weeks, they blocked the airline's chief executive from boarding international flights, one on Air Afrique and the other on Air France, saying they would not let him board any flight until he abandons all talk of layoffs.

So their boss, Jeffrey H. Erickson was forced to drivefrom the company headquarters here to neighboring Ghana to fly to Europe.

That's just the latest bout of turbulence for the insolvent carrier, which Erickson, a former TWA chief executive, was hired to revive.

When Air Afrique was founded 40 years ago by 11 newly independent West African countries, the airline was viewed as a shining symbol of pan-African dreams of unity and a model for the region's post-colonial era.

In contrast to the colonial system of building transportation routes primarily to extract raw materials, Air Afrique was designed to help the former French colonies unite by providing reliable service across the vast western and central reaches of the continent.

With French backing and credit, the countries bought an air fleet that connected the region's capitals, flew almost daily from those cities to Paris and offered several flights to New York each week. In the 1970s, there was talk of adding a supersonic Concorde to the fleet.

But today, the once-proud airline faces either privatization or collapse.

"We never thought that the airline would be run so badly that it is easier and often cheaper to fly through Paris to another West African capital than to use Air Afrique," said an African diplomat. "If I want to go from here to Niamey [Niger] or Bangui [Central African Republic], I can spend days waiting for an Air Afrique flight that might never show up, or fly through Paris. Something is very wrong."

What went wrong, according to labor and management sources and outside analysts, is that the company was and is a political creation, not a business. And it has suffered from many of the political pitfalls that have plagued the region: corruption, nepotism, bloated payrolls and a lack of accountability.

Benin, Burkina Faso, Central African Republic, Chad, Congo Republic, Ivory Coast, Mali, Mauritania, Niger, Senegal and Togo together own 68.44 percent of Air Afrique. Air France owns 11 percent, and several other small shareholders own the rest.

Until the early 1980s, the airline was largely operated by French expatriates who were somewhat insulated from political pressures. But the French trained very few Africans, union leaders say, leaving little technical expertise among the employees when the company was almost completely Africanized 15 years ago.

Since then, Air Afrique has suffered financially because it was unable to resist the political pressure to provide free transport for senior government officials and their families and friends, who demanded and received first-class seats that would otherwise have generated much of the airline's profits.

Airline employees said that, until recently, at least 40 percent of passengers traveled free because they used political clout to acquire tickets that were never paid for. Business travelers began looking for alternative carriers as more and more frequently they were forced to cede their first-class seats to a cabinet minister's mistress or child.

The airline also was badly hurt when it borrowed millions of dollars to buy jets in the mid-1990s, only to see its debt double overnight when the regional currency, pegged to the French franc, was devalued by 50 percent.

As a result, Air Afrique has been operating in the red since 1993, surviving on bailouts by the French government, Air France and its creditors. Now patience has run out because promised reforms have failed to materialize.

Five of Air Afrique's leased aircraft have been taken back by lessors since 1998, as the company's debts ballooned to $260 million. All fuel must be paid for in cash because credit has dried up.

By January, Air Afrique had only 10 airplanes in its fleet, including those in maintenance, but was operating on a schedule that called for 11. Flights were regularly canceled or left hours late. Those that flew were routinely overbooked, and a bribe to guarantee a seat became a normal part of the fare.

In desperation, the countries that own Air Afrique had turned to the World Bank late last year for a bailout. As part of an $800,000 package to help restructure the company, the bank supported naming Erickson to take over. Erickson, who arrived in January, spoke no French and had no experience in Africa. But he had 34 years of experience in the U.S. airline industry and had guided TWA through its successful bankruptcy reorganization in 1995.

The bank also agreed to lend the 11 governments money for a "reasonable" severance package for the 2,000 Air Afrique employees that are to be laid off to cut costs. Air Afrique has 4,200 employees, or 420 per plane; commercial airlines usually have 100 to 200 employees per aircraft. The countries also agreed to privatize the airline by April 2002.

In an interview, Erickson said that Air Afrique has reduced its schedule, raising on-time departure rates to "50 percent or 60 percent, an improvement from zero" when he took over.

"We are strategically well positioned to be the dominant carrier in West Africa if we can move from being a political entity to commercially viable enterprise," Erickson said. "The likelihood of success, despite many hurdles, is high."

But Erickson has hit a buzz-saw of opposition from unions and politicians, who oppose the layoffs and view the hiring of an American to run the company as an affront to Africans. Unions have called crippling strikes that have succeeded in rolling back an initial wave of layoffs.

"We don't understand how an American can just come in and think he knows how to solve our problems," said Bamba Bakari, a union leader. "What you do in the United States you cannot just do in Abidjan, or in Africa. Here, we have a different reality."

Bakari said "bad management" had turned Air Afrique from a "gold mine" into a debtor, and he insisted that France has a responsibility to recapitalize the company to stave off what he said were Erickson's plans to liquidate it.

Last month, as the restructuring plan foundered and creditors threatened to take back more aircraft, Ivorian President Laurent Gbagbo convened an emergency summit here of the 11 shareholding countries. At the end of the summit, no mention was made of layoffs or other politically costly moves. Instead, Gbagbo and President Abdoulaye Wade of Senegal were charged with seeking "political contacts at the highest level" with France to seek recapitalization funds and to persuade Air France to buy a greater stake in the company.

In the seven weeks since the meeting, neither the French government nor Air France has publicly commented. But diplomats familiar with the negotiations say both have told Air Afrique there will be no rescue package.

"That meeting was a huge disappointment, a real step back from what needs to be done," said a diplomat. "Neither the French government nor Air France is willing to bail out Air Afrique when they are having trouble with airlines at home. So we are back at square one."