Daallo merger key to re-emergence
Somalia’s Private Airlines kept the country connected through two decades of civil war and, as Martin Rivers discovers, they are now entering a new phase of consolidation.
When Mohammed Ibrahim Yassin, the chief executive of Daallo Airlines, describes his company as providing a “lifeline” to Somalis. he is not exaggerating.
“There was a time when there were no money transfers. no telephones. no postal system – we were everything for the country,· the airline boss recalled. “We were the link to the outside world. We transported not only people but also goods. money. medicine. It was quite a history. And still we are playing that role.” Established in 1991, the same year that Soviet backed dictator Siad Barre lost his grip on power, Daallo found opportunity in the declaration of independence by the north-western province of Somali land.
As the rest of the country descended into a power struggle between competing warlords. Somali land. which is globally recognised as an autonomous region. but not :on independent state, focused on reconstructing its self-declared capita Hargeisa- scarred by years of war withthe central government
Limited resources in Somali land’s fledgling public sector meant that local entrepreneurs and foreigners-many from across the northern border with Djibouti – became the driving force of the recovery. One sector. civil aviation, had to start from scratch.
“There was a void. Somali Airlines had collapsed,” Yassin said, referring to the former flag-carrier, which was based in Somalia’s capital Mogadishu but also had a strong presence at Hargeisa International Airport. “So we filled the void.”Initially it was very easy and there were a few factors that helped us. One was the availability of equipment.
When the Soviet Union collapsed, there were a lot of Russian aircraft available everywhere. The other thing that helped was the development of technology. The internet came into being. and all the systems which had been difficult to get- unless you were one of the major airlines.
From its humble beginnings with a 14-seater Cessna Caravan that new from Djibouti to Hargeisa. Daallo quickly took advantage of the glut of Soviet aircraft to expand operations. Chartering an Ilyushin ll-18 in 1992 allowed it to launch services to Sharjah in the’ United Arab Emirates. which had become a dumping ground for Soviet aircraft formerly based in the centralAsian republics.
Daallo then moved its headquarters to the relative tranquility of Dubai, before taking delivery of a Tupolev Tu-154 and adding more Middle Eastern points to the network in 1993.
Regional expansion across cast Africa followed and. by 2002. long-haul nights to London and Paris were being operated with a wet-leased Boeing 757. Although those European services have since stopped. Daallo maintains a scheduled presence on both sides of the Gulf of Aden. Mogadishu.
Hargeisa and Djibouti are considered its home bases. While internationally the airline serves Dubai, Jeddah and Nairobi (with a security stop in the remote Kenyan outpost of Wajir).
Daallo has also been designated as Djibouti’s national carrier, thanks to a short-lived partnership with lstithmar World Aviation. the investment arm of Dubai World, which unravelled during the global financial crisis. Looking back over the company’s history, Yassin said Daallo “has been lucky” lo preserve operations in such a challenging business environment.
There have been several close shaves. In late 2009, one hijacking and one bombing were foiled – the latter having eerie parallels with the attempted terror attack on Nothwest Airlines Flight 253 just days previously. Somalia’s battle against the AI Shabaab insurgent group and its proximity to Yemen -a stomping ground for AI Qaeda’s most dangerous affiliate-makes jihadist violence a constant worry for travelers.
But. with a semblance of security returning in recent years, foreign airlines are increasingly spying their own nights to the country. Turkish Airlines now serves Mogadishu; Ethiopian Airlines and Fly Dubai serve Hargeisa; and Qatar Airways is among the many carriers considering entering the market.
For Yassin and co-founder Mohammed Haji Abdullahi, this influx of competition has justified
a once-unthinkable merger with Jubba Airways, Somalia’s biggest carrier. “We have been operating for the last 24 years.
We have realised that Africa really needs a different way of playing the game of competition.· Yassin explained. “It’s not that easy to finance aircraft in Africa but. by mobilising resources locally among the people, by putting our forces together, we have an alternative way.
This is what we have realised after so long and that’s the reason we are taking this step.” Describing the merger as a “complete reform, he said that Daallo and Jubba will now operate jointly under the banner of Africa Aero Alliance.
Although they will retain their own distinct brands and products. equity has been re-distributed through the holding company and codeshare agreements are in place to share traffic. “Now we will have the ability to raise aircraft utilisation, so we can get better equipment,”
Yasin continued.· Also. instead of each airline doing some nights which are not profitable, when you put them together the situation immediately changes.
Cooperating. rather than competing with Jubba makes sound commercial sense. The one-time rival serves all the same markets as Daallo, as well as scooping up feeder traffic from the domestic points of Baidoa, Bosaso, Galkayo and Kismayo.
Collectively, the airlines deploy a fleet of two Airbus A321 “·two 737 Class b and one BAe 146. At the time of writing Yassin was negotiating finance leases for a pair of 70-seater ATR 72-SOOs, which will help optimise the domestic network.
The BAe 146 will then be reserved for charter flying and one of t he 737s may be withdrawn. Longer-tern1, Daallo will transition to 737NGs. while also evaluating wide-body options for the resumption of its European routes. Regional expansion is the priority for the remainder of 201 5.
Addis Ababa and Entebbe will be the first points to join the network gaining links from both Mogadishu and Hargeisa while the Yemeni cities of Taiz and Aden should be launched as soon as that country stabilises.
“We have to cover our home market adequately,” Yasin insisted. “That includes Djibouti. Somaliland, Somalia, Kenya. Ethiopia and Yemen. These are the countries we have to serve well.”
Noting that several other east African nations have under-served aviation markets. Yassin said his ultimate goal is to create 11 “bigger alliance for African carriers” – grouping together regional underdogs and finding strength in numbers as they compete with industry goliaths Kenya Airways and Ethiopian Airline.
Daallo and Jubba arc the first airline members but we are looking to expand the alliance across Africa.· he confirmed. “The company will expand to some countries which don’t have national carriers or are underserved. We’re looking into Chad, Uganda, or other countries where transportation hasn’t developed well.”
Africa Aero Alliance is currently headed by Yassin as group chairman and Abdullahi Warsame, Jubba’s managing director as group chief executive. Each new airline will gain a presence on the board, alongside a growing list of industry experts “who can add value into the venture”.
Yassin noted that Somalia’s oldest private airline. African Express Airways, has already been invited to join the alliance, and he is hopeful that it will accept the offer.
However, not everyone is expected to welcome the establishment of the new holding company. Last year, the cash-strapped government urged local operators to merge and resurrect Somali Airlines through a public-private partnership. While Yassin said he is “really excited” about the prospect of Somalia regaining its flag-carrier, he cautioned against focusing too much on branding.
“The idea of a national carrier is not what it used to be. It doesn’t necessarily have to mean the name of the country,” he insisted. It has to meet the demand and work towards the national strategy.”
After two decades without a functional government. the future of Somali civil aviation is now rightly being determined by those plucky entrepreneurs who kept the country connected during it darkest days.
Air Journal