The national airline- Air Botswana, is beginning to feel the devastating financial impact of the Coronavirus (COVID-19).
Air Botswana bosses are now thinking of putting some of its employees on forced leave and if push comes to shove employees will receive salary cuts. In a letter written by management to staff dated 18 March, 2020 headlined- Business impact of COVID -19 on the operations of Air Botswana, the management team explains that Air Botswana has reviewed sales trends since February 2020 and compared sales returns with the same period last year.
The letter notes that the variations between February 2019 and February 2020 sales proceeds were insignificant with a drop of P300 000.00, as cancellations were mostly limited to China which did not have a huge impact on Air Botswana as the overall passenger numbers to and from China are small in comparison to Europe and the Middle East.
However, the situation for March is more along global trends, primarily owing to cancellations or postponement of travel by businesses, the Government sector and traders as both Europe and the Middle East felt the impact of the virus. “In the first two weeks of March 2020, the drop-in sales stood at P5.5 million, representing a 32 percent contraction,” reads the letter. The decline in sales volumes in subsequent days, following the announcements made by South Africa, has significantly accelerated and the level of business contraction for the month is expected to be as high as 60 percent, reads the letter.
This has prompted the Air Botswana management to implement a few measures to minimize the impact of COVID-19. Staff leave levels have been reviewed and mandatory regulated leave conditions will be enforced to reduce accumulated leave. Air Botswana staff would be required to take compulsory leave from Monday 23rd March. “This would address social distancing as well as reduce leave liability,” reads the letter. Catering on all routes has been suspended with immediate effect.
Air Botswana will monitor the situation and if ti does not improve staff may be required to take “unpaid leave or even receive lower salaries.”
President Ian Khama has finally issued a directive instructing that the struggling and cash-strapped national airliner, Air Botswana be turned into a company with private shareholding. This came to light this week from documents shared at the ongoing Public Accounts Committee (PAC) and passed to BG News. The Presidential Directive CAB 12(A)/2017 of 3 May 2017 further instructs the privatised Air Botswana to “partner with Wilderness Holdings who will have a majority shareholding” subject to negotiations and applicable statutory requirements.
Permanent Secretary in the Ministry of Transport and Communications, Kabelo Ebineng told the ongoing PAC this week that the sale of Air Botswana is expected to be completed in eight months’ time because they are still negotiating with a company that will take over the struggling airline.
Air Botswana is believed to have successfully completed its first phase of restructuring in December 2016 culminating in over 200 jobs shed in a retrenchment exercise that was concluded in March 2017.
This was then followed by an expression of interest (EOI) to turn Air Botswana into a company, which was floated and closed in 28th February 2017. A total of 17 companies are believed to have responded to the advertisement to acquire the struggling airline and were evaluated in March 2017. According to a report seen by this publication, “Botswana Government is considering various workable ways of weaning itself of the airline’s financial adversity, while maintaining the entity as a national flag carrier.”
This explains the Presidential Directive instructing that Air Botswana be turned into a company with private shareholding, and to partner with Wilderness Holdings, which owns Wilderness Safaris and has interests in Okavango Delta. According to Wilderness Holdings’ financial results, President Ian Khama has beneficial interests in Linyati Investments, which is a subsidiary of Wilderness Safaris.
During the last Parliament sitting, Minister of Transport and Communications, Kitso Mokaila was adamant that with the current financial challenges facing Government, the Executive has decided that Government “will not reinvest in Air Botswana” but rather look for strategic partners. He said at the time, “We are currently going through the process of looking for a strategic partner to assist Air Botswana in the direction we want it to go.”
In 2003 the government attempted to privatise the airline, with Air Mauritius and Comair as strategic partners. Air Mauritius later withdrew from the process in September 2003, citing the downturn in global air travel markets since the 11 September 2001 terrorist attacks in New York City.
Comair also withdrew in December 2003, due in part to increased competition by low-cost airlines in the South African market. The government then suspended the search for a strategic partner in February 2004.
In September 2006 it was announced that three potential investors had placed bids for the tender to take over the airline: Airlink of South Africa, African World Airways Ltd, and Lobtrans (Ltd), a local truck fuel transporter.
Shortlisted companies which did not submit bids included Ethiopian Airlines, Comair, Tourism Empowerment Group, ExecuJet, and Interair South Africa. In November 2006, PEEPA announced that the Ministry of Works and Transport (now Ministry of Transport and Communications) has put forward Airlink as the preferred bidder for Air Botswana.
The government ceased negotiations with Airlink in October 2007, when Cabinet decided that the deal was no longer viable. Cabinet also believed the proposal didn’t meet requirements for air transport for the country, and didn’t address government objectives for the further development of transport and tourism sectors in Botswana.
The government then began the search for a management company to operate the company for a three-year period, and also announced that government would recapitalise the airline by injecting P100 million to improve performance and to make it more attractive for privatisation.
The government entered into negotiations with Comair, but following disagreements over terms, negotiations continued with reserve bidder, International Development Ireland, in conjunction with Aer Arann.
In a previous interview with Botswana Guardian in 2016, asked to give reasons why privatisation has come to a standstill in 2007/08, PEEPA chief executive Kgotla Ramaphane indicated that the environment in the aviation sector globally was not conducive at the time of deferring the decision to privatise the airline.
He indicated that it would be ideal to study the environment again, find models suitable for it and bring back the airline for privatisation.
Eco-tourism companies, Wilderness Holdings and Chobe Holdings are expecting a mixed set of results for the past year,amid forecast that the industry will grow by nearly ten percent this year.
Botswana Stock Exchange (BSE) listed firm, Wilderness stated in cautionary note that results for the 12 months to February 2017, ‘are likely to be more than 10percent lower than those achieved in the corresponding period in the prior year’. The expected fall in profits is likely to have shareholders worried, given that the Little Mombo owner also posted a drop in profits for the past year (2016).
For the same year, the dual-listed group saw its results taking a dive by 3 percent to close at P74, 2million. The Keith Vincent -led company explained the bottom line is down for the soon-to-be released results because of unrealised losses resulting from translation of the company’s foreign currency position. However, there has been a jump in segmental profit. The company, which listed at BSE in 2010, sells its rooms in the highly volatile US dollar.
Shareholders will have a chance to read more on the financial results when they are made public at the end of the month.The report of lower profits comes amid media reports that, government is on the verge of selling the struggling national airliner, Air Botswana to Wilderness following an expression of interest. Chairman of the group, Parks Tafa has denied the latest developments in an interview with a local weekly.
Meanwhile, shareholders of Wilderness competitor, Chobe Holdings are excited that profits for the group will be higher when compared to the year ended February last year. “The board of directors hereby announces that the Group’s results for the year ended February 2017 are likely to be significantly higher than those achieved in the corresponding period in prior year,” a company statement reads.
For the year to February last year, the owners of Desert and Delta Safari made a profit of P56million, up when compared to P52million recorded the year before. The BSE-quoted company has not stated factors which led to the rise in bottom line. Writing in the company’s 2016 annual financial statement, Chief Executive Officer, Jonathan Gibson said the introduction of South African Airlink’s flight between Maun and Cape Town ‘is anticipated to contribute positively to Maun’s accessibility.
“These factors,coupled with the Group’s superior marketing strategies and ever improving product offering,are anticipated to translate to satisfactory results in the forthcoming financial year,” said Gibson. Chobe Holdings has not announced when the results will be out. It has, like Wilderness Safari, cautioned shareholders to exercise caution when dealing with its securities.
On a related matter, Chief Economist at the finance ministry, Batane Matekane told the just-ended HATAB annual conference that, the industry has grown rapidly in the past few years. Travel and tourism generated 32 000 jobs directly in 2014, representing 4.6 percent of total employment. This was forecast to grow by 2.6 percent in 2015 to reach 32 500 or 4.6 percent of total employment.
“Total employment in the tourism sector includes direct employment by hotels, travel agents, airlines and other passenger transportation services, excluding the commuter services,” said Matekane.
Air Botswana’s re-fleeting process which has been under consideration over the last few years by the shareholder (government) has since been put on hold pending completion of the privatisation process. The shareholder recently invited suitable entities, companies, consortiums or service providers capable of offering efficient and reliable air transport services to meet the needs of Botswana’s business and tourism sectors by operating Air Botswana to indicate their interest in the airline.
Air Botswana’s Director-Commercial, Hugh Fraser revealed to Botswana Guardian that “Air Botswana is currently undergoing privatisation and the re-fleeting project is on halt until the process is complete.” This was following an inquiry from last week’s announcement on the resumption of Air Botswana routes to Kasane and Cape Town. Air Botswana currently operates four ATR turbo propeller aircraft and a leased Jet aircraft, which is operated on the Gaborone-Cape Town route. Meanwhile, the Gaborone-Cape Town route resumed on February 26th, whilst the Gaborone-Kasane resumed on March 1st.
The service will be operated through an existing agreement with CemAir on the same current flight schedule to minimise any customer inconvenience. Air Botswana said this is an internal commercial agreement to cover the operation of the Cape Town route and has been in place since 2015
Fraser explained to this publication that, the Kasane and Cape Town routes were never suspended. Rather, “we had replaced the Jet service with a turboprop for six weeks between Gaborone and Cape Town, but the jet operation has been reintroduced. The Kasane flights were reduced due to heavy maintenance on the aircraft and reduced fleet availability. However, five flights per week have now been restored between Gaborone and Kasane from 01 March.”
Days of operation between Gaborone and Cape Town in either direction remain as Monday, Wednesday, Friday and Sunday. The Gaborone and Kasane flights will be on Wednesday and Friday respectively. Air Botswana said the Sunday flights will become a later morning schedule, to better suit tourism and other business travellers to the Kasane / Chobe area.
Public Enterprises Evaluation and Privatisation Agency (PEEPA) Chief Executive Officer has called for a revisit of the decision to privatise Air Botswana.
In an exclusive interview with Botswana Guardian this week, from his office, Kgotla Ramaphane indicated that the environment in the aviation sector globally was not conducive at the time of deferring the decision to privatise the airline. “As we are established to implement privatisation-it would be better to study the environment again, find models suitable for it and bring it for privatisation,” he said.
Air Botswana has been making losses for several years, and there have been various attempts to privatise it and frequent changes to the corporation’s management and board, so far without reducing the losses. Blaming the losses in part on overstaffing, the operation of an ageing, fuel-inefficient fleet, increasing operational costs, inadequate management expertise and an inability to retain and attract qualified pilots - the government earmarked Air Botswana to be the first of the parastatals to be privatised.
The privatisation process began in April 2000, when the government signed a consultancy agreement with World Bank-affiliated International Finance Corporation (IFC), which saw IFC being appointed as the government’s main adviser in the privatisation process.
In 2003 the government attempted to privatise the airline, with Air Mauritius and Comair put forward as strategic partners. The process would have seen the winning bidder receiving a 45 percent stake in Air Botswana, with the government holding a further 45 percent, and employees holding the remaining 10 percent. It was planned that once the airline has firmed its position under new ownership, it would be listed on the Botswana Stock Exchange. Air Mauritius later withdrew from the process in September 2003, citing the downturn in global air travel markets since the 11 September 2001 terrorist attacks in New York City. Comair also withdrew in December 2003, due in part to increased competition by low-cost airlines in the South African market. The government then suspended the search for a strategic partner in February 2004.
In September 2006 it was announced that three potential investors had placed bids for the tender to take over the airline: Airlink of South Africa, African World Airways Ltd, and Lobtrans (Ltd), a local truck fuel transporter. Shortlisted companies which did not submit bids included Ethiopian Airlines, Comair, Tourism Empowerment Group, ExecuJet, and Interair South Africa. In November 2006, PEEPA announced that Airlink has been put forward by the Ministry of Works and Transport (now Ministry of Transport and Communications) as the preferred bidder for Air Botswana.
The government ceased negotiations with Airlink in October 2007, when cabinet decided that the deal was no longer viable. Cabinet also believed the proposal didn’t meet requirements for air transport for the country, and didn’t address government objectives for the further development of transport and tourism sectors in Botswana.
The government then began the search for a management company to operate the company for a three-year period, and also announced that the government would recapitalise the airline by injecting P100 million to improve performance and to make it more attractive for privatisation. The government entered into negotiations with Comair, but following disagreements over terms, negotiations continued with reserve bidder International Development Ireland, in conjunction with Aer Arann.
According to press reports in August 2008, Alexander Lebedev, a Russian oligarch, expressed interest in investing in the airline, and the Ministry of Works and Transport confirmed that Lebedev was invited to travel to Gaborone to present his bid to the government. Part of the bid reportedly included extending Air Botswana’s route network to Düsseldorf Airport; the base of Blue Wings which is 48 percent owned by Lebedev’s National Reserve Corporation. At the end of 2008, it was reported that Lebedev had abandoned plans for investment in Air Botswana.
In another development, the national airline left the International Air Transport Association (IATA) because of its inability to meet the December 2008 deadline of the IATA Operational Safety Audit. It was then re-admitted as a full member in 2012, under the leadership of the General Manager, Sakhile Nyoni-Reiling.
In December 2012 Nyoni-Reiling resigned and in May 2013 the local press reported of internal conflicts and that two directors had been suspended for gross mismanagement pending investigations. In 2014, the Zimbabwean national Ben Dawah was appointed the new General Manager for Air Botswana. In late 2015 Tshenolo Mabeo the minister responsible for transport, sacked Dahwa together with his entire board of directors, following allegations of corruption. General Tebogo Carter Masire, former Botswana Defence Force (BDF) Commander, was appointed in February 2016 to lead Air Botswana as board chairman, replacing Nigel Dixon-Warren.
Travel visa restrictions are a major impediment to growth in tourism and air transport in the African region, Botswana included. This was said by the General Manager of Air Botswana, Ben Dahwa, at this year’s annual conference of the Hospitality and Tourism Association of Botswana (HATAB) that took place in Kasane on Wednesday. The conference was themed “Tourism: Vital for Development and Economic Growth.”
“Inter-African tourism would be facilitated if the continent was treated as one domestic market similar to the EU with no need for transit visas,” Dahwa said. “Where a visa is required, it should be obtainable at the airport or the process should be speeded up to get it in one or two days.” He added that regions should adopt ‘univisas’ to facilitate region-wide travel and there should be electronic visa programmes.
Dahwa identified poor infrastructure in air transport and the tourism industry as another persistent problem that constrained growth in Africa. This was characterised by inadequate transit facilities at some airports, shortage of parking space for aircraft, and irregular power supply that constrained the use of information technologies at airports.
“There is need for adequate infrastructure to facilitate efficient, fast and inexpensive movement of tourists,” Dahwa said. “Some major airports urgently need a second runway, in case of one being closed for any reason. Air Botswana fleet needs on-going renewal. Tourist traffic will be attracted to airports and airlines that are user-friendly, comfortable and convenient.” Botswana’s Sir Seretse Khama International Airport (SSKIA) is a major project that the government has prioritised for upgrading. The project, which was meant to accommodate the FIFA World Cup in South Africa, is still incomplete five years beyond schedule.
It is understood that air transport is by far the most effective transport mode for international travel constituting around 40 percent market share of all transport modes. The most remote areas can now be reached by air transport. Dahwa said this was critical in Africa where surface transport infrastructure was inadequate in many countries. Air Botswana which its airlines are commonly known for delays for departure, its time performance has significantly moved from 66 percent in March 2014 to 85percent in February 2015. Meanwhile, Dahwa called for the need for air transport and tourism authorities to collaborate and coordinate their policies to drive the development of these related industries.