Will it be fourth time lucky for Air Botswana?
Mbongeni Mguni | Friday June 9, 2017 16:13
A political storm is brewing over this week’s announcement by the Transport Ministry that Wilderness Holdings is the preferred bidder for the privatisation of the national airline, Air Botswana.
Commentators, who have long questioned President Ian Khama’s links to the tourism group, say the fact that a presidential directive appears to have decided a public procurement process points to bad ethics.
Away from that storm, however, many eyes in the aviation industry and the broader economy are on whether this latest efforts to privatise Air Botswana will be carried to fruition.
Government has attempted to privatise the loss-making airline three times before, in 2003, 2006 and 2008, but the deals have fallen through each time due either to investors withdrawing, or Cabinet rejecting the terms.
Air Botswana has experienced running losses since 2008, due to an aging fleet, high maintenance costs, equipment failure, route redundancy and pressure from competition.
In 2015, Air Botswana made a net loss of P165 million compared to, P100 million in 2014, which Finance Minister, Kenneth Matambo, in his budget speech in February 2016, said was “mainly due to high costs of maintenance of its old fleet of aircraft”.
Meanwhile, the financial troubles have weighed heavily on the airline’s organic stability, with 10 out of 40 pilots quitting recently and others waiting in the wings as aggressive, financially sound rivals ready to pounce.
In the midst of the doom surrounding the airline, this February the Transport Ministry floated a request for Expressions of Interest for privatisation, a notice many in the industry would have greeted incredulously having lived through the previous failed privatisation bids.
Still, 17 bidders responded proposing partnerships, joint ventures, wholesale takeovers and other solutions, from which Wilderness Holdings and a small South African private airline, CemAir, were shortlisted.
On Wednesday, the Transport Ministry said Cabinet had indicated it wanted Wilderness as its preferred bidder, paving way for negotiations towards a partnership and a working structure within 12 months.
Putting aside the political overtones of the deal, Wilderness’ bid was always going to be competitive. The group would have scored highly across the criteria specified in the February request, which included experience, responsiveness to operational challenges, resources and citizen participation.
In experience, Wilderness Air was established in 1991, in responsiveness it has built up a track record through various business cycles from just one plane in 1991 and in resources, it built this up to the current 45-aircraft strong fleet. In citizen participation, while Wilderness is active in seven countries, it is a Botswana-founded and listed business with 2,200 staff of which just over 47% are based in Botswana.
While Air Botswana has a fleet of four aircraft with combined seat capacity of 206 seats as well as a lease on a single Bombardier jet aircraft, Wilderness Air’s 45 aircraft fly approximately 350 people a day from major access points to camps across the continent.
By comparison, CemAir, Wilderness’ rival for the bid, was established in 2005 and has a fleet of 24 aircraft, although these have a significantly higher total seat capacity than Wilderness, whose assets are almost exclusively light aircraft designed for charters and transfers.
For Wilderness CEO, Keith Vincent, the Air Botswana bid is all about getting a “seat at the table” in terms of ensuring safe, cheap and reliable access to Botswana’s tourism heartland.
While for the broader economy, Air Botswana’s woes have caused all manner of trouble and inconvenience, for tourism players such as Wilderness, they mean at best disaffection from source markets but at worst, direct and immediate loss of clientele.
“One incident that was just terrible happened during Good Friday recently when the Air Botswana flight from Maun was so delayed it landed in Gaborone at 0130hrs,” he says.
“Just imagine the chaos for people who missed their connecting flights and had to put up with alternative arrangements.
“It’s in our strategic interest to have a seat at the table to ensure that there’s cheap, safe, sustainable and reliable access for tourists.
“We should be boxing everyday for better and cheaper access and if we don’t, our whole business is at risk.”
For Vincent, the choices are clear: either close down Air Botswana and open the skies or find “someone decent” to run the national airline for the good of the economy.
“We will be happy to sit with them and work on a solution for the industry and the country,” he says.
“We are open to any type of discussions on a solution that can work.”
Although Wilderness is mum on the solution they proposed in their Expression of Interest, it is expected that legislative reforms will restructure Air Botswana into a private company in which government will hold a minority. Wilderness will hold majority equity and the operational contract.
Whether the Wilderness deal will be fourth time lucky for Air Botswana depends on the nature of discussions over the next 12 months, a period that has proved fatal for previous bids. Preferred bidder status means government has selected Wilderness for exclusive talks towards the privatisation, but either party can pull out if they are not happy. This was the fate of previous privatisation bids.
For the next 12 months, evaluations of Air Botswana will take place, as well as fine-tuning the model of privatisation and price for the shareholding. For Wilderness, a new Air Botswana must arise from the privatisation process, one capable of delivering on the demand for access by the economy.
“We are saying Air Botswana must start again,” Vincent says. “It’s a change of legal parameters from a parastatal to a private company and it must be acknowledged that it will have to operate under different Ts and Cs.
“Ultimately, the deal will have to make financial sense to us and if it does not, it would not be worth pursuing.” Once again, the broader economy waits to see whether this latest attempt will rescue Air Botswana, or join other attempts in the dustbins of history.
The difference, this time around, might ultimately be in the politics of the deal.