How RwandAir plans to spread its wings across the globe

As we are about to start this interview, a Russian-made cargo aircraft that is loading cargo at the Kigali International Airport attracts RwandAir chief executive officer, John Mirenge’s attention. The aircraft, used by the UN to deliver supplies for Rwandan peacekeepers in the Central African Republic, is able ‘to kneel’ to allow easier front loading, Mirenge explains. This is probably where RwandAir sees its cargo section in future as exporters seek new markets. The airline has shown significant growth potential since its inception in 2002, launching operations in West Africa, the United Arab Emirates and Southern Africa besides serving regional routes. The national carrier last year acquired new aircraft, a key element in its marketing strategy. Mirenge says during the initial stages, revenue growth vis-a-vis passenger growth stood at about 50 per cent year-on-year. Today, it is between 24 and 25 per cent, mainly due to the company’s expansion strategy. Last year, RwandAir transported about 500,000 passengers, up from 366,000 in 2012, according to industry experts. The airline has introduced new routes, especially in West Africa and looks to opening long haul routes in Asia and Europe over the coming years. However, this ambitious expansion strategy has left some sector experts and economists wondering whether the airline is not ‘biting more than it can chew’ at present. Questions have been raised as to whether it is making profit, with many saying the airline should have consolidated the east and central African routes first before going to West Africa and Asia. However, Mirenge disagrees saying RwandAir is a ‘business enabler’, noting that though the company has routes that are yet to break-even, it still has a few years before it becomes profitable. “When you talk about profitability, it depends on where you gauge your efforts. RwandAir, as an enabler to the country’s economic growth is already contributing enormously. The passengers the airline brings through Kigali, spend in hard currency when they are in the country. This, which is a result of RwandAir’s expansion, benefits the economy,” he argues. Mirenge says unlike other businesses, airline operations are today affected by the uncontrollable global fuel prices, impacting on profitability. Related to these challenges, the national carrier still has to build its capacities to reduce dependence on foreign expatriates. “Because aviation is relatively new in Rwanda, we depend on expats who come at a higher price,” he notes. The company has benefited from government funding, which views it as a strategic investment in making Rwanda an aviation and conference tourism hub in the coming few years. Last year, the government used some of the $400 million raised from the Eurobond issue to fund RwandAir and completion of the Kigali Convention Centre as part of a bigger plan to support the tourism and services sectors. This year, the company announced that it will inject $200 million into a five-year expansion plan that is also designed make to it profitable. The airline has invested heavily in equipment and has grown its fleet to seven aircraft. In March, it acquired its latest Bombardier Q400 NextGen aircraft. The carrier has introduced two new routes in West Africa; Accra, Ghana and Douala in Cameroon and Lagos, Nigeria over the past few years. This adds to the 16 other destinations it plies, including cities like Dubai, Johannesburg, Nairobi, Entebbe, Juba, Kilimanjaro, Dar es Salaam, Mwanza, Libreville and Brazzaville in the Republic of Congo. “Before we go to any destination, we look at the strategic importance of that city, the commercial aspect and its size in terms of population and number of travellers,” he explains. “We go into the systems of travellers and get their numbers so that we gauge the likely number of people that could say travel from Douala (Cameroon) to Dubai or from Douala to Johannesburg. We offer an alternative that fits into their schedule.” Mirenge says the company’s strategy is to have more trunk routes introduced by the carrier in the next few years to attract more passengers who go through Kigali. “Today, our main trunk routes are Dubai and Johannesburg. “So travellers from West Africa, in most cases, come through Kigali mainly to Dubai and South Africa,” he explains. Rwanda’s main export markets are in Europe and Asia. The destinations also serve a large share of the country’s imports. While briefing the media on the progress of the East African Community (EAC)-European Union pact recently, the Minister for EAC Affairs, Amb Valentine Rugwabiza, said the national airline will play a critical role in propelling regional trade with Europe in the future. “RwandAir’s expansion is part of the EAC’s infrastructure projects that will facilitate the growth of exports to Europe from the region,” she noted. It is against this background that Mirenge feels the two trunk routes to Dubai and Johannesburg are not enough. “Probably in a year or so, we shall introduce Bombay as another trunk route and then Beijing, say two more years after this, so that people who go to Bombay or China for business will find it easier to use Kigali.” Starting such long haul routes however requires more investment, especially in larger aircraft and personnel. “We need to fly wide-bodied aircraft which give us cargo capacity and more seats,” he says. He notes that RwandAir’s expansion plans would receive a big boost when it acquires two Boeing 787 Dreamliner planes in 2017. This is expected to improve its capacity and help it focus more on the cut-throat competition the airline is currently facing from established airlines like Kenya Airways, Ethiopian Airlines and low-cost carrier, flydubai, which recently launched its East African operations. Mirenge is however, optimistic, saying the competition “pushes them to be more innovative in their service delivery.” “We operate new aircraft, our service on board is very decent and there is so much that we offer that wooed customers who previously travelled with our competitors. Therefore, any other new competitor that would come to the market would not destabilise us,” he says. Instead, the RwandAir chief says the more the new airlines join the local market, the more the opportunities. “The more accessible Rwanda becomes, the more tourists, the more business people come to Rwanda.” Aviation experts argue that RwandAir is using an effective strategy that will see it break-even in the coming few years. However, the timing of starting new routes, the marketing and decision-making will determine where the airline stands in the coming years.

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How RwandAir plans to spread its wings across the globe