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"The reasons for our success "
M. ZOUHAIR M. EL AOUFIR, AIR SENEGAL INTERNATIONAL Managing Director
" Monopoly is good neither for the operator, nor for the customer "
The year 2001 was a test for Air Senegal International, which will celebrate its first birthday on this coming 23 February. The test was successful, since the company has realised more than CFAF11 billion turnover, instead of the 7 billion expected. In this interview, the company's Managing Director unveils the reasons for these good performances, as well as the company's main projects.
"Le Journal de l'Economie" (JDE) :
Mister Managing Director, the results achieved by Air Senegal International were largely over the forecasts. How can you explain that?
M. ZOUHAIR Mohamed Eil Aoufir (ZMEA) :
These positive results can be accounted for by several parameters. First, we've noticed that the product we've devised - a means of air transport in the West-African sub-region, which complies with international standards, in terms of quality of services, and punctuality- has satisfied a larger portion of our customers, than expected. As far as traffic is concerned, we have transported 124,000 passengers, instead of the 98,000 initially expected. Of these 124,000 passengers, many customers regularly travel with us, which means that once they've tested our product, they come back. We thus have a high rate of customer loyalty on our airlines.
It is obvious that our good quality product attracts customers, on one hand, but on the other hand, the situation is favourable to the development of a good quality product. There is currently a craze for the Senegal route, at the sub-regional and international level, which accounts for the important growth rates in traffic, a situation from which we have obviously benefited. However, this does not account for the whole situation.
We also have an advantage: the quality of our services, the rates adapted to the various demands, in terms of regularity and punctuality. All of these are explanatory factors. One must not forget that 60 to 70% of the traffic is a professional one, i.e. for international conferences, business meetings, and business-type travels, and customers only wish to arrive on time, attend their meetings, and go back home.
A punctual, consistent and good quality product obviously creates a stronger "addiction", which accounts for this 26% extra benefit, in terms of traffic, and for the 50%, in terms of turnover.
(JDE) : You have talked about the main reasons that account for this increase, but weren't there any additional investments in 2001, that added up to those initially planned?
(ZMEA) : Investments were not much more important, but some adjustments were made, and this is our strength: the flexibility of a small company like ours, as far as frequencies and capacities are concerned. We could afford these technical adjustments, in relation to the market. We even opened up destinations which were not planned for 2001, such as those of Cotonou, and Ouagadougou, because there was a high demand that made us readjust the programme, by diminishing the frequency to certain destinations, to others, such as Cotonou, and Abidjan, and this has really worked. We have also operated in the sub-region, to offer adapted products, such as Banjul and Bissau. Such flexibility has enabled us to adapt quickly and meet the immediate needs, without creating a huge vacuum, as is the case for larger companies. You know, we are monitoring our results, as well as our management indicators virtually every day, in relation to international air transport standards, and we have weekly meetings, to discuss them. This enables us to react within a week on structural matters. Everything is done consistently, so that everything that is undertaken is relevant to the situation and can produce immediate results.
(JDE) : Much was said about the over CFAF 11 billion turnover, but only a little about profits.
(ZMEA) : Well, the first year is a loss-making one. In the business-plan, the first three years are expected to show a loss. What is important today is that we managed to reduce this loss, since we've achieved a 50% excess in turnover Instead of the CFAF7 billion expected, we've achieved 11 billion. We have had charges amounting to around CFAF12 billion, which creates a one billion deficit, while the deficit forecast was 1.85 billion. We've thus managed to curb it by around 65 - 70%, which is considerable. In the air transport sector, there are many capitalistic projects, for which you need funds, and various investments, which enables you to keep very high depreciation rates. This is what happened to begin with. We therefore have confidence in the future, since we are meeting growth rates and are planning to pursue this development. As you know, we are opening up new destinations, mainly to Europe and Africa, and there are even more development possibilities. Today, our goal is to ensure a management system which can make the company even more profitable, while bearing in mind that an airline company is not profitable in its first year of activity.
(JDE) : Your two flagship projects are about handling and catering. Is there a niche for such investments?
(ZMEA) : There is a niche, but when there is one single operator which stops operating, there is no more market. This is a strategic approach. This is the case for the Dakar route, which is currently highly prized. When, for instance you only have one operator on this route, you cannot corner the market this way. There are strategic considerations. You need a maximum of two operators on the Dakar destination. For instance, African hubs that are far less important than Dakar have at last two operators. I'm thinking of Bamako, which has a catering unit or Abidjan, where there is a catering project. That's the way things should be, because monopoly is good neither for the operator, for the customer, nor for the market. There should be some competition at this level, and we are expecting some development.
After this first point about the strategic positioning, you then have the Dakar hub, which is probably the first one, together with Abidjan. This largely justifies the presence of two operators, as far as handling and catering are concerned. The current development of airline companies allows for such projects. You'd be amazed to see the traffic figures in 1999, 2000, and 2001, because they show a significant growth.
(JDE) : What amount of money are you going to devote to this projects and how many jobs do you intend to create through these new investments?
(ZMEA) : Around $2 million per unit (around CFAF 1.4 billion), for both. Each unit can create around a hundred additional jobs. Projects are being studied. We haven't got any exact figures, yet, but projects are being developed now. The handling project will be finished in the short-term, and one must not forget that ASI is already doing some handling for its own flights. The catering will be operational in the medium and long-term, because it takes time to set up such a project.
As for our new development projects, and apart from the two handling and catering projects, there is also the creation of 100 additional jobs, thanks to the introduction of new aircraft and the opening up of new routes. All this will create 300 jobs, and this is our contribution to the employment market, for young graduate Senegalese.
(JDE) : The difficulties of Air Afrique probably partly account for the success of ASI. Isn't its comeback going to reduce the market?
(ZMEA) : Not at all. The future is to clever opening up of the market. It is obvious that there is no problem with two or three operators. There are currently six to eight companies servicing Dakar-Abidjan. Now, it is all about making successful market shares, and improving the product. We have several kinds of offers, such as qualitative ones, mass ones etc. There is thus a real market, that will not be reduced. On the contrary, it will keep on expanding, while market shares can be reduced. Now, we have to work, in order to conquer market shares, and above all, keep them. It is a challenge ASI has to take up, together with its staff, thanks to which, we managed to achieve this performance . People must be aware that it is not only the market or the material investments that generated such performance, but also peoples' will and human resource investment.
" Our contribution also includes the creation of around three hundred jobs for young Senegalese graduates"
(JDE) : For the projects of opening up new routes, most aircraft will be provided by Royal Air Maroc (RAM). Doesn't Air Senegal International have plans to purchase its own aircraft?
(ZMEA) : That's not exactly true, because we're going to purchase two additional planes. The medium capacity aircraft of 734 type does not belong to RAM. We are going to lease it with professional charterers. The second plane, a 757 is going to be jointly utilised together with RAM. You see, we haven't celebrated the first anniversary of ASI yet. This will be on 23 February 2002, but projects are being developed, and we have to position ourselves rapidly, by immediately meeting the demands of the market, under favourable conditions. This is why we are doing things so rapidly, and gong forward with our business plan. 2002 is an even more crucial pivotal year, since we will be doubling our fleet. We are introducing additional destinations, such as Paris, Lomé and Niamey, and we are increasing our frequencies in the whole West African sub-region. At the end of 2002, if the Paris experience proves to be successful, we will open a Dakar-New-York flight. From that moment on, we will consider the possibility of purchasing planes, be they new planes or planes acquired through leasing etc. Anyway, the plans or business plans made over three or four years can still be revisited and cleverly reworked, so as to allow us to act in accordance with market trends.
As for national flights, people have talked about the prices of the Dakar - Ziguinchor flight which have increased, and also the opening up of new destinations which are still awaited.
As far as national openings are concerned, we are considering the Saint - Louis route, to see to what extent it could work.
As I said, we have opened the route to customers, but unfortunately, there was no demand. And so we cancelled the flight, and removed it from the reservation equipment, because we have one strong competitor, which is the road. People prefer travelling by road, but we are trying to see whether Tour operators would not be interested in such a project.
As far as the Dakar - Ziguinchor flight is concerned, we did not go ahead with an outrageous price increase. All airline companies worldwide increased their prices, after the impressive and unilateral rise in the price of insurance. We had to do the same, because, when you have a deficit on a destination, you can no longer maintain it. This accounts for the slight changes in prices, but we think that prices are stabilized now, at least for the time being, but there are a few crucial things, that should be borne in mind.
We are operating a new and state-of-the-art 50 seat plane on the Dakar - Ziguinchor destination. It is a very expensive one. I'm not saying that this should be compensated for by excessively increasing the national routes, but the price of the ticket should partly cover the price of this new plane. However, all this was already accounted for, just as we did for other flights. We have passed the cost of insurances onto the price of the Ziguinchor flight.
One must not either compare what was done before, with rather old planes, and problems of regularity, with what is being currently done, with brand new aircraft, on schedule daily, and on which we serve breakfast, have high-quality services etc. One must not forget all that and only consider prices. We have completely changed our product, as far as services, quality etc. are concerned, which is all in line with ASI international regulations. And as I said, we barely cover these costs on domestic flights. Another point is that Ziguinchor only accounts for 12% of our traffic, and for less than 6% of our turnover. One should not go on thinking that the significant turnover that was achieved comes from the expensive prices which would have applied on domestic flights.
(JDE) : Apart from the Handling and Catering, are there other projects in the ASI business - plan?
(ZMEA) : I think that today, in our development plan, we basically have enough to occupy several teams and company resources. We should not spread ourselves too thin, either, which is why we are focusing on our " core-business ", i.e. our initial main business area, which is air transport, and the opening up of new destinations. Development will come later, in terms of traffic increase, diversification of products, such as weekend ones, visiting cards… However, 2002 will be mainly devoted to traffic, frequencies, handling etc.
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