Air Namibia has announced the suspension of the Gaborone- Windhoek route blaming its decision on the limited number of passengers on the route that has negatively affected its margins.
The Namibian carrier commenced servicing the two cities in May 2012 and managed to capture 86 % of the market share during that period to present and flew 294 flights with an income of over $N 6 180 45.
“We captured 86% market share, but this translates to a load factor of 35%, meaning even if we have 100% market share we will still be having lower than 45% load factor,” revealed Xavier Masule, the General Manager, Commercial Services at Air Namibia.
He added that at the current average fare, ‘we need load factor of 103% to break-even, which is not only impractical, but simply unattainable.’
When it started to service the route, Air Namibia operated three flights per week, on Tuesdays, Thursdays and Saturdays and this was changed to Tuesdays, Thursdays, Fridays and Sundays when we re-arranged our entire network.
“There is limited traffic numbers on the route, which we knew from the beginning, but hoped that the introduction of a direct service would help grow these traffic levels between our sister cities,” Masule explained.
“Though we recorded growth in traffic numbers, and we have frequent flyers on this route, levels are not sufficient and will take a very long time to reach desired economic levels”.
He said if they are to break even at 50% load factor, they will need to increase fares by 106% to N$ 2,217, but warned that fares are already too high for us to consider increasing these, given that people have the option to use competitors via Johannesburg.
Masule noted that reducing capacity by reducing frequencies will make us loose part of the markets share, and thus worsen the financial performance levels.
“Given the foregoing, we decided to suspend our operations into Gaborone for a while, and we will be looking at new options on how we can re-enter the market,” he said. “We will however continue to be active in the GBE market by continuing to be in the BSP, with sales visits and maintaining contact with the travel trade.”
“We have interline and SPA with BP, and we will use this as our offering for air service from GBE via JNB, the GBE-JNB leg being served by Air Botswana and the JNB-WDH leg being operated by Air Namibia. We currently have two flights per day between JNB & WDH.”
Air Namibia will also continue with the Maun route which is critical for the transportation of tourists from Botswana and Namibia. The decision also comes at a time when bigger airliners including Ethiopian, Kenya Airways, and South African Airways are focused on executing distinct business strategies.
“All three are building intra-African connections. They’re also linking Africa with the world, but competition from larger, better capitalized foreign competitors is tough,” said Masule. SAA has shifted to a more regional approach by growing its intra-Africa services. The South African airliner is currently seeking additional support from the government. Air Namibia transports half a million (May 2013) passengers per annum and reaches 15 destinations including Frankfurt and Accra.