Monday, October 1, 2012

■ ALGERIA: More government protectionism as Minister says Low Cost Carrier would be "unprofitable".

Algerian GovernmentDespite protests outside offices of Algeria's national carrier Air Algérie (AH)  in both London and Paris two weeks ago, calling for the liberalisation of Algerian skies, the Algerian Government has remained adamant that the creation of any Low Cost Carrier (LCC) in the country would not be profitable; a move that the Algerian media says, smacks of government protectionism for both Air Algèrie and AigleAzur (ZI).

At present, Air Algérie is the sole operator on domestic routes and it has also a market leading position on international routes, with an approximate 46% capacity share. Aigle Azur, a French airline, is the country’s second largest carrier with a 29% share of international seat capacity. Air France is the third largest operator in Algeria in terms of seat capacity on international routes, holding a near 6% share.

Algiers' Houari Boumediene Airport
Algiers' Houari Boumediene Airport
During a recent Q&A session in the Algerian National Assembly in Algiers, MP Djamel Bouras echoed the protesters complaints about exorbitant air fares on the Paris-Algiers route; in some instances costing as much as EUR€250. The creation of a public-private airline based on the LCC  model was then proposed but this was, however, shot down by Algeria's Minister of Transport, Amar Tou, who ruled out the creation of a Low Cost Carrier (LCC) to service saying:
"The Algerian community abroad would need USD1billion dollars (EUR775million) per year, which would not be enough to create a profitable low-cost airline."

The CEO of Air Algérie, Mohamed Salah Boultif, recently anaemically rejected accusations of fare-fixing/collusion with its main competitor AigleAzur stating that: 
"In France, Air Algeria, like all foreign companies, is subject to strict rules and unavoidable costs (i.e obtaining slots, approval of flight schedules and pricing policy based in accordance with the practices of the French market)."

In August the Algerian national carrier outlined their long term 2012-2017 goals which would primarily aim to turn the airline and Algiers' Houari Boumediene Airport into a transitory hub and return the carrier to growth. Investment in Algeria's aviation sector by foreign carriers has remained difficult as any possible LCC venture would necessarily be a 49%-51% venture, as Algerian law stipulates that any foreign-invested company must be majority owned by an Algerian company, with the government having first refusal on the sale or transfer of any foreign company.

Even though it has a large diaspora in France and the Mediterranean as a whole, the North African market, aside from Morocco's Air Arabia Maroc (3O), Jet4You (8J) and Air Arabia Egypt (E5), has been largely left untapped by indigenous LCCs, with numerous governments unwilling to open their airspace to European LCCs for fear of creating unwanted competition in an already cut-throat market.