RwandAir goes for new routes to drive profits
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RwandAir goes for new routes to drive profits

Posted ALLAN OLINGO in Nairobi

on  Sunday, August 27   2017 at  16:09

RwandAir is banking on new routes and efficient use of assets to get back to profitability this year after it plunged into loss-making last year.

The Rwandan national carrier’s financial documents show that it posted a $1.01 million loss last year, from an operating profit of $2.8 million in 2015.

But the airline has in the past three years reduced its losses from $37.3 million in 2014 to $1.01 million last year. The airline’s revenue is steadily growing, recording earnings of $99.85 million last year, up from $95.2 million the previous year, and $86.8 million in 2014.

RwandAir has in the last three years expanded to new routes, increased frequencies on others, and acquired new aircraft, which it hopes will give it an edge on long flights. In May, it made its maiden entry into Europe, with three weekly flights to London’s Gatwick airport.

It has also applied for a landing rights licence from the US Department of Transport as it seeks to tap into the American market. On March 29, it applied for a foreign carrier permit from the US, signalling its intention to start plying the transatlantic route.

RwandAir will mainly utilise its own Airbus A330s into the US, or such other aircraft as it may have or acquired to conduct the proposed operations,” Derryck Nuwagaba, the manager in charge of partnerships, government and industry affairs at RwandAir said in the March 29 request letter seen by The EastAfrican.

Trade and tourism

Charles Ndagano, the airline’s acting chief executive, said the latest routes in its network demonstrate the commitment to improving connectivity on the African continent, while creating new opportunities for trade and tourism between countries.

From its financial documents, the airline has seen its grant allocation from the Rwandan government reduce drastically from $56.2 million in 2015 to $53.8 million last year.

In the 2017/18 budget, Finance Minister Claver Gatete reduced this further to $47 million, but it is expected that the airline’s aircraft guarantees, which the government provided on its new aircraft and the expansion of RwandAir operations, could see a negative reflection in its 2017/18 books of account.

Employee costs

RwandAir has also seen its operating expenses slightly fall last year to $115.7 million, down from $116.4 million in 2015, even as its staff costs increased, possibly due to the new routes, which require more human resources.

Last year, it spent $11.8 million on employee costs, up from 10.3 million the previous year.

The airline’s total liabilities have risen to $238.1 million up from $166.06 million even though its borrowing went down to $113.9 million from 131.7 million in 2015, while its finance costs rose to $15.12 million, up from $10.5 million last year.

The airline has also seen its total assets increased to $238.15 million, up from $166.06 million in 2015.

The money

The Rwandan government has in the past borrowed to finance the operations of the airline as it hopes that it will break even by the end of next year. In 2013 where Rwanda went for a 10-year Eurobond, Kigali indicated that it would use part of the $200 million to finance RwandAir, without indicating how much of the money went to the airline.

In the revised budget for 2013/2014, RwandAir allocation rose from $32.3 million to $47.9 million as more funds were committed to repay loans. In 2015, the airline received $160 million from PTA Bank to acquire the two new Airbus aircraft that it received last year.

The airline is currently servicing a loan of $60 million borrowed from the same bank in 2011 and due for maturity in 2021.

RwandAir has indicated that it will bolster its West African operations through establishment of a hub in Cotonou, Benin, with three new connections from this secondary hub.

New deliveries

The airline will start plying the new routes from September 30, which will include three weekly flights to Conakry in Guinea, Bamako in Mali and Dakar in Senegal.

In the last three months, the airline has launched new routes to Europe, plying the London route in May and Brussels in July. It also started flights to Mumbai, India, and Harare in Zimbabwe this year.

The airline acquired two new deliveries of an Airbus A330 in September and December last year, and plans to lease a further two Boeing aircraft, to bolster its fleet and actualise its long range flights to Europe and Asia.

Currently, it has 11 aircraft, comprising of two Boeing 737-800s, two Bombardier Q-400s, two Bombardier CRJ-900s and two Boeing 737-700s.