Brussels Airlines opens the door of Congo

[rwandan-flyer]

The airline wants to attract more passengers from South Kivu, by providing connections with RwandAir via Kigali, also increase the number of pax on its Brussels Kigali route.

From 3 March 2014, RwandAir will use a brand new Q400NG on the domestic service, 67 seats in a two class configuration

Subject to fierce competition on the line to Kigali (Rwanda), Brussels Airlines is preparing to draw sales away from eastern Congo, Bukavu and in particular, by providing a single ticket from Cyangugu, the twin city of the Rwandan side ( 15 minute drive) to the chosen destination via Kigali and Brussels.

Cyangugu to Kigali, the flight will be operated by Rwandair, and passengers can wait for their evening flight to Brussels in a VIP lounge of Kigali International Airport. Return (flight day), they will spend the night in the Rwandan capital at the expense of the Belgian company.

So it opens the door to the east of the DRC, or rather half-open: to date, there is still no direct link between the Congo and Rwanda. Remains to be seen how Kinshasa will react if the customer Kivu file en masse to the Rwandan "enemy", just in front, instead of a long and expensive transit by the Congolese capital.

After the Rwandan genocide, Brussels Airlines has benefited for many years a monopoly on connections Europe, Rwanda, with prices cheerfully exceeding 1,000 euros round trip from Brussels. In recent years, she must deal with fierce competitors, including KLM (via Amsterdam) and Turkish Airlines (via Istanbul), who perform much more attractive rates it difficult to follow.

http://translate.googleusercontent.com/ ... 7GdedtAOZQ

[BrightCedars]

Sabena in her time and nowadays Brussels Airlines have been living off Africa with comparatively much higher fares than on other more competitive and developed markets. One may not find this very ethical.

Now that Africa is finally rising out of its economical misery, competition is appearing and they fear for their survival.

It should be time for SN to revolutionize it's offer and invade the African market aggressively with a solid product and more reasonable fares. Will they do it or will they slowly get pushed out of most markets by European, Middle Eastern or African competitors and retreat to Europe where they don't manage to turn a profit and face ever more intense attacks on their own home?

Time will tell but their future doesn't look rosy should they not change their business model soon enough.

[b720]

absolutely!!! They need to change their strategy for Africa, and very fast!

[Passenger]

After the Rwandan genocide, Brussels Airlines has benefited for many years a monopoly on connections Europe, Rwanda, with prices cheerfully exceeding 1,000 euros round trip from Brussels. In recent years, she must deal with fierce competitors, including KLM (via Amsterdam) and Turkish Airlines (via Istanbul), who perform much more attractive rates it difficult to follow.

Seems this journalist from Le Vif L'Express was recently transferred from Sports into Politics, so he still has to learn about Africa. The Rwandan genocide happened in 1994, so it wasn't Brussels Airlines that benefited the most (although "benefited" is an ugly word in this genocide context).

[b720]

Reagrdless, he means SABENA and what came afterwards.. the idea is right though.. SABENA and what followed benefited from the near absence of competition in Africa. Offering mediocre product compared to the price charged. Until very recently the C class seats on SN were PATHETIC. Finally SN offers a product worthy of 21st century long haul on their flights to Africa, in both C and Y class. They need, as bright cedars said, to change their approach as the Sabena approach does not fit the new environment. With the likes of ET, KQ, MS, SA to name a few and now RWANDAIR, Africans do have a choice, (We all remember AFRIQIYAH before Libya's collapse. They were harvesting SN's clients here in BRU and other destinations in Europe, namely CDG and GVA). add to that the ME3 in east Africa, TK, and then RAM for western Africa even TP..Not to mention AF/KL.. why should people still pay an arm and a leg to fly SN? SN must find a reason for its clients to stick to it, and fast!!

[Inquirer]

I think too many people around here think you can keep competition out by 'a new strategy'.

When a monopoly/duopoly is ended by competitors stepping in, your market share is always going to drop, no matter what you do and even your volume is going to suffer as capacity growth is initially not sufficient to offset the extra capacity offered.

What they need to do is to protect their bottom line first in order to avoid making losses as capacity is dumped upon them, while making sure they have a good product to attract extra passengers if and when overall demand picks up from the increased offer.

Other than that, they can diversify their product offering further (more and new destinations, possibly maybe more flights if that is legally allowed) and except that the days are gone when an airline from a tiny little Western European country could be the king of Africa.

IMHO,
The role of Brussels Airlines on Africa is going to be fairly compatible in future to that of say a Finnair on Asia, or an Air Lingus on the USA: a niche specialist, whether we like it, or not.

[Kris]

They should for sure look at their pricing to Africa also.
Last year october I flew to NBO, choose TK just for the price difference to be honest. 440 euro iso over 700 euro with SN.
Love to fly SN, but not with such a huge price difference unfortunately.

[Flanker2]

Well Inquirer, that's easy to say now.
SN had its chance to maintain its market share and many including myself were pushing for SN to do that, albeit with strategies that were less traditional, which apparently seemed impossible but new competitor TK adopted without any problem and is expanding on it.
I'm still pushing for SN to start China flights before TK has the chance to expand there, to boost its China-Africa flow.

Instead SN did nothing and continues to do nothing.
So when SN looses Africa, it will be their own fault, not the competition's fault.

Their options were on the table, they chose the easy road: change nothing, organic growth and start U.S. feed, invest nothing and keep the door wide open for competition. I can not have any sympathy with that.

SN can not reduce its prices because its operating structure with A330 triangles is too high cost.
They wouldn't have had that problem with narrowbodies. All they can do now is pray.

When is Afriqiyah relaunching its Africa and BRU flights?

[kilobravo243]

Though the idea looks interessting, I am not too sure if this operation could be profitable. There are already a certain numbers of people, mostly from NGO and multinational firms based in east (Goma) that travels to Kigali to fly with Turkish Airlines (Cheap price). The population in east DRC mostly do business with the middle east, Dubai and China...Not sure there is a significant market for a transit to BXL. Lets wait and see.

[Passenger]

They should for sure look at their pricing to Africa also. Last year october I flew to NBO, choose TK just for the price difference to be honest. 440 euro iso over 700 euro with SN. Love to fly SN, but not with such a huge price difference unfortunately.

440 Euro for a TK return ticket to NBO: superb offer indeed and it's normal you took it.

But if one would deduct all airport & security taxes, and then split the balance into the 4 flights (BRU-IST-NBO/NBO-IST-BRU), I'm pretty sure TK had a negative yield. That is, if one calculates it aviation wise, like we all are told to do so. However, if your aim is to get foreign currency into your country, the selling price doesn't really matter: it just has to be a lot cheaper then the average market price. Someone mentionned Afriqiyah: they were indeed the champions for this practice.

[nordikcam]

When is Afriqiyah relaunching its Africa and BRU flights?

Hummm I prefer to pay more, flying SN and do not transfer in Tripoli !!!!

[Flanker2]

440 Euro for a TK return ticket to NBO: superb offer indeed and it's normal you took it.

But if one would deduct all airport & security taxes, and then split the balance into the 4 flights (BRU-IST-NBO/NBO-IST-BRU), I'm pretty sure TK had a negative yield. That is, if one calculates it aviation wise, like we all are told to do so. However, if your aim is to get foreign currency into your country, the selling price doesn't really matter: it just has to be a lot cheaper then the average market price. Someone mentionned Afriqiyah: they were indeed the champions for this practice.

TK isn't trying to make money here. They are out for market share.
To win market share you have to be very cheap in the beginning, then as you start killing off your weak competitors, you jack up the prices and make money.

Don't hesitate for a second: TK isn't trying to compete with SN, their aim is to finish them off and take over their market. And of course meanwhile, SN is looking at which flower they can pluck across the Atlantic ...
It only proves that there is a big problem with the decision-making process at SN, whether it's fuelled by top management or shareholders.
SN's staff don't deserve it, but SN can not survive as they are proving that they can not compete.

[Passenger]

440 Euro for a TK return ticket to NBO: superb offer indeed and it's normal you took it.

But if one would deduct all airport & security taxes, and then split the balance into the 4 flights (BRU-IST-NBO/NBO-IST-BRU), I'm pretty sure TK had a negative yield. That is, if one calculates it aviation wise, like we all are told to do so. However, if your aim is to get foreign currency into your country, the selling price doesn't really matter: it just has to be a lot cheaper then the average market price. Someone mentionned Afriqiyah: they were indeed the champions for this practice.

TK isn't trying to make money here. They are out for market share. To win market share you have to be very cheap in the beginning, then as you start killing off your weak competitors, you jack up the prices and make money.

To build up a market share for medium haul or long haul is totally useless and utterly stupid if it's done at a loss, month after month after month. A market share for Brussels-Nairobi is totally different from the market share for, let's say, Brussels-London. For such routes, used by many passengers many times a month, you can indeed sell cheap to build up a fix clientele, who will then hopefully remain onboard if prices increase. But you can never never build up a clientele on a route like Brussels-Nairobi. How many passengers are same year repetitor in Y? I don't have figures for that route, but my guess is 5 to 10% maximum. They buy TK at 440 but will not buy TK at 600+ six months later, simply because they won't need a ticket at all.

TK can sell BRU-NBO at 440 Euro (and loose money), sell al 475 (and loose money), sell at 500 euro (and loose money), sell at 550 euro (and now reach break even), and then finally sell at 600 to make some profit. But at that moment, some competition (Brussels Airlines, Lufthansa, Air France, ...) will step in (again) and will sell at 590. Or sell at 700, because they offer a nonstop flight or better connection, and they know that passengers are willing to pay a little more for that.

[Flanker2]

Passenger, you are trying to explain why TK won't succeed in winnig market share based on loyalty.

TK is not trying to win market share in Africa based on loyalty.
TK wants to build market share by eliminating a competitor, and that competitor is clearly SN, as they are focussing most of their attention on SN's destinations.

Once SN is out, TK can jack up their prices and ask for decent yields, just as SN was doing before TK came in.

What is happening right now?
This is the problem of SN: if TK take away 40 or 50 pax per flight, SN can no longer make money.
TK is taking 40 or 50 pax on Europe-Africa from SN at a small loss or break-even, charges higher fares to Asia-Africa pax to fill the rest of the seats of their B738/B739ER/A332's and probably even make a small profit.

In the meanwhile SN will start losing money on their Africa flights... which is what will start to happen this year. This should be enough to drive them out of business or at least out of Africa.
TK hope that it will drive SN out of business, so that the other 150 pax who still fly SN despite their higher fares will then have no choice but to fly with TK to Africa and pay the same fares they were paying with SN to TK.

[b720]

SN with its 4 and on some days 5 triangular dailies to Africa is not a major player.
It is actually one of the smallest players in africa today.

[Flanker2]

That's right, that's why it will be easy for TK to eliminate them and take their place.
SN should have grown while they could have. It's too late now, the last option they have is to try a last resort ditch by going into China to get pax for their Africa flights, but I don't see that happening.
Even if they did, TK seems prepared for that by going with A380 iso B77W...(I wonder if that is in response to our previous discussion on this forum about the Asia potential) which proves to me that they fear to loose their grip on China-Africa traffic, their main driver for their Africa operations.

That's why I'm trying so hard to focus the attention on the importance of operating China to kick TK back out of Africa. If you cut their lifeline on the Asian feed to Africa, TK can not sustain its African growth solely on the Low-yield Europe-Africa traffic and will have to retreat to some degree.

Is it so hard to understand, Mr. Gustin and friends? That's right you read this forum, so please start doing something about it, even if you have to beg Lufthansa.

[Passenger]

SN with its 4 and on some days 5 triangular dailies to Africa is not a major player.
It is actually one of the smallest players in africa today.

Indeed, and they apply the basic principle in trade: vraag en aanbod - supply and demand. If they can fill those 4 or 5 triangles but at the same time don't have to turn down hundreds of other requests, it's useless to plan 10 or 20 triangles (or 10 or 20 direct flights).

[Air Key West]

TK isn't trying to compete with SN, their aim is to finish them off and take over their market.

You could be right. And as I mentioned it before, FR will try and do the same with b.air at BRU. When b.air is gone, BRU will be eager to give MOL what he wants (but is not getting at BRU).

Predatory pricing, it is called.

(excerpts from wiki below)

Predatory pricing (also undercutting) is a pricing strategy where a product or service is set at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is even a de facto monopoly.

In many countries predatory pricing is considered anti-competitive and is illegal under competition laws. It is usually difficult to prove that prices dropped because of deliberate predatory pricing rather than legitimate price competition. In any case, competitors may be driven out of the market before the case is ever heard.


Examples of alleged predatory pricing[edit]
France Telecom/Wanadoo—The European Court of Justice judged that Wanadoo (Now Orange Internet France) charged less than cost in order to gain a lead in the French broadband market. They have been ordered to pay a fine of €10.35m, although this can still be contested.[10]
According to an AP article[11] a law in Minnesota forced Wal-Mart to increase its price for a one month supply of the prescription birth control pill Tri-Sprintec from $9.00 to $26.88.
According to a New York Times article[12] the German government ordered Wal-Mart to increase its prices.
According to an International Herald Tribune article,[13] the French government ordered amazon.com to stop offering free shipping to its customers, because it was in violation of French predatory pricing laws. After Amazon refused to obey the order, the government proceeded to fine them €1,000 per day. Amazon continued to pay the fines instead of ending its policy of offering free shipping

[Flanker2]

Indeed, and they apply the basic principle in trade: vraag en aanbod - supply and demand. If they can fill those 4 or 5 triangles but at the same time don't have to turn down hundreds of other requests, it's useless to plan 10 or 20 triangles (or 10 or 20 direct flights).

Exactly... but this only exposes the vulnerability of SN's A333 operations in Africa.
You can't micro-manage your growth because as soon as you want to increase your frequencies a little bit on a single route, you need to go all-in with an additional A333 and find sufficient growth on other routes to avoid that it ends up sitting in BRU the other days.

That's why I prefered a rationale with narrowbodies and so did TK.
With a combination of A319/A321 you can micro-manage your frequencies and respond quickly to new competition.
TK comes in on route BRU-ZZZ? Increase frequencies on BRU-ZZZ by taking an aircraft out of mid-haul operations, decrease the fares and drive them out. You can't do that with an A333, because the short flights between the African cities bring a higher operating cost resulting in a loss at any price reduction, and also because you can't pull an A333 out of anywhere else without resulting in reductions. But you can't add an A333 to add one frequency on one route, you need to find more growth... it just doesn't work in a competitive environment.

SN worked for years in an environment without competition, where they were the ones to steal pax from CDG by undercutting AF on their routes. Now TK comes to steal pax from both CDG and BRU, undercutting both AF and SN. We said it in 2009, a good 5 years ago: SN will not be able to handle new competition in Africa with their current modus operandis.... and it's now proven true.

In the end, it won't matter, with losses to come in Africa, U.S., and Europe, this can only serve as a lesson for the next Belgian flag carrier.

[crew1990]

As we are speaking of competitor for SN;

Gambia Bird Airlines will increase the capacity on the flights between Banjul, Freetown and London Gatwick, going from an A319 leased from Germania to a Boeing 757 leased from Titan Airways.

Gambia Bird will also start two other route in Europe, conecting Dakar to London Gatwick on A319 leased from Germania. The second route will be Dakar to Barcelona on A319 from Germania as well.

Geambia Bird already operate two destination from Barcelona, to Banjul and then now from Dakar as well, with very attractive price and brand new factory aircraft.

What is SN waiting to make an early morning flight from Barcelona. For the moment the earlyest flight from Barcelona is arriving at 11.15 at BRU while the flight to Dakar and Banjul take off at 11.30.

How do you want to compete?