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Political, visa issues driving Libya's Airbus orders
Source: BI-ME , Author: BI-ME staff
Posted: Fri May 30, 2008 12:00 am

LIBYA. Years of embargo led to a major degradation of the Libyan civil aviation infrastructure. But with its reintroduction into the global economic system, competition for the modernisation of the Libyan fleet is already heating up. In Summer 2007, the two Libyan carriers ordered 26 aircraft, confirming the vast potential of the Libyan market.

Essentially benefiting the European giant Airbus, Libyan Airlines ordered 15 units, of which four are the long-haul carriers A350-800 XWB, four A330-200 and seven A320. Afriqiyah Airways ordered 11 units, comprised of six A350, four A350 and three A330 under specific option terms.

This latest deal, in addition to the 12 units ordered by Afriqiyah in July 2006, shows the ability of Airbus to strike in places where Boeing has long sought a strong and dominant competitive position. As such Airbus will get US$3.6 billion. But Airbus is not the only one making strong inroads in the promising Libyan market. Negotiations with the Canadian Bombardier are said to be near the final stage for the purchase of three aircraft, slated for delivery this fall.

These deals certainly dealt a major blow to Boeing, which is likely to use its political clout to get the Libyans on board for future contracts. For Afriqiyah’s senior management, the argument for selecting Airbus is of an economic nature, although it is clear that politics may be the first factor. Afriqiyah’s CEO Sabri Abdallah stated that “our fleet is too small to diversify our supply sources.” But in an interesting addition to his comment, he said: “While our relations with the United States are substantially improving, we continue to face serious problems in obtaining American visas, forcing us to think about logistics issues when considering the training of our pilots. Airbus’ package of offers was much better.”

Since its establishment in late 2001, Afriqiyah Airways opened new routes with several destinations in West Africa in particular, with the use of leased Airbus aircraft. For its part, its competing peer and long-established Libyan Airlines operated with an aging fleet in need of renewal. In 2002, while Afriqiyah inaugurated its first Tripoli-Paris route, Libyan Airlines was still waiting for an authorisation to fly to France, a process stalled due to its old fleet. The aggressive stance of Afriqiyah meant that prices for most of its African routes were substantially reduced, making Tripoli an increasingly important transit area. Today Afriqiyah is competing head to head with Air Senegal in the take over of routes abandoned by the defunct Air Afrique.

But Africa is not the only focus of Afriqiyah. It also flies to Paris, Brussels, Geneva, Amsterdam, Rome and Jeddah. Before year end it will expand its services to Dusseldorf, Beirut, Istanbul and Dakar. By 2010, accompanying the global economic reintegration of Libya, Afriqiyah’s pilots will take passengers to Beijing, Shanghai, Mumbai, New York and Houston, carrying business executives, foreign workers and tourists alike.

Even so, the expected success of Afriqiyah is not likely to come at the expense of its older peer Libyan Airlines. The older carrier’s recent ordering of new airplanes is an indication that it will spend whatever it takes to resume its activities and become relevant in the fast moving North African airline sector. The company undoubtedly suffered from the embargo impossed on Libya. In a normal operating environment, Libyan Air carried an average of 2 million passengers annually. In 2006, it only transported less than 850,000. Even with this weak performance however, it is still double what Afriqiyah carried. While both carriers have about the same number of airplanes in operation, Afriqiyah is likely to take a competitive lead with the coming delivery of its latest units. Such an addition to its existing fleet will enable it to grow its capacity from 400,000 to 600,000 passengers per year this year and 1 million in 2008. Initially launched to cover domestic routes, Afriqiyah generated US$120 million in revenue in 2006.

Going forward, even Libyan Airlines says the sky is the limit. With its ambitions to fly to far away places such as India, Thailand and China, the company’s revenue profile is likely to improve when its fleet is renewed. But competition between the two is certainly going to be tough and the possibility for a future sharing of resources and tasks is already rumoured to be the subject of talks in Tripoli.

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