The airline market in Algeria is set for a shakeout after Algeria’s government announced plans to launch a new airline.
That new airline would focus on domestic routes while the state-owned carrier, Air Algerie, will concentrate on international services. It’s part of a push by the government to get more private sector involvement across Algeria’s transportation industries.
The announcement follows a decision last weekend to reopen domestic airports and resume domestic flying. Domestic flights were grounded in March for health reasons.
A restructure of Air Algerie is on the cards
At the same time, the Algerian Government appears keen to re-energise the local airline market. The Algerian President, Abdelmadjid Tebboune, is interested in improving air links within Algeria. He’s flagged restructuring Air Algerie and opening the domestic market to new competition.
Algeria’s border have remained closed since March. With domestic services also suspended, that’s effectively crippled Air Algerie.
In July, the airline reported a loss of US$130 million. It was the fourth straight year of losses for the airline. By the end of 2020, losses of nearly $700 million are predicted.
In August, the Algerian Government said it would provide some financial assistance to Air Algerie. However, the government did not specify how much.
“We must assess the real situation of our airline,” Hani Lazhar, the Algerian Minister of Transport, told Ennahar television. In the same interview, Minister Lazhar suggested a restructuring of the national carrier was on the cards.
“It is not excluded that the company is restructured and put on healthier foundations,” he said.
Details are sketchy about the proposed new airline
In the two months, the government seems to have advanced its thinking. At the start of this year, Air Algerie flew to 35 domestic and 44 international destinations.
The Algerian Government, or the Algerian President at least, wants Air Algerie to focus on international flying. President Tebboune said he wants Air Algerie to be “competitive internationally” and to focus on new routes, “particularly in Africa and the Americas.”
Details are sketchy concerning the proposed new domestic airline. While the Algerian Government is touting for private investment across transport industries in Algeria, a Reuters report issued on Monday suggests any new airline would be a government enterprise.
According to that report, the Algerian Government wants to “ease pressure” on Air Algerie.
The Algerian Government’s idea seems to be driven by several issues. Firstly, Algeria, like many other countries, is under a bit of economic pressure this year.
Secondly, the government wants to diversify and modernize the economy. Bringing transportation links, including air links, up to speed, is one aspect of this. Thirdly, there’s a call out for more private investment in Algeria, reducing the need for the government to fund things itself.
The role and extent of any private investment in any new domestic airline is unclear. There seems to be two conflicting priorities here – private funding and government control.
It may be that’s the model President Tebboune wants to pursue when it comes to a new domestic airline in Algeria. It is hardly an unusual model, especially in Africa. Whether private investors bite, especially those with experience in aviation and sufficiently deep pockets, is another issue altogether.