Airliners.net

https://www.airlineratings.com/news/rwa ... s-new-ceo/

Article indicates that WB has never been profitable and they are entering their 11th year of operation. How long is it going to take them to be profitable? Is the government so flush with cash that it can continue investing indefinitely?

Not profitable is an understatement! Here are the annual subsidies they're received from the Ministry of Finance:

2010 FRw 10.8 billion
2011 FRw 25.2 billion
2012 FRw 22.0 billion
2013 FRw 27.0 billion
2014 FRw 29.1 billion
2015 FRw 33.6 billion (The 2015 subsidy was 33% of turnover!)
2016 FRw 49.6 billion
2017 FRw 86.3 billion
2018 FRw 107.0 billion

That's a total of FRw 390.6 billion which is $656.6 million at current rates. Most of this is even before the big expansion with the arrival of the A330s in 2016! They're burning money pretty quickly!

Rwandair is partly being used by the government to expand Rwanda's Tourist industry and expand the countries profile. As such profitability is not necessarily the most important metric they are looking at.

PlymSpotter wrote:

Rwandair is partly being used by the government to expand Rwanda's Tourist industry and expand the countries profile. As such profitability is not necessarily the most important metric they are looking at.

I don't disagree with that, but it's an awful lot of money. The last year's subsidy is nearly 2% of GDP.

evanb wrote:

Not profitable is an understatement! Here are the annual subsidies they're received from the Ministry of Finance:

2010 FRw 10.8 billion
2011 FRw 25.2 billion
2012 FRw 22.0 billion
2013 FRw 27.0 billion
2014 FRw 29.1 billion
2015 FRw 33.6 billion (The 2015 subsidy was 33% of turnover!)
2016 FRw 49.6 billion
2017 FRw 86.3 billion
2018 FRw 107.0 billion

That's a total of FRw 390.6 billion which is $656.6 billion at current rates. Most of this is even before the big expansion with the arrival of the A330s in 2016! They're burning money pretty quickly!

You mean million right ?

Mortyman wrote:

You mean million right ?

Corrected typo. $656.6 million (not billion).

I know it's not enterily related but last month I flew them on BRU-KGL-EBB-KGL-LGW. Surprisingly premium cabins were more popular than Y, as long haul sectors LF were:

1) BRU-KGL: J=85%, W=71%, Y=30%
2) LGW-KGL: J=95%, W=66%, Y=45% ( Though most pax got off in BRU)

They are looking to improve their Gatwick slot and soon to connect the US from Accra. Further they plan to add two A330-900 NEO and two 737 max8 also. One could/should be flown to Europe during the low season ( northern hemisphere winter) and one probably to TLV or CAN via DXB/BOM's to the fleet, that's why profitability will probably arrive in a decade or so...

evanb wrote:

PlymSpotter wrote:

Rwandair is partly being used by the government to expand Rwanda's Tourist industry and expand the countries profile. As such profitability is not necessarily the most important metric they are looking at.

I don't disagree with that, but it's an awful lot of money. The last year's subsidy is nearly 2% of GDP.

It may seem drastic, but so long as the benefit outweighs the 'investment', it can work.

Looking at the figures, in 2017 tourism brought in $438m with an overall GDP of £9.137bn. So it accounts for 4.7% of GDP and is growing rapidly - and this is just for tourism, not including trade enabled by better airlinks.

PlymSpotter wrote:

Rwandair is partly being used by the government to expand Rwanda's Tourist industry and expand the countries profile. As such profitability is not necessarily the most important metric they are looking at.

Very true! In that way, last year Rwanda has launched a policy in which citizens of all countries travelling to Rwanda for short trips will no longer need to apply for a visa and will be issued a 30-day visa upon arrival.

PlymSpotter wrote:

Rwandair is partly being used by the government to expand Rwanda's Tourist industry and expand the countries profile. As such profitability is not necessarily the most important metric they are looking at.

Must be great to work for a company that isn't worried about profitability.

Maybe it's because the fact that they have horrible fleet plan.

1 330-200, 1 A330-300, 2 B737-700, 4 B737-800, 2 CRJ900ER, 2 Q400.

So, 4 type of different type of aircraft at small number from 3 different manufacturers.

Should have gone with all Airbus or All Boeing.

ewt340 wrote:

Maybe it's because the fact that they have horrible fleet plan.

1 330-200, 1 A330-300, 2 B737-700, 4 B737-800, 2 CRJ900ER, 2 Q400.

So, 4 type of different type of aircraft at small number from 3 different manufacturers.

Should have gone with all Airbus or All Boeing.

Seen worse fleet plans, looking at you TG.

As for the current fleet, you would really need to look when each type was acquired and where they are flown too. May not have been practical to get wide bodies when they first got the 737s, so when the time came, the best deal they got was for the 330's, hardly the first airline to do that. As for the CRJ and Q400, the capability of the airports they operate into may well be a determining factor when they were acquired. The Q400 would be a better fit for more austere airstrips, no doubt Rwanda has plenty of them, while the CRJ are a better fit for the regional, less popular routes that don't require the 737.

They do cover a lot of different capacities with the present fleet, while having the 4 different types may not be considered ideal, it should be flexible enough to be reasonably efficient. As for the no profits, the greater benefit to the economy will be the determining factor. Of course the airline would prefer to stand alone as a profit making enterprise, but as long as losses are digestible and the benefit to the overall economy is clear, they will continue to fly and bring tourists in to spend their cash.

jupiter2 wrote:

They do cover a lot of different capacities with the present fleet, while having the 4 different types may not be considered ideal, it should be flexible enough to be reasonably efficient.

It's 4 fleet types, but only a total fleet of 13 aircraft (with 2 more on order). They're also 4 very different fleet times with very little cross commonality. The higher fixed costs of operating 4 types cannot be overcome when you have such a small fleet. As for TG, at least they're sharing those fixed costs over much larger sub-fleets.

evanb wrote:

jupiter2 wrote:

They do cover a lot of different capacities with the present fleet, while having the 4 different types may not be considered ideal, it should be flexible enough to be reasonably efficient.

It's 4 fleet types, but only a total fleet of 13 aircraft (with 2 more on order). They're also 4 very different fleet times with very little cross commonality. The higher fixed costs of operating 4 types cannot be overcome when you have such a small fleet. As for TG, at least they're sharing those fixed costs over much larger sub-fleets.

Curious, what do you suggest the fleet should be for the routes they serve, also remembering the time frame the current fleet was acquired in ?

jupiter2 wrote:

Curious, what do you suggest the fleet should be for the routes they serve, also remembering the time frame the current fleet was acquired in ?

Well, they want to be a jack of all trades and master of none. They want long haul (2x A330s), they want short/thin routes (2x CRJ-900), they want access to shorter runways (3x Dash 8) and also want a little more range and capacity (6x B737s). For 14 aircraft, they barely have enough size for 2 fleet types, never mind 4 fleet types. If they want a sustainable business model, I'd stick to 2 fleet types, one of the Dash or CRJ, and one of the A330 or B737 and generate sufficient scale (probably more than 20 aircraft before they add a third fleet type). But they'd have to give up some routes or ambitions to get there.

Also, I'm not sure what the time frame has to do with fleet acquisition.

jupiter2 wrote:

As for the current fleet, you would really need to look when each type was acquired and where they are flown too. May not have been practical to get wide bodies when they first got the 737s, so when the time came, the best deal they got was for the 330's, hardly the first airline to do that. As for the CRJ and Q400, the capability of the airports they operate into may well be a determining factor when they were acquired. The Q400 would be a better fit for more austere airstrips, no doubt Rwanda has plenty of them, while the CRJ are a better fit for the regional, less popular routes that don't require the 737.

There is only one domestic route for RwandAir (Rusizi/Kamembe) but a few years ago they used to fly to Rubavu (GYI). Both located at the border with DRCongo were renovated not long ago and runways are not in shacky condition.
Apparently WB opted for A330s instead of terrible teens 787 which is a good choice. Also if/when they get the 737max8 they will get rid of the CRJ900 (which are sometimes sent to Central African destinations).

AF022 wrote:

PlymSpotter wrote:

Rwandair is partly being used by the government to expand Rwanda's Tourist industry and expand the countries profile. As such profitability is not necessarily the most important metric they are looking at.

Must be great to work for a company that isn't worried about profitability.

Must be the same as the ME3 10 years ago.
WB looks to be overstaffed, that's said some of the front office staff lack efficiency because it often takes several weeks to solve some basic issues...

evanb wrote:

jupiter2 wrote:

Curious, what do you suggest the fleet should be for the routes they serve, also remembering the time frame the current fleet was acquired in ?

Well, they want to be a jack of all trades and master of none. They want long haul (2x A330s), they want short/thin routes (2x CRJ-900), they want access to shorter runways (3x Dash 8) and also want a little more range and capacity (6x B737s). For 14 aircraft, they barely have enough size for 2 fleet types, never mind 4 fleet types. If they want a sustainable business model, I'd stick to 2 fleet types, one of the Dash or CRJ, and one of the A330 or B737 and generate sufficient scale (probably more than 20 aircraft before they add a third fleet type). But they'd have to give up some routes or ambitions to get there.

Also, I'm not sure what the time frame has to do with fleet acquisition.

Well time frame is relevant, as you just don't start a new airline with 4 different types. Most airlines will start with 1 or maybe 2 and expand from there, as has Rwandair.

So the aircraft they have cover short haul, low density (Q400), medium haul, low density (CRJ9) also remembering that the distances for medium haul in Africa, will probably be 2 hours plus in a jet, so not really viable for the Q400. Then we have medium haul higher density (737) and then their long haul routes to BRU and LGW and higher density medium haul (330). So not sure what you would get rid of. The 330 is too big for most of the regional routes, but good for Europe. The 737, good for regional routes, probably include Dubai and Mumbai (just), but useless for Europe, which would be the prime source of high value tourists, can't really afford to lose them. The Q400 and CRJ9, you could probably get by without the Q400, but the CRJ9 will be too much plane for some of the current routes.

All in all, I still see the fleet as balanced and meeting the needs of a young national carrier with a very specific focus, to bring tourists to Rwanda. Business travel and other leisure travel (VFR) is catered for as well, but the primary aim is to bring tourists in and the dollars they represent and that's what the fleet is based around.

evanb wrote:

Not profitable is an understatement! Here are the annual subsidies they're received from the Ministry of Finance:

2010 FRw 10.8 billion
2011 FRw 25.2 billion
2012 FRw 22.0 billion
2013 FRw 27.0 billion
2014 FRw 29.1 billion
2015 FRw 33.6 billion (The 2015 subsidy was 33% of turnover!)
2016 FRw 49.6 billion
2017 FRw 86.3 billion
2018 FRw 107.0 billion

That's a total of FRw 390.6 billion which is $656.6 million at current rates. Most of this is even before the big expansion with the arrival of the A330s in 2016! They're burning money pretty quickly!

This is a huge amount of money. Is there a source for this?

AF022 wrote:

This is a huge amount of money. Is there a source for this?

Rwanda Ministry of Finance and Economic Planning release a Budget Framework Paper every year. See the following link for the most recent year's (2018): http://www.minecofin.gov.rw/fileadmin/t ... _Paper.pdf

In part IV.1.2.(c) you find the subsidy to Rwandair. You need to search through each year's Budget Framework Paper to get put together the full list.

evanb wrote:

They want long haul (2x A330s)

RwandAir’s latest acquisition, an Airbus A330-900NEO, is already sporting her livery in Toulouse, where the aircraft was assembled.



https://atcnews.org/2019/02/18/rwandair ... -toulouse/

It seems to make sense for a country like Rwanda to subsidize its national airline. It connects the country to the world and enables trade and tourism that would otherwise depend on the surrounding airlines, which wouldn't serve it adequately.

peterinlisbon wrote:

It seems to make sense for a country like Rwanda to subsidize its national airline. It connects the country to the world and enables trade and tourism that would otherwise depend on the surrounding airlines, which wouldn't serve it adequately.

I can't imagine how this could be worth the investment of $120,000,000 for just one year.

eastafspot wrote:

RwandAir’s latest acquisition, an Airbus A330-900NEO, is already sporting her livery in Toulouse, where the aircraft was assembled.

Adding another new engine type is going to drive up costs even more.

AF022 wrote:

peterinlisbon wrote:

It seems to make sense for a country like Rwanda to subsidize its national airline. It connects the country to the world and enables trade and tourism that would otherwise depend on the surrounding airlines, which wouldn't serve it adequately.

I can't imagine how this could be worth the investment of $120,000,000 for just one year.

Is that in dollars or local currency?

peterinlisbon wrote:

AF022 wrote:

I can't imagine how this could be worth the investment of $120,000,000 for just one year.

Is that in dollars or local currency?

It's actually more. In 2018, it was FRw 107 billion, which is $180 million at current rates.

This airline should be buying used A330s, not factory fresh ones.

peterinlisbon wrote:

AF022 wrote:

peterinlisbon wrote:

It seems to make sense for a country like Rwanda to subsidize its national airline. It connects the country to the world and enables trade and tourism that would otherwise depend on the surrounding airlines, which wouldn't serve it adequately.

I can't imagine how this could be worth the investment of $120,000,000 for just one year.

Is that in dollars or local currency?

[twoid][/twoid]

US dollars

180$ million dollars doesn't sound like that much. It's the cost of one aircraft. If the benefits to the country as a whole outweigh that then it's worth it. Rwanda is fairly isolated and surrounded by poor countries with a lot of problems, so the only practical way in and out for business people and tourists is by air. Think how much it costs to build utility networks, roads or bridges - governments often spend money on things because they are good for the country, even though they will never make a profit.

Exactly, the economy is growing at around 6% per year. This is being fuelled by tourism and business, both of which require stable levels of air connectivity.

Subsidising air services doesn't always make sense, but here it is delivering significant value to Rwanda's economy and society.

peterinlisbon wrote:

180$ million dollars doesn't sound like that much. It's the cost of one aircraft. If the benefits to the country as a whole outweigh that then it's worth it. Rwanda is fairly isolated and surrounded by poor countries with a lot of problems, so the only practical way in and out for business people and tourists is by air. Think how much it costs to build utility networks, roads or bridges - governments often spend money on things because they are good for the country, even though they will never make a profit.

Maybe to you, but $180 million is a fantastically large amount of money for Rwanda. $180 million is 4.4% of all government expenditure, 11.4% of non-wage government expenditure and 7.9% of tax revenue. To put it in context, it would be the same, proportionately, as South African Airways receiving ZAR 114 billion (7.9% of tax revenue) in the budget announced today in Cape Town. Instead they received ZAR 5 billion and people were outraged!

Even though their economic growth has been strong, Rwanda is still a tiny country, and this is a fantastically large amount of money!

PlymSpotter wrote:

Exactly, the economy is growing at around 6% per year. This is being fuelled by tourism and business, both of which require stable levels of air connectivity.

Subsidising air services doesn't always make sense, but here it is delivering significant value to Rwanda's economy and society.

Sure, subsidizing air services can make sense. However, the size of that subsidy needs to be appropriate and achieve an outcome.

Secondly, this argument would make sense if one can actually show that foreign carriers are not providing sufficient capacity and connectivity. They've acquired two A330s, ostensibly for long haul operations, that are being underutilized. The only long haul routes that they're flying are a 3x weekly KGL-BRU-LGW. The result is that the A330s are spending most of their time on short, regional routes, rather than long haul. The furthest their A330-200 has gone this month is the 5th freedom route from Mombasa (in Kenya) to Dubai. It mostly flies short to medium routes like Lagos and Johannesburg, easily in the range of B737s. Their A330-300, which does their 3x weekly KGL-BRU-LGW, is also massively underutilized, spending more of its time on short routes too. The under utilization suggests that in fact there is an over capacity in Rwanda, rather than under capacity.

I believe Rwandair should be more boutique.
They should similar their fleet to A338/A339--->B737max8--->CRJ900ER, and add more a330s and b737 to make all long medium haul daily
C class and W class should be doubled to fit the market need

C W Y
339 60 40 100
73M 32 108
CR9 12 50

Why would any expect a profit? It's not a prerequisite.
Airline serves as a national vehicle and has been part of Rwandas great political and economic rebound.

evanb wrote:

Adding another new engine type is going to drive up costs even more.

For sure, it must have been forecast, no?

KICT wrote:

This airline should be buying used A330s, not factory fresh ones.

Why?
Used A330s cost more in maintenance right? At least, RwandAir can now claim to have Africa's youngest aircraft fleet with an average of 5,6 years:
https://blog.ch-aviation.com/2017/08/17 ... -revealed/

Sure it's only marketing, but perception is often what does matter the most for traveller after price!

PlymSpotter wrote:

Exactly, the economy is growing at around 6% per year. This is being fuelled by tourism and business, both of which require stable levels of air connectivity.
Subsidising air services doesn't always make sense, but here it is delivering significant value to Rwanda's economy and society.

I can only agree with you. This is similar to the Arsenal Football Club – Rwanda deal worth €39 millions.
The poor Rwanda paid the rich London club £30million  ($40 million) to have Arsenal players wear the "Visit Rwanda" tourist board logo on one sleeve last year for a 3 year contract period (with foreign donors money of course ... ).
It will have a positive impact for country's future undoubtly, whatever the naysayers moan!

evanb wrote:

PlymSpotter wrote:

Exactly, the economy is growing at around 6% per year. This is being fuelled by tourism and business, both of which require stable levels of air connectivity.

Subsidising air services doesn't always make sense, but here it is delivering significant value to Rwanda's economy and society.

Sure, subsidizing air services can make sense. However, the size of that subsidy needs to be appropriate and achieve an outcome.

Secondly, this argument would make sense if one can actually show that foreign carriers are not providing sufficient capacity and connectivity. They've acquired two A330s, ostensibly for long haul operations, that are being underutilized. The only long haul routes that they're flying are a 3x weekly KGL-BRU-LGW. The result is that the A330s are spending most of their time on short, regional routes, rather than long haul. The furthest their A330-200 has gone this month is the 5th freedom route from Mombasa (in Kenya) to Dubai. It mostly flies short to medium routes like Lagos and Johannesburg, easily in the range of B737s. Their A330-300, which does their 3x weekly KGL-BRU-LGW, is also massively underutilized, spending more of its time on short routes too. The under utilization suggests that in fact there is an over capacity in Rwanda, rather than under capacity.

Sustainable economic growth and a booming tourist industry. Seems like a pretty appropriate outcome to me.

You need to bear in mind that Rwanda is a landlocked country with limited infrastructure, especially overland links to surrounding countries. The A330s utilisation is largely being driven by strong cargo demand, which in turn is driven by the growing economy. Of course it's 'sexy' for the A330s to be marketed as leading a longhaul revolution but, pragmatically, there are other reasons - the 737 is not exactly renowned for it's cargo handling abilities.

evanb wrote:

Maybe to you, but $180 million is a fantastically large amount of money for Rwanda. $180 million is 4.4% of all government expenditure, 11.4% of non-wage government expenditure and 7.9% of tax revenue. To put it in context, it would be the same, proportionately, as South African Airways receiving ZAR 114 billion (7.9% of tax revenue) in the budget announced today in Cape Town. Instead they received ZAR 5 billion and people were outraged!
Even though their economic growth has been strong, Rwanda is still a tiny country, and this is a fantastically large amount of money!

Obviously this is not the right forum to talk about politics here, however for once it will explain a few things:
Not sure about South Africans and SAA, but Rwandan citizens living in Rwanda can barely express their opinion about most government projects – you will never see a strike or a protest for a major issue in Kigali, let alone in the countryside.
That said, President P. Kagame is a true visionary business man, and acts in way that can promote and develop Rwanda. Period.
If that includes financing an unprofitable airline and building the New Bugesera Airport, then be it!

chunhimlai wrote:

I believe Rwandair should be more boutique.
They should similar their fleet to A338/A339--->B737max8--->CRJ900ER, and add more a330s and b737 to make all long medium haul daily
C class and W class should be doubled to fit the market need

C W Y
339 60 40 100
73M 32 108
CR9 12 50

Very interesting approach, especially in Africa!
Do you have some successful examples?

chunhimlai wrote:

I believe Rwandair should be more boutique.
They should similar their fleet to A338/A339--->B737max8--->CRJ900ER, and add more a330s and b737 to make all long medium haul daily
C class and W class should be doubled to fit the market need

C W Y
339 60 40 100
73M 32 108
CR9 12 50

Very interesting approach, especially in Africa!
Do you have some successful examples?[/quote]


Someone above said that the premium seat are almost full but Y class is half empty
So the best way is to add premium and cut Y seats

chunhimlai wrote:

chunhimlai wrote:

I believe Rwandair should be more boutique.
They should similar their fleet to A338/A339--->B737max8--->CRJ900ER, and add more a330s and b737 to make all long medium haul daily
C class and W class should be doubled to fit the market need

C W Y
339 60 40 100
73M 32 108
CR9 12 50

Very interesting approach, especially in Africa!
Do you have some successful examples?

Someone above said that the premium seat are almost full but Y class is half empty
So the best way is to add premium and cut Y seats[/quote]

Only if that is the case year round. Sufficient Y seats are probably quite important for tourism....

And as long you have enough premium seats to match demand at reasonable pricing they probably pay for much of the flight, with lossmaking Y seats maintained for macroeconomic reasons.

Best regards
Thomas