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Policy Brief: Limping Cameroon Airlines Company (Camair-Co), Any Future? By Asanji Burnley N. (President/Co-founder-CACLiTA), 23 October 2016

23 Oct

Background
The Cameroon Airlines Company (Camair-Co) was created on the remnants of the Cameroon Airlines (CAMAIR) following a presidential decree no. 2006/293 of 11th September 2006 with the State being the lone shareholder. Following its creation, the company took five (05) years to take off the ground with its inaugural flight being on the 28th of March 2011.

Camair-Co five years later is riddled with debts, as of 2016 to the tune of close to 35billions francs CFA as stated in a correspondence dated 13th June 2016 from the Director General to the Minister of Finance requesting for urgent intervention to salvage the situation which is gradually getting off hand. Of which 5 billion francs CFA was urgently needed to pay for services to permit the exploitation of the recently repaired Boeing 767-300 ER, the Dja that was just recently delivered after close to 6 months of repairs in Kenya.

This state of affairs was also reiterated by the former Director General of Camair-Co Mr. Jean Paul Nana Sandjo in an interview with the Cameroon national daily- Cameroon Tribune last year 2015 where he said :’Ca va mal’ that’s saying things are bad. He also recognized that Camair-Co started under conditions which have created a lot of debts. Today they are under restructuring.

The million dollar question is what accounts for this alarming state of affairs? This write up seeks to bring out the issues and propose a possible way forward if certain actions are carried out to permit the airline company come out of the storm and uphold its baptismal name of the ‘Star of Cameroon’.

Challenges
Origin: an indebted Camair-co
Firstly, the debt situation of Camair-Co came about due to poor strategic decisions and management orientations. According to statistics obtained from Camair-co, findings by the Central African Centre for Libertarian Thought and Action (CACLiTA), Cameroon, debts were accrued from unpaid bills for services amongst which include accrued rents for rented office space which cost 200million per year, arrears of bills for the maintenance of its three airplanes by Lufthansa for an exorbitant price, unpaid services to the Cameroon Civil Aviation Authority (CCAA) and unpaid fuel bills amongst others. The Company thus trailed a debt bag of 35billion F CFA.

Inadequate nature of the fleet
Secondly, the inadequate nature of the fleet has also been a pull factor for its lack of productivity. Camair-Co has few aircrafts – two Boeing 737-700’s and the repaired Boeing 767-300 ER (The Dja). To this can be added the two MA-60’s, which are still having difficulties being exploited due to the cloud of safety worthiness which delayed its validation for air worthiness.

Low and unskilled staff base
Thirdly, the personnel base is also one of the factors accounting for the non productive nature and thus increasing the financial burden on the company. Findings from CACLiTA show that Camair-Co has a staff base of 700 staff for 3 air planes. This is just not realistic as it increases the financial burden on the airline company which is still to take off effectively. Statutorily international standards hold that an airline company should have an average staff base of 150 staff per aircraft.

A lack of a strategic government vision
Fourthly, the lack of a strategic government vision is also a problem hindering the effective take off of the company. With the lack of strategy for development and growth for the airline company, it thus gave room for amateur strategies by the different ministerial heads as well as the different Director Generals. The different Ministers of Transport did not follow a particular strategy of development for the company as there is no blue print to this effect.

This has had a negative impact on the company, thus hampering its development. Proof of this is the non respect of the business plan that was submitted by the former Director General – Mr. Jean Pierre Nana Sandjo. He proposed a strategic development plan for the airline which has never been respected. While he proposed a restructuring program and finance was sought, the Minister of Finance instead of approving the financing for the restructuring of the airline company rather requested for a complete audit and proposal for a full productive business plan (Restructuring Plan) for the company. Likewise the continuous change of the management team at the head of the National Company – Camair-Co, we are at the sixth Director General for its 10 years of existence is not healthy and is not the solution to a smooth functioning of the company.

A poor exploitation license
Fifth, is the external factor such as the cancellation of its exploitation license for the European Union airspace by the Cameroon Civil Aviation Authority (CCAA). In a letter from Mme Paule Assoumou Koki (D.G. of C.C.A.A.) addressed to the Director General of Camair-Co where the top management was informed of the suspension of its flights to the E.U. airspace due to incomplete technical file. The CCAA took that decision to restrain its certificate of air transporter, by excluding the European airspace and to inform the European Agency for Safety and Aviation (EASA).
Camair-Co could not even fly to Mecca because only planes less than 20 years old are allowed to fly to the Haj. Presently Camair-Co has no aircraft that is less than 20 years old but for the two MA-60’s which did not hold air worthiness for the European air space.

Government monopoly
The inadequacies of political will to effectively permit the national air carrier effectively function as a company with main goal to generate profits. As the government is the sole proprietor and thus with the constant delays in injecting the needed capital required for the effective running of the company. This trickling injection of capital by the government into the company which does not permit it meet its running cost of paying for services rendered just like any other company. As reported in the National daily by the former Director General of Camair-Co, the government injects monthly 1,5billion F CFA for the day to day running of the company. This situation has plumbed the company into debt and the difficulties it is facing and unable to come out.


A poor business model

According to the Boeing consulting audit report submitted to the government it revealed that Camair-Co’s main problem is the company’s business model where expenditure largely exceeds its revenue. Findings from CACLiTA’s research team show that fuel cost represents more than 60% of revenue. 49% of the revenue is allocated for fees paid to the Cameroon Airport Company (ADC) for ground services. Salaries represent 20% of revenue, as to 16% for aircraft maintenance costs, all amounting to 140% of Camair-Co’s revenue, excluding depreciation charges.

A way forward
This write up tries to stirrup the way forward by proposing some potential strategies for Camair-Co to take off in the skies and remain a sustainable airline company.

Cancelling the outstanding debt

Firstly, the debt situation of 35billion FCFA needs to be cleared and further investment based on a strategic and well thought out business plan. To this the audit that the government had recommended and a propose plan to restructure Camair-Co by America’s Boeing Consulting following the support agreement signed with the government in March 2015. Boeing Consulting finished the job and submitted to the Head of State for approval an Audit report and a Plan to Restructure the Company. The President of the Republic, President Paul Biya approved Boeing Consulting proposed plan to restructure Camair-Co on Tuesday July 26th 2016 through a decision made public by the Civil Cabinet. This is a step in the right direction but more commitment still needs to be put in for there to be progress and a cancellation of the outstanding debt.

Stepping up the total fleet to international standards
Secondly, this proposed plan envisages the acquisition of nine aircrafts to take the total fleet of the company to 14. Which will permit the national carrier meet its investment needs, fleet and route requirements. Thus expanding its flights route to 5 intercontinental destinations, to include; Paris, Brussels, Guangzhou, Dubai and Washington. These added to the regional flights, Camair-Co will by 2020 be flying to a total of 27 destinations across the world.


The need for more qualified staff

The plethoric staff base which is one of the key areas to restructure as it increases the running cost which needs to be reviewed by laying off and retaining the basic minimum staff needed to permit it optimize its running cost. This is also included in the Boeing consulting plan for the restructuring of Camair-Co.

A state of the art strategic plan
Fourthly, the need for a strategic plan of action with long/ short term objectives to attain as this will guide the management team to seek ways and means to attain the goals or objectives there in. Thus, the need for a comprehensive business plan which showcases effectively the goals that needs to be attained. The short coming of the Boeing Consulting plan of restructuring which has been approved needs to be expanded beyond the 5years restructuring period.

Respecting international standards
Also the respect of the international standards to obtain all the necessary accreditation to fly the expected destinations is primordial. To this effect the ban that was imposed by the CCAA has been uplifted following the completion of the needed documentation as well as the approval of the restructuring plan which Boeing Consulting has proposed. These factors all played in favour of the national airline carrier making it credit worthy which was the key reason for which CCAA imposed the ban as it was clear if Camair-Co flew the E.U airspace and with its financial challenge was unable to pay for ground services, it brings down the reputation of the CCAA. This justified CCAA’s ban for Camair-Co to fly the E.U airspace to save the prestige and honour of the Cameroon Civil Aviation.

Cutting Camair-co’s expenditure
Another recommendation is for the comprehensive cut in the company’s expenditures as these largely exceeds its revenues. This is possible for example by carrying out in-house maintenance as external maintenance cost the company too much amongst others.

Camair-Co can also request for authorization to carry out its own ground services just like Camair used to do as this will greatly reduce its cost. Camair when it existed was realizing its ground services in Cameroon as such it helped the company save much money as it halso had the necessary man power.

A need to have alternative sources of revenue
To these CACLiTA also recommend, just like most aviation experts agree that, there is need for the airline company to diversify its revenues source. Revenue from passengers should not be the only source as this will not be optimal for the company. Thus there is need to diversify the company’s sources of revenue. This can be achieved through the introduction of freight services as this service generates substantial revenues; establish an aviation training centre with simulators, to enable the company train its pilots as well as pilots from other airlines. Training of the airline pilots generally cost a lot of money to the airline company. With its own training facilities it generates revenue from the pilots of other airline companies coming to be trained.

Lastly, there is need for a complete restructuring of the company’s structure or organigramme to encourage or limit government control or intervention. This is key to permit a good business strategy for the company which can permit the effective take off of the company and permit it be productive. This will also reduce the government intervention and constant control as with the constant change at the Head of the technical ministry disturbs the smooth functioning of the company as each head decides on the management system and also spells out its own objectives which are not necessarily those of the company.

The restructuring plan proposed by Boeing consulting is good no doubt but it lacks that profitability aspect beyond the 5 years of restructuring period. If the recommendations mentioned above are not taken into considerations amongst others even with the new Director General – Mr. Ernest Dikoum, Camair-Co will still face the same challenges as before. There is ardent need to realize a policy and structural change for tangible change. Thus Camair-Co still has a possibility to survive and why not spur profitability if these components are included into the present restructuring plan as well as the diversification of the sources of revenue.

 
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Posted by on October 23, 2016 in Uncategorized

 

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