Posted by: Reuters

TUNIS (Reuters) – Tunisair is counting on new African routes to drive passenger growth as it prepares for increased competition for flights to and from Europe under an “Open Skies” agreement with the EU.

The Tunisian state-owned airline will launch two new routes by the end of this year, to Sudan and Cameroon, the company told Reuters. That will bring the number of its African routes to 10, after it began flights to Guinea and Benin last year.

New paths to growth could be vital for the survival of loss-making Tunisair, the national flag carrier and one of the North African country’s biggest employers.

Whether its business can adapt to the Open Skies agreement is also a test case of whether the Tunisian economy and its slew of state firms can modernize and compete after being shielded from foreign rivals for decades. The deal, which comes into force later this year, will put European carriers on a level footing with Tunisair in terms of airport slots and fees.

“The agreement will have a good impact on the tourism sector and boost activities at Tunisian airports,” said Mohammed Ali al-Toumi, head of the Tunisian federation of travel agencies. “But Tunisair is not ready for fierce competition.”

Flights to and from Europe are Tunisair’s main business; they accounted for 68.9 per cent of its 475,000 passengers in the first two months of 2018, compared with African routes’ 16.9 percent and the Middle East’s 13.4 percent.

However the African passenger numbers are growing far faster – they increased by 27 percent in that period year-on-year, compared with a 4.6 percent rise in European route passengers.

A pivot towards Africa will not be easy.

Tunisair is not the only carrier looking to capitalize on strong growth in African air passenger numbers, which the International Air Transport Association sees growing by almost 6 percent a year over the next decade due to increasing economic output and poor road and rail links. That compares with 2.3 percent for both the European and North American markets.

Tunisair’s regional rival Royal Air Maroc of Morocco, Gulf carriers like Emirates and Turkish Airlines, for example, are also expanding on the continent.

They have deeper pockets and are more advanced; Turkish Airlines already flies to over 30 African countries and is planning to add new destinations including Luanda and Juba.

STRIKE THREAT

Even should Africa continue to deliver rapid passenger growth for Tunisair, in which Air France-KLM holds about 5 percent, the carrier faces deep problems.

It has been posting losses for years, hit hard by a tourism slump after militant attacks and the loss of major market Libya – which made up 25 percent of its business – when it stopped flying there in 2014 for security reasons.