Can Air Algérie fly out of trouble?

24/02/2008

Air Algérie has had a bumpy ride, but company and state officials agree that pilot pay incentives, new aircraft and a tourism partnership can help keep "Air Couscous" viable in the global economy.

By Mohand Ouali for Magharebia in Algiers – 24/02/08

[File] Faced with overseas competition and eventual airline deregulation, national carrier Air Algérie must tackle a number of problems, including below-market wages and poor customer service.

Air Algérie – which Algerians have nicknamed "Air Couscous" – has one of the worst images of any airline, being notorious for its poor customer service, frequent delays and appalling in-flight service. New initiatives in the works, however, may turn things around.

While speaking on national radio February 19th, the company’s acting chief executive said that no fewer than 15 foreign-owned companies are operating in the international flights market and that Air Algérie is holding its own: "We’ve set ourselves apart from the rest and taken a 50% market share", Abdelnacer Hadj-Rabia announced.

He even voiced hopes that the domestic market will be opened up to competition. "It would enable us to minimise our losses", Hadj-Rabia said.

Indeed, Air Algérie has had a bumpy ride in the domestic market so far. Ticket prices are not high enough to cover costs, but the company cannot raise air fares without government approval. Most people are unable to afford them as it is, especially in the country’s southern regions – so higher prices could kill off the market altogether.

The company’s finances have also been under considerable strain from its efforts to keep its domestic routes going since the liquidation of Khalifa Airways.

Another issue plaguing the company is that of delayed flights. According to figures published by Air Algérie, 54.7% of flights ran on time in 2007. One of the reasons for flight delays, Air Algérie’s Casablanca manager told attendees at the company's annual conference on February 13th, is a shortage of aircraft. A number of other bosses shared this view, saying that Air Algérie’s fleet is currently stretched to the limit. If even one plane breaks down, a domino effect causes a flurry of delays.

To remedy the problem, the government has just given Air Algérie the go-ahead to purchase 5 mid-sized passenger jets, 4 regional transport planes and 2 small-capacity aircraft for a total of $100 million.

The need to modernise its fleet is not the only problem facing Air Algérie. More and more pilots are deserting the national carrier, lured by the higher salaries offered by foreign-owned airlines. Some thirty or so have left already, though the pilots’ union says the real figure is closer to fifty.

The company knows that in order to retain pilots, it will need to overhaul its wage policy. Air Algérie is now holding talks with the union. They are also planning to train and recruit new pilots and improve benefits for all staff.

In light of these difficulties, experts have advised Air Algérie to focus its new strategy on training, human resources development and communication. Plans also call for implementing an online purchase system.

The hope is that by 2015, the company will cater to 50% of the 16 million tourists expected to travel to Algeria. To achieve this goal, a partnership agreement is planned between the state tourism department and Air Algérie.

Air Algérie still receives support from the government, but this arrangement may soon come to an end, indicated the director for civil aviation at the Ministry of Transport. Messaoud Benchemam said, "The globalised environment in which we find ourselves will make deregulation of the airline industry inevitable."

A similar message was given by Transport Minister Mohamed Maghlaoui: "It is imperative that we boost competition by improving service quality, because sooner or later, the air transport sector will be opened up further."

According to the minister, however, the process of deregulating the airline industry will not begin before 2009.

This gives Air Algérie time to put its house in order and brace itself for the challenge of competition.