Analysis Aviation Tunisair’s turbulence a ‘toxic mix of circumstances’ By Gavin Gibbon July 6, 2023 Reuters Analysts say Tunisair will require 'huge investment' if it is to survive National carrier seeks restructure to help it survive Revenue grew 29% in Q1 but market share fell Airline requires ‘huge investment’, say analysts Tunisia’s national carrier Tunisair is facing a “toxic mix of circumstances” as it battles for survival, according to a leading aviation expert. The North African country’s president Kaïs Saïed, minister of transport Rabii Mejidi, and Tunisair’s CEO Khaled Chelli met recently to discuss a rescue plan for the airline, which is seeking a restructure to resolve financial difficulties and refresh its fleet. Sponsorship deal grows Emirates’ presence in Africa EU offers Tunisia $1bn loan – if it accepts IMF reforms Boeing looks at selling 150 jets to Riyadh Air “Tunisair was one of the best public companies for years before it was hit hard by corruption, like other companies,” Saïed was quoted as saying by Tunis Afrique Presse, the national press agency. “The parties who today want to sell this public company or drive it into bankruptcy must assume their responsibilities,” he added following the meeting. Tunisair’s issues have been compounded by a slow recovery from the Covid-19 pandemic following global travel restrictions, as well as competition from low-cost carriers, political instability, high staffing numbers and an ageing fleet. John Grant, partner at Midas Aviation, said the airline required “huge investment”. He conceded this might not be possible given other pressing economic issues to be addressed by the Tunisian government. Tunisia is in the middle of protracted talks with the International Monetary Fund over a bailout. This is viewed as essential to help the country avoid a financial crisis. “Sometimes it’s better for all to just accept the inevitable and let the airline fall before allowing new competitors into the market,” Grant said. Calls for improvement Tunisair’s current fleet averages around nine years old. It comprises 15 jets, including two Airbus A319, seven A320-200, four A320 Neo, and two A330-200 aircraft. Another A320 Neo has been ordered to further modernise the fleet. Saïed requested an action plan be drawn up for the sale of aircraft that are no longer in service. He also called for the improvement of air and ground services. Almost six years ago, the North African country and the EU said they had agreed to open all Tunisian airports to foreign carriers. This has yet to materialise. “We want the skies to be open for Tunisian planes, and not to be strewn by planes that do not include ours,” Saïed said. Linus Bauer, managing director of Dubai’s Bauer Aviation Advisory, said the deal “could break Tunisair’s neck”. “Tunisair needs to fight for every bit of business from Europe, and Ryanair and EasyJet would immediately poach the lucrative low-cost tourism markets,” Bauer said. Tunisair posted a 29 percent increase in its transport revenues to nearly TND292 million ($94.7 million) in the first quarter of this year. At the same time, however, the market share of the national carrier dropped from 33.1 percent to 28.8 percent. The company’s outstanding bank debt decreased significantly from TND847.5 million at the end of December last year 2022 to TND766.5 million at March 31 2023. Industry growth The number of flights scheduled by Tunisair for the summer has increased by an estimated 330,000 seats, up 17 percent compared with 2022, the Ministry of Transport announced this week. The International Air Transport Association (IATA) announced last month it expected the global airline industry to see net profits reach $9.8 billion this year, more than double the previous forecast of $4.7 billion in December 2022. Middle East carriers are forecast to see a profit of $2 billion this year, up from $1.4 billion in 2022. However, IATA said Africa “remains a difficult market in which to operate an airline” and carriers across the continent are forecast to make a combined loss of $500 million in 2023, slightly better than the $800 million loss projected in 2022. Despite the challenges facing Tunisair, Dubai’s Emirates is looking to tap into the greater share of the African market. Last month it announced it is to sponsor a Tunisian sports club. The airline will sponsor Etoile Sportive du Sahel, which has teams across a number of sports including football, basketball, volleyball and handball. Emirates reported in May a record-breaking profit of AED10.6 billion ($2.9 billion) over the last 12 months, a turnaround from a loss of AED3.9 billion in the previous financial year. Africa accounts for 8 percent of total revenues for Emirates, or AED8.5 billion ($2.31 billion), according to its 2021-2022 annual report published in May. This compares to AED9.2 billion in the 2019-2020 financial year and AED6.13 billion a decade ago in the 2011-2012 financial year.