After a career at airlines such as Vueling and Viva, Spanish executive Eduardo Fairen assumed the position of CEO at TAAG, Angola’s state-owned airline, in 2021.
A year after a first interview on the inaugural Luanda-Madrid flight, Fairen recently spoke to Aviacionline to discuss the Angolan airline’s latest developments.
The interview was edited for clarity.
Aviacionline (AL): We last spoke a year ago. Since then, what has changed at TAAG?
Eduardo Fairen (EF): I don’t know how much time we have to tell, because some things have changed. We have changed our headquarters, we are in a new building, the most modern and newest area of Luanda in a smart building with facilities to improve performance. And improve the working conditions that were not there in the other building, unfortunately, because they were very, very old facilities.
So we have been completing our program of our fleet plan to secure aircraft for [2024] and 25 and first quarter of 26. There are 15 Airbus A220 aircraft that we have signed with four different lessors.
We are still on the subject, negotiating more aircraft. We are in a tender between Airbus and Boeing for the replacement of the Triple Seven. There is no decision yet.
We have opened new routes, more frequencies, we have closed some routes that were not working. We have made a profit in 2022 and it has been a historical issue, it had been a long time since this company had made a profit.
There have been a series of important changes. But there are still many more to be completed before we can think that the task is solved.
AL: But also economically Angola is changing. Exports last year grew a lot; is that felt in demand?
EF: Let’s see, now the opposite is being felt, because right now we are going through an oil cycle that is reducing its price, so the country’s income is being affected. And this has also weakened the currency, since it has depreciated quite significantly against the dollar in May and June.
This has also caused an increase in domestic inflation, which is affecting price levels and the economy as a whole. We do not have up-to-date information on the forecast for exports between now and the end of the year, but at the end of the day this whole context is affected by many factors.
The price of oil today is also affected by the war in Ukraine and the different producers and the production levels of many other countries that have notably increased production, such as the United States, which affects prices, which are falling, and this affects the economy.
We expect that there is going to be a contraction in demand in the Angolan market, possibly in the range of 3 to 5%, in the second half of this year. So we are trying to increase our supply outside Angola, to offset the company’s revenues and maintain financial balance — that is where we are right now.
AL: The country’s economy depends on a higher oil price, but if the oil [price] grows, your costs also grow. how do you manage that balance?
EF: We have always worked with an expensive aviation fuel price, because in Angola the price of aviation fuel is more expensive than in the rest of Africa. That fuel price should be going down, but it is not going down at the same rate as the price of the barrel. That would help our expenses.
Our problem comes because most of the sales, an important part of TAAG’s income, comes from ticket sales in Angola that are made in kwanzas and that is much weaker than the dollar than before. So this causes us to adjust prices to maintain parity, and this makes it difficult for more customers to buy, because for them the ticket is more expensive.
Then we have to apply in cases like this a policy beyond cost control and to promote those destination routes that generate more income in foreign currency than in kwanzas. For obvious reasons, we need to pay in dollars abroad, so we need more dollars.
AL: According to Cirium, TAAG has not yet returned to 2019 seat count levels. When do you expect to return to those levels?
EF: The African market issue does not affect only TAAG, it affects all of them. The African market is not recovering at the same speed as other European or North American, South American markets, for obvious reasons, simply because the economies are much more dependent on commodity prices.
In addition, the economic impact of COVID has hit all these areas very hard and has meant that the return and the return to normal activity of the economy is at a slower pace.
We estimate that we will be able to reach 2019 passenger levels by the middle of the second half of 2024, if the progression continues as it is and nothing happens. That is in terms of passenger numbers — but in terms of revenue, we have already passed the 2019 figures, on a year-to-year basis.
AL: After one year of the Madrid flight we don’t have specific data on load factors. But how is the route doing after one year — is it doing well, is it doing as expected, or what is going on there?
EF: The Madrid route has almost all corporate or family travel, it has very few tourism components, except in the summer. Right now we are having quite high load factors on the Madrid flight, but that is because we are in the middle of summer.
And then we the route is behaving within what is reasonable for a route of these characteristics, which flies as big an aircraft as this one that we are using, which is the Triple Seven.
It is not in the optimal place, because we are also not seeing our partner Iberia opening up connections and connectivity to South America and North America mainly, which could make other customers in the southern area want to travel with us to connect in Madrid with those flights to those destinations. It is not progressing right now at the speed — I am talking about the winter — that we would like.
Well, that will probably continue, because it will force us to reduce the frequencies on that route, reduce some frequencies to keep the cost level within the limits that we want.
AL: The 777 looks, from the outside, like an aircraft that is too big for the market. Do you see that as well? And for the replacement, how is it going to work?
EF: The replacement is a smaller widebody than the Triple Seven. We are looking at two aircraft that we have on the table, they are the Boeing 787-9 and the Airbus A330-900neo.
They are aircraft that have greater operating economies than the present one, they consume less fuel and they are also smaller, which makes them easier to fill than an aircraft as large as the [777].
AL: To expand the intercontinental [operation], if you were to do it today, do you have the aircraft to do it, or do you lack the aircraft?
EF: We lack the aircraft.
AL: But if you were able to grow tomorrow, would there the demand [for that]?
EF: Yes, of course, yes, yes, yes, yes, yes, yes.
AL: The 777-200s have been parked for a long time. Is the plan to sell them or get them back [to flight]?
EF: We have to make a decision on those aircraft because, as you say, they were dedicated to cargo transportation until last December and they are on the ground right now, pending a decision on whether we are authorized to continue with those flights or not. In that case we will take the most appropriate decisions. Among them, we will also sell the planes on the market, if necessary.
AL: Did the contract for flights to China finally run into problems, or is it still a priority for you?
EF: It is a contract that we are still keeping alive. We are still talking to them to find a solution, because they need an ad hoc solution and we are signatories to that agreement. So, as we said, we are awaiting a decision on whether we can continue to operate with those aircraft or not.
So, based on that we will have to make the other decisions about the fleet and the type of service we can provide to the customer, including whether we can contract specific freighter aircraft to be able to do that operation, but initially we would like to do it with our own aircraft.
AL: In Paris, you announced nine additional A220s. The [narrowbody] fleet, from four 737s, is going to go to almost five times as many [aircraft]. Commercially, that seems like a big challenge. How are you going to expand traffic in the same proportion?
EF: You have to keep in mind that we have a number of regional routes. [Here,] understand regional meaning everything on the African continent. We are not doing that today simply because we do not have enough aircraft. There are demands for operations and traffic from nearby countries that we cannot meet because we do not have enough aircraft.
We are now going to incorporate three more 737s. We are already in the final stages for the incorporation of these aircraft precisely because our regional operation is demanding much more service than we are able to provide.
So the total of [A220s ordered] that we have today are 15, and at the moment we are not going to add more until we finish the discussions that we have pending with Pratt & Whitney on the engine issue and the warranties on them.
But our initial idea at TAAG is to finish the decade with a fleet of 30 Airbus aircraft, so we would be halfway there. So the potential is there. We have routes that are doing very well and there are others that we wish we could do, but we can’t because we don’t have aircraft. So those planes will go directly to operate those routes.
AL: And where are those three new 737s coming from?
EF: We have two 737-700s coming from SonAir, we have a 737-800F coming [converted]. The 737-800F comes to reinforce the cargo operation that we are maintaining regionally, together with the current 737-700 «quick change» that we have.
AL: In Europe, is the idea to consolidate the current destinations or do you plan to enter new destinations? A few weeks ago the Gatwick slots came up [for the winter] and you were there.
EF: Well, we are exploring potential new destinations, but no decision has been made. An intercontinental route has to be launched at least six months or a year in advance.
AL: So you are not ruling out, but you are still missing the airplanes.
EF: Well, in the case of other European destinations, we lack the aircraft, and it is not only a problem of numbers. We lack the right type of aircraft to be able to operate those routes, and it is certainly not the Triple Seven. Well, when we have the new widebodies we will have another scenario.
AL: And when would the new widebodies arrive?
EF: We are still negotiating with the two manufacturers, so we don’t have a signed agreement. Because you know that when those agreements are signed is when we can have a certainty of when they are going to be delivered. But we would like to be able to incorporate next year two new ones, two more widebodies, at least, in our fleet to be able to meet the demand.
We have the Triple Seven and we have been leasing the A330s for a while for maintenance purposes, but we have a very limited fleet. Precisely with the lack of sufficient aircraft to do all the flights I would like to do.
AL: This has been a critical point for you, the issue of wet leasing the A330s. It is a necessity, but how is customer satisfaction with these flights?
EF: You do not wet lease for sport, you wet lease because you have a route that you cannot serve with your fleet.
On the subject of customer satisfaction, the impression we have is that it is varied, in the sense that some people were very identified with the TAAG brand and did not understand the fact that we were operating with a different aircraft and so on.
Due to the circumstances in which we are living right now, I believe that in terms of internal service, we have been able to provide a standard that we were not able to provide with the aircraft we are currently operating.
It is because we had a series of internal maintenance problems that we needed to fix before we could provide a service — again — of the quality we would like to provide to all our customers.
So I think the wet lease issue has been positive, and we don’t rule out that we may have to resort to similar tools at some point in order to be able to continue operations and expand them. It will depend on the delivery dates of the widebodies we are looking for.
AL: You also recently announced a codeshare with GOL. How is this partnership going so far commercially?
EF: At the moment it is going very well. In fact, we are looking to put a sixth frequency in São Paulo because the market is demanding more service, and we would like to end this year with a daily flight to São Paulo.
AL: In Latin America, what are the major destinations beyond São Paulo with the codeshare?
EF: We have some very preliminary numbers there. I think we are too early in the relationship to be able to give a very clear idea of what the preference is. There are some that are obvious, such as Rio de Janeiro.
But there are others that we have the impression that when we get to the winter season they are going to improve substantially. Maybe they will surpass some that right now seem to be the favorites.
We must give the market some time to get to know the advantages of this codeshare and see how regularity works, etc.
AL: For Rio we asked the same question last year, but are you planning to come back [with direct flights], or with the codeshare the idea is to concentrate everything in Guarulhos?
EF: It doesn’t make much sense for us to fly to a destination where we don’t have a critical mass to justify a regular route. If one day that happens, then it will be time to consider it. For the time being, our objective is to maintain a strong regular route with São Paulo as the entry point to Brazil.
That there may be other destinations later on, well, the time will come to evaluate it, but for the moment our objective is still São Paulo.
AL: Another destination for Luanda that has not yet returned — and that was not served by TAAG — was Houston, due to the oil demand. Do you have a plan to fly to the United States in the long term or do you prefer codeshare?
EF: The issue of the United States is pending the country’s certification in order to be able to start flights of any kind to the United States. Then, when we have that certification from the country — whose process has not even begun in theory, and if I am not misinformed it begins in the second half of this year — we will be able to consider whether it makes sense for us to start operations to a huge market like the United States, where nobody knows us.
All in all, such a large market has some very big difficulties as well.
AL: But also because it is huge, do you think there would be the critical mass to operate direct or codeshare?
EF: Neither codeshare nor direct flight. The main problem remains the same, are there enough passengers to fill a plane, yes or no?
I mean, remember that the Houston Express [as the Houston-Luanda direct flight was called, ed.] was done because the oil and gas companies needed at that time to send their people directly there because there was no other way. There are many more operators here today than there were then.
They are doing exactly that; we have all the Middle East companies, we have Ethiopian and we have the connections through Frankfurt, Paris, Madrid, Lisbon. Now there are many more alternatives.
We have not done the study at this moment of what would be the level of demand for such a route. Because until we have a certain location in the country to be able to initiate the request for operations, this plan is still a long way off, for the time being. There is still at least one or two years to go.
AL: Since one year ago, what is TAAG’s greatest achievement for you?
EF: I think that a great achievement has been to close the 2022 accounts with a profit, because it shows that TAAG has a business that needs to improve and perfect. And that it has to solve many, many barriers and many problems that it has, but the business exists; then to prove that the business exists and that it works.
Well, even though we had a pilots’ strike that affected us for almost four months, an aircraft stoppage by the authorities that affected our income very significantly, in spite of all that, we were able to make a profit in a very difficult year.
Well, I believe that this is the greatest achievement that this administration has been able to make with TAAG so far. Apart from making a strategic plan, a new fleet plan, and all the negotiations that had to be done to ensure that this year the leasing agreements and the like that we have been signing in Paris will start to materialize.
AL: For next year, what do you expect to be [TAAG’s] greatest achievement?
EF: [2023] is a year of consolidation and trying to fix the house. We’re changing the whole infrastructure, we’ve moved our headquarters. We are going to do important work in the maintenance areas and in other areas of the company to be able to start the projects and programs for the entry into service of the new airplanes that start the following year.
In other words, we are not so far away, that means a massive training of people. The renewal of investment equipment, of purchases, of facilities and a lot of things that have to be done so that those airplanes, when they arrive, can fly as soon as possible and in a safe, efficient and economic way.
So all this plan is what we are working on now, and we like to work without making big announcements until things are tangible and visible. We are also in a rebranding project, of which we will soon see some visible elements.
We have made a complete change of the digital part, the website, we are changing some software and systems to help us to be more efficient and reduce work and production times.
In short, we are doing a lot of tasks that are not visible to the public that are done behind the walls of the new headquarters. But their results will be visible when the planes arrive.
Just think that the aircraft delivery schedule we have with the A220 means that we almost take delivery of one aircraft a month for almost two years. It’s a very significant amount of work and effort across all the teams.
AL: Privatization continues to be the major goal of your administration and how has the issue of privatization been going in the last few months, the last year?
EF: Privatization is not within the immediate objectives of this administration, but it is a decision that corresponds to the shareholders. And when the time comes, we will have to be at their disposal and follow all the steps of that future privatization, whatever it may be.
It is clear that all this raises and awakens interest in the company. I know that there are some conversations underway, but they correspond to the shareholder and not to the management.
I believe that this process will come, because I don’t know when it will be formally announced, but it will have to happen, if we continue, if we are able to meet all the milestones of the transformation and modernization plan of the company.
So at some point next year, I don’t know when, I imagine there will be some kind of official communication about it, but it is a process that is happening. But we are not the party that has to be sitting at the table.
We are focused on putting a plan in place, which was our commitment, and to carry it out, and if it is done, it will help to have that activity that you say of privatizing, looking for a new partner, etc.
AL: So it is not your role, not as the administration, right?
EF: [Our role] is to manage and to put things in order and make them work. So the issue of the sale is always up to the shareholders. And well, when the time comes, they will inform us.
They will tell us what they think they have to tell us, etc, but we do not have any information to date as to who these meetings are being held with, these meetings or these expressions of interest.
