On 7 January 2022 in Brazzaville, Jean-Marc Thystère-Tchicaya, the Republic of Congo’s transport minister, and Denis Christel Sassou Nguesso, the minister of international cooperation and promotion of public-private partnership, signed a memorandum of understanding with Allegiance Capital so that the national airline, ECAir, could restart its operations.
Since 2016, the government has repeatedly expressed its willingness to revive the activities of the queen of the Congolese sky, without presenting a concrete plan.
In Brazzaville, there is hope that this agreement with Allegiance Capital can change the situation. “The partner we have identified will make an initial investment of around 15bn CFA francs ($26m). This cash contribution will enable technical investments to be made, settle the social debt and insure national flights, to begin with,” Nguesso said on Twitter.
In 2016, the Congolese state held 99.99% of ECAir’s capital. The new distribution of capital has not been disclosed.
This partnership marks a new stage in the relationship between Brazzaville and Allegiance Capital, which had already partnered up to relaunch the Compagnie Nouvel Air Congo (NAC). The Congolese transport minister – who met with the company’s general manager, Jean Fulbert Rodrigue Nombo, on 14 December – tweeted that NAC, which suspended its activities in 2020, is set to rise from its ashes.
A little known partner from South Africa
There are still many uncertainties surrounding ECAir’s relaunch. Little information is available about Allegiance Capital and its managing director, Eric Kenneth Mouritzen, who visited Brazzaville in early January.
The South African executive shows up on various databases from the 2000s and early 2010s as the manager of the charter airline Allegiance Air (PTY) Ltd, which is based at the private international airport in Lanseria, northwest of Johannesburg. Allegiance Air offered a variety of aircraft (including Embraer and British Aerospace regional jets) for lease, as well as charter flights covering Brazzaville, Malabo and Libreville, with at least one local branch in Gabon (Allegiance Airways Gabon).
Inactive for many years, Allegiance Air’s website highlights the company’s ‘combined expertise’, as well as an offer providing ‘all aviation services’ that the public ‘needs’, including ‘aircraft charter on all types of aircraft’, ‘aircraft sales and leasing’ and ‘VIP charters’. In the early 2010s, Allegiance Air was briefly mentioned as a potential partner for the former Air Congo.
Uncertainties surrounding ECAir’s financial situation
Although Allegiance Air’s cash contribution should, according to the Congolese authorities, enable ECAir’s ‘social debt to be settled’, several questions remain regarding the company’s financial health and whether there is enough available capital for its relaunch and future operations.
A few months ago, and until August 2021, several ex-ECAir employees held a series of demonstrations in front of the company’s headquarters in Brazzaville. They were demanding five years of salary arrears and denounced the authorities’ silence when confronted with this situation.
Created in 2011, the airline, which was intended to showcase the Republic of Congo abroad, has experienced a series of financial setbacks. In October 2016, the Agency for Aerial Navigation Safety in Africa and Madagascar (Asecna) forced it to cease operations because of the back payments it was incurring. Fees that “should not have been too high, since they make up only a small part of the total costs of an airline”, Tomas Chlumecky, a partner at Lagos-based Avaero Capital Partners, which specialises in structuring deals in the airline sector, said in 2018.
At the end of 2015, a year before it filed for bankruptcy, ECAir owed nearly 14bn CFA francs to its suppliers. Its financial debts amounted to 124bn CFA francs, including 39bn CFA francs in the form of ‘leasing and similar contracts’. Its share capital had jumped from CFAF 100m to CFAF 65bn between 2013 and 2014, not because of an injection of fresh capital, but following the ‘conversion of the majority shareholder’s debt’ – in this case, the Congolese state.
In France, where ECAir claimed to have only ‘a secondary establishment’, the administrative procedures have had many twists and turns and have dragged on since 2017. In October 2018, the Paris Court of Appeal reversed the Bobigny Commercial Court’s initial decision to liquidate the branch. Even though the former had noticed that payments had stopped, it annulled the judicial liquidation, as it preferred a judicial recovery.
In April 2020, the Bobigny Commercial Court terminated the receivership procedure. However, the latter was reopened last November, due to a new suspension of payments in January 2021.
Les ministres Jean-Marc Thystère-Tchicaya (Transports) et @ChristelSassou (Promotion du partenariat public-privé) ont pour le compte du gouvernement procédé ce 07 janvier à la signature d'un mémorandum d'entente avec la société Allegiance Capital, en vue de la relance d'ECAir. pic.twitter.com/92hyynQlhH
— Ministère de la Coopération Internationale - Congo (@CooperationCG) January 7, 2022
Translation: Ministers Jean-Marc Thystère-Tchicaya (Transport) and @ChristelSassou (Promotion of public-private partnership) signed a memorandum of understanding with Allegiance Capital on the government’s behalf on 7 January, in order to relaunch ECAir.
The cost of public subsidies
The actual state of ECAir’s assets remains equally uncertain. In a brochure circulated in 2016 as part of a CFAF 60bn bond issue with a five-year maturity at 6% gross per annum, ECAir stated that it “owned” seven aircraft (including four Boeing 737s and two Boeing 757s, all managed by the Swiss company PrivatAir) as well as a small Beechcraft King Air twin turboprop. The debt issue had been abandoned due to a lack of interest from investors.
Although deciding to buy aircrafts rather than leasing them – an option favoured by several African operators – is a heavy burden for any national airline, it does provide a real asset base. In 2017, the Swiss press, which was covering PrivatAir’s activities, was concerned about the opaque relationship between the two partners as well as the amount of public funds injected into ECAir’s operations. In early 2018, we noted that the Congolese state had injected €500m into the company since its creation in 2011.
How will Brazzaville finance ECAir’s activities and operating costs? The IMF, which has strongly urged the Republic of Congo to renegotiate its debt to several oil traders, is closely monitoring Congolese government spending and debt. The Fund made this a condition sine qua non before endorsing a three-year financing package worth $450m (the file is currently on the board’s desk).
Will the multilateral institution accept ECAir being publicly subsidised until the company becomes financially stable? By way of comparison, RwandAir, Kigali’s acclaimed carrier, received no less than $143m in state subsidies in 2019.
Reduced scope of activities
In any case, in order to relaunch itself, ECAir should first aim to reduce its scope of activities. ECAir used to operate 136 flights per week from Brazzaville, with national routes to Pointe-Noire and Ollombo, as well as Douala, Kinshasa and Libreville in the Cemac zone, and to Cotonou, Bamako and Dakar in West Africa.
For the moment, the Congolese carrier is planning to only operate national routes and to later serve the sub-region and international destinations. According to our information, the first flights will connect Brazzaville to Pointe-Noire, a route on which competitors, such as Africa Airlines, Canadian Airways Congo and Trans Air Congo, are already very present.
The flights will be operated by the Boeing 737 that ECAir had sent to Addis Ababa for maintenance work and which was sent back to Brazzaville almost a year ago. The company is also working to retrieve part of the remaining fleet, which was grounded in Johannesburg.
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.