Arms tycoon link to new cut-price airline

11 January 2015 - 02:00 By Tina Weavind
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Billionaire Ivor Ichikowitz says he helped raise funds for new low-cost airline Flyafrica
Billionaire Ivor Ichikowitz says he helped raise funds for new low-cost airline Flyafrica

Billionaire arms manufacturer Ivor Ichikowitz, a vocal supporter and funder of the ANC, has emerged as a pivotal player in the newly launched low-cost airline Flyafrica's battle for the skies.

Flyafrica, which launched six months ago, is owned by a private equity company based in Mauritius, offering flights between South Africa and Zimbabwe, Namibia and Zambia.

The airline plans to open a base in South Africa this year, and says it will offer flights between Johannesburg and Cape Town at the jaw-dropping price of R50 each way.

Ichikowitz is the founder and executive chairman of the Paramount Group, which makes, among other things, military equipment such as armoured vehicles and surveillance drones, primarily for the African market. It is the biggest privately owned defence and aerospace business in Africa, raking in more than $1-billion a year in sales.

Ichikowitz also owns a private- equity company called Transafrica Capital, which insiders say is backing the new airline.

This week, however, Flyafrica CEO Adrian Hamilton-Manns denied that Ichikowitz provided cash to the new airline - although one employee at Transafrica told Business Times that the airline was "under our umbrella".

Transafrica invests in aerospace, telecommunications and property, among other things.

Contacted this week, Ichikowitz said he was a close friend of Hamilton-Manns, and that he had helped raise funds for the airline.

Ichikowitz said that while he wasn't yet invested, he was looking at getting financially involved and was doing substantial due diligence on Flyafrica.

"I'm considering putting serious weight behind it," he said.

But Ichikowitz said if he did invest, it wouldn't be through Transafrica.

However, three members of the airline industry said they believed Ichikowitz was behind the company. "It's his," said one. Another said: "He is the main funder."

Asked about Ichikowitz's involvement, Flyafrica's South African director, Mike Bond, said tersely: "I can't mention anything, thank you." Then he cut the call.

Despite the discrepancies, Ichikowitz was adamant there was nothing cloak-and-dagger about his connection to the airline.

But there is some scepticism about whether Flyafrica's plans for South Africa, including the eye-catching R50 flights, would be sustainable.

Hamilton-Manns, who was an executive vice-president at South African Airways in 2005 and has been involved in a slew of low-cost carriers around the globe, said Flyafrica would be able to offer such cheap fares because it owns its planes outright and doesn't lease them. "This means we have a low cost of capital," he said.

He said the airline would have a low staff complement, and its strategy was to be a franchise operation, in which it tied up with local carriers in different countries. The new entities would operate under the Flyafrica colours.

Hamilton-Manns said that while Flyafrica currently flew just three routes, the idea was for it to juggernaut across sub-Saharan Africa this year. A third Southern African base - tipped to be Malawi - would probably be announced before the end of the month, with a fourth base in West Africa to follow.

Low-cost operators were this week incredulous at the rock-bottom fares Hamilton-Manns was promising. On hearing of the R50 Cape Town to Johannesburg claim, Erik Venter, CEO of Comair, responded with a contemptuous "yeah, sure".

Hein Kaiser, spokesman for Mango, said that "fares significantly below cost weren't sustainable over extended periods of time ... it can be expected that launch fares will fast climb to business-sustainable levels".

Dave Andrews, CEO of Flysafair, the latest low-cost carrier to take to the skies in South Africa, said: "This is plainly not sustainable when the tax element of a domestic flight is more than triple that amount.

"No airline can sustainably offer average fares which are below average costs," he said.

Flysafair offers one-way trips of R499 between Cape Town and Johannesburg to passengers who book early, but essentially a mix of fares was charged.

Ichikowitz, who has been outspoken about his support for the ANC in the past, is a controversial figure because of his entanglements with politicians including President Jacob Zuma and former Malawian president Joyce Banda.

He was embroiled in a scandal in Malawi after Banda signed a $145-million contract for military vehicles and boats.

Outrage and accusations of corruption followed when it was discovered that Banda was using Ichikowitz's private jet. The issue was a major factor in Banda's ousting in May.

Soon after President Peter Mutharika took over as leader, his finance minister Goodall Gondwe called the deal "illegal, expensive and unsustainable". Yet days later, the contract was reinstated.

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