United Airlines Looks Toward Africa for Profits

There has never been a ton of air service between the US and Africa. Not only are the distances great, but very few of the population actually flies, and safety and infrastructure are spotty at best. Sure, Pan Am flew there as it blazed trails around the world, but it has been a long time since significant service was provided by US carriers. Last year, Delta (NYSE: DAL) started to make a push and now United (NYSE: UAUA) is doing the same.

Yesterday, United announced that it would begin flying to Lagos in Nigeria along with Accra in Ghana. This will be United’s first service to Africa in its history. The flight will go nonstop from Washington/Dulles to Accra and then continue on to Lagos. That last leg is one of the more interesting routes around. While just shy of 250 miles, it actually passes through four countries (Ghana, Togo, Benin, and Nigeria).

But why is United doing this? Has something in Africa become so much more attractive that the time is now right for them to push into the continent? On the contrary, I think that as demand in the rest of the world goes downhill, it makes alternative opportunities look more attractive. They have to fly those planes somewhere.

We’ve seen tremendous drops in demand on European and Asian routes from the US and airlines have cut back on capacity. In Europe, for example, United cut available seat miles (number of total seats x number of miles flown) more than 7 percent in October. As cuts go deeper, United has to find a place to put those airplanes. In this case, Africa probably looks like an opportunity that’s worth a shot.

The thing about Africa is that there aren’t very many easy ways to get there from the US. Most people end up flying through Europe, but that adds a lot of time. For example, from Washington, the nonstop flight to Accra takes about 9 hours. Alternatively, a flight to London would take 7 hours and then it would be another 7 to Accra. So there nonstop flights allow for real time gains to be made.

Now that international traffic is softening, it may be opening up new opportunities in places like Africa. That’s going to be very interesting to watch.