There has been lots of foreign, mostly European investment in African startups lately. Yields in Africa are high and the market is growing at above average rates, so the potential for handsome profits is real. But progress can be painstakingly slow.

FastJet is probably the most high-profile example that the reality of setting up an airline in sub-Saharan Africa is much more difficult than the dream. The low-cost carrier (LCC) launched in November 2012 with three leased Airbus A319s operating two daily flights from Tanzania's capital Dar es Salaam to Mwanza and Kilimanjaro, in the north of the country, and grand ambitions to provide a true pan-African service in a short timeframe. The set-up received a lot of media coverage due to the involvement of Stelios Haij-Ionnau, who founded EasyJet and is chairman of EasyGroup. His group holds 4.1% in the new venture, and FastJet is already listed on the London AIM exchange. FastJet's business plan includes expanding its fleet to at least five A319s by June and deploying 15 by the end of the year, with five aircraft operating in Tanzania and 10 in Kenya. The airline plans to operate up to 40 aircraft across several countries within three years. But a series of lawsuits have slowed down this lofty goal—the LCC operated on just two routes in Tanzania in mid May. These legal battles, which are complex and difficult to judge without insider knowledge, are related to the way FastJet was set up. It took on existing regional air operators' certificates and bought into defunct local airlines, bound together by a string of licensing agreements (EasyGroup has licensed the FastJet brand for 10 years). The new airline hoped this would be a good way to speed the process of becoming established, but hindsight shows that starting from scratch would have been easier.

Yet, Democratic Republic of Congo (DRC)-based Korongo Airlines proves that launching a new airline is also no guarantee for quick success. Korongo was originally founded in 2009 as a joint venture between Brussels Airlines, George Forrest International Group and local investors. The startup finally secured all necessary licenses and approvals from the DRC authorities in March 2012 and launched commercial operations one month later with one Boeing 737-300 and one BAe 146-200. Flights are operated by Brussels Airlines, which has an aircraft, crew, maintenance and insurance (ACMI) contract with Korongo Airlines. In February the carrier reduced its fleet to one aircraft after returning the BAe 146-200 to Brussels Airlines, casting doubt on Korongo's survival. The carrier promptly denied that it was in financial difficulty, with CEO Christophe Allard saying that its market share keeps increasing on its two routes and emphasizing that the 737 is better suited for the local market than the BAe 146. Korongo operates flights between Lubumbashi Luano International Airport and Johannesburg Oliver Reginald Tambo International Airport and six weekly flights between Lubumbashi and Kinshasa N'Djili Airport, three of them via Mbuji-Mayi. Korongo Chairman George Forrest in August 2012 announced plans to also add Goma and Kisangani in the DRC as well as international routes to Cameroon, Kenya, Uganda and Zambia by the end of 2012, but there has been no further word on progress.

Last month, Brussels Airlines CEO Bernard Gustin admitted that a one-aircraft operation is not sustainable. While pointing out that 10-15% of Brussels Airlines' passengers on the Brussels-Kinshasa route connect onto Korongo, Gustin remains tight-lipped on the future of the Congolese venture and whether the shareholders are committed to continue funding it. The company declines to comment on rumors that Korongo has not paid its ACMI contract since the launch and that Lufthansa, which controls 45% of Brussels Airlines, has ordered management to end the financial drain on Brussels Airlines' own struggle for profitability or pull out of Korongo.

Air Cote d'Ivoire started operations in November 2012 replacing Air Ivoire, which collapsed in March 2011. The new incarnation is 65% government owned, while Air France-KLM holds 20% and the Aga Khan Fund for Economic Development 15%. The airline launched after five months of delay but it is keeping pace with its growth plans. Air Cote d'Ivoire already serves 11 destinations in West Africa from its base in Abidjan's Port Bouet Airport with two former Air France Airbus A319s and one 70-seat Embraer 170. “In a couple of months the airline has succeeded in creating a mini-hub with two waves and a flight reliability of 95%. The feedback from passengers is very positive,” says Air France-KLM Senior Vice President for Middle East and Africa Pierre Descazeaux. “This proves that it can work when the concept is good, the business model is good and the product is good.”

Descazeaux reckons that the cost of participating in African startups can be quite high, but these are not short-term investments, he notes. “It has to be seen in the long term-strategy of strengthening our position and growing a market. Traveling inside Africa is not easy, but we think this demand will grow as the local economies grow. “There is a need for efficient regional airlines, and we are convinced this is possible,” he says.

“The main target is to serve regional routes, not only to feed Air France or KLM. Also, when you invest in a local airline or a national airline you create a strong link with that country,” Descazeaux adds.

“In this way, Europe's majors can limit traffic rights and the entry of new competitors such as the big Middle Eastern hub carriers, Turkish Airlines and Asian airlines,” asserts Mathieu Blondel, principal at Arthur D Little. These “newcomers” are increasing, he observes.

Blondel says that there could be a shift by African governments to choose “new-world” partners for their aviation projects, reflecting the ambition of, for example, China to become a strong economic partner with Africa. HNA Group, parent of Hainan Airlines, invested in the Ghanaian startup Africa World Airlines. “However European airlines remain very well positioned to be the preferred partners. The bulk of long-haul traffic volume is still between Europe and Africa, and European airlines have an intimate knowledge and understanding of the African markets,” Blondel says.

Investing in local airlines is not novel for Air France or KLM. The latter has held a 26% shareholding in Kenya Airways since its privatization in 1995, while Air France has held stakes in several African airlines, including Air Afrique. The transnational carrier filed for bankruptcy in 2002 but Air France was selected as the preferred strategic partner for its successor Air Cemac, after ties with the initial technical partner South African Airways were ended. Plans and talks for the creation of a sub-region airline for Central Africa have been ongoing for more than a decade, but the carrier now appears to be nearing its operational phase. “Air Cemac is up and running. The capital is available, the president of the board of directors is known, the board has already convened. The CEO has been named,” Cemac President Pierre Moussa said on March 7. The capital of the company is divided among the six member states of Cemac—Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea and Gabon—at 5% each. Air France-KLM Group holds 34%, and thus is the largest single shareholder, and 15% is held by Development Bank of Central African States. The rest is reserved for private investors in the sub-region.

“I hope it will become reality. The business case is attractive; it is a bit more complex because there are six countries involved,” Descazeaux concedes. But the joining up of six smaller countries is also the main asset of the Air Cemac project, he says. “You quickly reach scale and you can design an optimized network.”

Gambia Bird Airlines is another example of the renewed European interest to invest in a new African airline. The carrier launched last October and positioned itself as the country's new flag carrier, although it is 90% owned by the Berlin-based airline group Germania. In December a second A319-100, operated by Germania crew under an ACMI agreement, arrived in Banjul International Airport to support the expansion of scheduled flights across West Africa including Ghana, Guinea, Liberia, Senegal and Sierra Leone as well as to Europe (London Gatwick and Barcelona, Spain). The airline is continuously upgrading its systems and in April added an online booking facility on its website and a “low-fare calendar.” In the summer schedule Gambia Bird is operating a single aircraft and a reduced network. One A319 was sent to Germany in March for maintenance work and the aircraft is being used by Germania.

“There is definitely an upswing of foreign, mainly European investment in Africa. The reason for investing in independent, point-to-point projects like FastJet or Gambia Bird is simple: investors are targeting the hidden gold mine that is the African air market,” concludes Blondel.