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Guy Leitch

June 22, 2017

 

 

The current restrictions placed on Qatar Airways promise to be either a great benefit, or a great threat, to African airlines

Five years ago, there was much hope that the much vaunted African Renaissance was about to become real. However, the latest economic figures show that the growth opportunity may have already been missed.

Due to the necessity to transport goods and services in intra-African trade, one of the major beneficiaries of the African Renaissance was expected to be the airlines. In the absence of cost effective and reliable rail and road links, air connectivity is essential to move people, goods and services as the key components of trade. However, the African airline industry failed to come to that party. African airlines have timidly sought the protection of their government owners and not seized the opportunity to grow or partner to meet the crying need for intra-African connectivity.

The most recent World Bank study found that Sub-Saharan African economic growth slowed to 1.5 percent in 2016, the lowest level in over two decades. This slump is below the population growth rate and is a consequence of, amongst other factors, the limitations on African businesses to efficiently and cost effectively transport goods to market. Where effective transport links exist, such as for the transport of fish and flowers to Europe by air, new businesses are emerging and thriving.

Africa has key competitive advantages which can be plugged into Global Value Chains. However, for this to happen, there has to be efficient transport connectivity, particularly air transport.

Internal tourism, such as visiting friends and relatives (VFR) by air is yet to capture the public imagination. IATA reports that just 10 percent of Africans use air travel. With the economic growth which was expected, and the creation of a middle class with more discretionary income, the African airline industry should have taken off. However, the three Gulf Carriers and Turkish Airlines are out-smarting and out-manoeuvring African airlines.

The failure of African airlines to seize these opportunities and grow is due to many factors: Lack of skills, poor safety and security, lack of infrastructure, poor regulatory oversight and government interference, amongst other factors, have weakened the African airline industry and the international carriers have been climbing in and eating the African carriers’ lunch.

If Qatar Airways continues to be severely restricted by its neighbours, it will turn its attention even more aggressively to the African market, bringing with it skills and capital and putting African operators under further pressure to either sink or swim.

A key challenge that has been in many instances half-heartedly met by the continent, is the liberalisation or deregulation of the African airline industry. In practice, it appears that mostly lip-service is paid to the Yamoussoukro Declaration of 1988 and Decision of 1999, and the latest ‘solemn declaration’ by 21 African states for increased liberalisation. It would appear that the majority of airline-owning African states fear that the larger and better capitalised and managed airlines will threaten their own airlines, forcing them into even more crippling financial losses.

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