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The State of African Aviation

May 25, 2018

Aviation is a massive logistical undertaking. Everyday, over 100,000 flights carry over 10 million passengers around the globe. The systems, processes, procedures and technology required to make this happen make aviation a unique industry – one on which Africa is yet to capitalise.

 

 

 

At the BARSA Conference held earlier this year, Ms Adefunke Adeyemi, IATA’s regional head of airlines and relations in Africa and the Middle East, emphasised collaboration amongst African airlines. BARSA is the Board of Airline Representatives of South Africa – an industry body of non-South African airlines operating into South Africa.

Speaking at the conference, Adeyemi pointed out that aviation is not an end in itself as all 10 million people are travelling for a reason. Every flight that takes off and lands represents enormous opportunity to connect businesses, link cultures, visit friends and family, learn, grow tourism, and supply aid and medication. Thus, aviation provides endless opportunities through connectivity. “In IATA, we like to call aviation the business of freedom,” says Adeyemi.

For much of the world, aviation is fundamental to the way we live and conduct business. In terms of trade, US$6.4 trillion worth of cargo was handled by air in 2016. That’s 35% of the total value of global trade, according to IATA.

In Africa, air transport supports 6.8 million jobs, and US$73 billion in GDP. Aviation is therefore a major economic contributor in Africa, but the potential of the industry over the past 20 years is not being realised, says Adeyemi. The last time African airlines, as a whole, achieved profitability was in 2010, and that was only by US$100 million. Since 2010, the industry has been losing money, and last year it lost US$700 million. Africa is therefore lagging far behind the rest of the world in terms of aviation profitability, even taking into account the hiccups in the Middle East and Latin America over the past few years. Change is needed, and the Single African Air Transport Market (SAATM) is a move in the right direction, although lack of implementation of similar open skies initiatives in the past casts doubt over SAATM’s potential for success.

One of the factors that would address this lack of profitability is the development of economies of scale within airlines. “We need strong, healthy airlines,” says Adeyemi, who points out that in North America, you can count the number of major airlines on two hands, whereas in Africa, there are over 250 air operating certificates, hardly any of which belong to healthy carriers.

Another issue that needs addressing is the high cost of air travel in Africa. Worldwide, the overall true cost of air travel has come down by around 60% over the past decade, but this is not the case in Africa. Intra-African travel is still 45% more expensive than anywhere else in the world. In desperation to fill seats, African airlines have lowered the cost per ticket to the point where the profit margin per ticket is just US$0.83, compared to the global average of around US$8. Such slim margins are directly related to the losses experienced by African carriers.

Amid this gloom, IATA still forecasts that Africa will be the fastest growing region for air travel over the next 20 years, averaging 5.9% growth per year. South Africa is expected to see the highest percentage of growth on the continent, in terms of passenger numbers.

But Africa needs the right political environment – regulatory and operationally – to realise these gains. The perception that aviation is a specialised, exclusive sector needs to be addressed, and governments should rather understand it as an integral part of the development of their country and economy, says Adeyemi. Thus IATA, with ICAO, has developed what they call ‘Good Regulatory Practices’, which are designed to enable and support industries to grow through connectivity. A smarter regulatory approach is needed across the board, in terms of safety and security, connectivity, fund repatriation, infrastructure, environment and taxation, she says.

Africa needs more direct services and city pairs to shorten travel times. Adeyemi argues that shortening travel times, creating and developing new routes, increasing frequencies, and offering lower fares increases air traffic growth, which in turn generates tourism, trade and investment that ultimately leads to job creation and an increase in GDP.

There is evidence of this model working. In the UAE, aviation has contributed 22% to the country’s GPD. Between 2010 and 2017, Côte d’Ivoire fast-tracked aviation development and has seen a 52% increase in connectivity across the region. Rwanda is following the same route.

The key to growing connectivity and making air travel more affordable is at the heart of SAATM, which would allow one country to fly a direct route into another, and then pick up passengers in that second country to transport them to a third, without first returning to the home country. Currently in Africa, only two countries, Ethiopia and Kenya, have direct connections to over half of the continent. In South Africa, and the rest of Africa, there is much opportunity to improve intra-African connectivity, says Adeyemi, and this will come with deregulation of African skies.

In the 1970s, the US led the world in opening its skies. Today, they have a very strong domestic market. The USA may be one country, but Europe has shown that the same principle works across borders with their Single European Market. There is tremendous competition in those air spaces, to the extent that it has become saturated, but there is extensive connectivity. China and Latin America, too, have opened their skies to the point that the market is becoming saturated. “All these regions have a very strong domestic and regional market. But with those domestic markets saturated, where does anyone who wants to expand go? The answer is Africa,” says Adeyemi.

Speaking to governments and regulators, Adeyemi points out that “if you are worried about competition, and you think you are only competing with your brother and sister African airlines – no, you are competing with the world. But you’re on your own turf as African carriers. You can’t go to Heathrow and expect to compete effectively as an African carrier, nor can you go to Dubai or any of the other bigger markets. You can only effectively ‘play’ here in Africa.”

The key message is that closing African skies to other African nations only weakens the continent’s air travel, while agreements with foreign carriers to bring in trade and tourism from around the world allows those carriers that have already saturated their markets, and have the economies of scale and experience, to come and take a dominant share of the available market that still remains in Africa. Africa should focus on growing its intra-African regional connectivity, and allow the big foreign carriers to connect Africa to the rest of the world, thereby growing international trade.

The African Union has a vision for regional integration, prosperity and unity across the continent, as stipulated in its Agenda 2063. In the short term, aviation is the only way to achieve this vision, says Adeyemi, especially due to the lack of reliable road and rail connectivity, which is why SAATM, launched in January 2018, is the flagship programme for Agenda 2063. According to Adeyemi, SAATM finally shows that there is political will to liberate African air travel, something that has been lacking in Africa’s Open Skies initiatives to date – the Yamoussoukro Decision and Declarations.

But the success of SAATM depends on far more than a political will to open skies and a regulatory framework on how liberal intra-African air travel is to be conducted. It goes beyond air travel itself. In addition to enabling connectivity through infrastructure, safety and security, and aviation regulation, there needs to be multisector collaboration.

Take visa requirements and the ease of intra-African mobility, for example. “There’s no point in opening up the skies if people can’t cross the borders on the ground,” Adeyemi says. “Seychelles is the only country that allows every African access without a visa.” The proposal of a single African passport and the continental free trade agreements are other initiatives that show the drive for a more liberal, open continent.

Adeyemi briefly explains how multisector collaboration should play out: “The minister of transport needs to ensure that there is market access – SAATM – and they need leadership on integrated transportation strategies. The tourism board needs to interact with the transport board and define a role in promoting and enhancing aviation. At the airports, air service development must ensure the right fit for the market. The civil aviation authority must be responsible for developing regulation that ensures safety and growth, and the carriers need to co-operate with the authority, and play their role in providing safe connectivity. Other players include the minister of finance, health, education, agriculture … you name it.”

Then there is inter-airline co-operation. The three largest carriers in Africa – Ethiopian Airlines, Kenya Airways, and South African Airways – are part of worldwide alliances, namely Star Alliance and Skyteam, but the carriers don’t have alliances with each other. Thus, although there is co-operation between African carriers, they are working more closely with foreign airlines than they are African airlines.

Infrastructure need not mean large, elaborate airports, such as some of the ‘white elephant’ airports seen around Africa. Rather all that is needed in many places are simple, functional and efficient airports that enable the linking of different cities and don’t “break the bank”, says Adeyemi. Likewise, reducing airport taxes and charges is important.

Skills development is another area that needs attention. The average age of professionals in aviation in Africa is currently 54 years old, whereas in Tech, it’s in the 20s. Furthermore, the average age of the African population is 19. “We need to be thinking about how we are going to get this younger generation into the pipeline to support the anticipated growth in African aviation,” says Adeyemi.

The SAATM has a target of increasing intra-African connectivity by 20% by 2023 and is already facilitating such collaboration, according to Adeyemi, who uses a shift in policy at the African Development Bank and the New Africa for Partnership and Development (NAPAD) as examples: “When you want something to happen, you put your money where your mouth is. The African Development Bank, for the first time, said it is turning its attention away from road and rail, and towards aviation. Likewise, NAPAD has said they have been focussing on other areas, but now are going to focus on aviation, and have elevated aviation to ‘crisis mode’. For the first time in the history of African aviation, we have total alliance between all 23 stake-holders on the SAATM. This is our moment, and we need to cease it.”

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