Comesa pushing for single airspace but will airlines survive the competition?

Monday May 28 2018

An Ethiopian Airlines airliner at the Entebbe

An Ethiopian Airlines airliner at the Entebbe International Airport. The open skies agreement could be a poisoned chalice for the struggling airlines that have been relying on state subsidies to survive, as they could collapse from the increased competition. PHOTO | MORGAN MBABAZI | NATION 

By JAMES ANYANZWA
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On May 18, ministers of justice and attorneys-general from the Comesa region approved an agreement for the creation of a single airspace for the 19-member bloc.

The open skies agreement guarantees a free market for the bloc’s airlines by abolishing restrictions on, among others things, routes, frequencies, number of selected airlines and type of aircraft, while market forces determine pricing.

While the move is important for businesses, tourism and cargo transporters who are likely to benefit from reduced air fares and improved quality of services, it could be a poisoned chalice for the struggling airlines that have been relying on state subsidies to survive, as they could collapse from the increased competition.

The major airlines of the Comesa bloc are Ethiopian Airlines, EgyptAir, RwandAir, Air Seychelles and Kenya Airways.

Africa’s top ranked airlines are Ethiopian Airlines, South African Airways, Royal Air Maroc, EgyptAir, Air Algérie and Kenya Airways.

Regional frameworks

Although the approval of the unified airspace by the Comesa ministers of justice and AGs does not lead to an immediate opening up of the skies, it sets a stage for the establishment of more legal, regulatory and institutional regional frameworks to allow unrestricted cross-border flights and boost trade across the region.

But it remains to be seen how the Comesa open skies plan fits in the much broader initiative by the African Union to liberalise the air space of all African countries and lower airfares by over 25 per cent, improve air service connectivity, support free movement of goods and people in Africa and ensure the survival of African airlines.

The AU launched the Single African Air Transport Market (SAATM) in January this year and so far, at least 23 countries have signed, among them Kenya, Rwanda and Egypt.

The three states have sent representatives to the ongoing Fourth Meeting of the Ministerial Working Group in Togo that is reviewing the status of key measures needed for the harmonisation of air service agreements among countries.

Countries have been restricting their air services markets to protect their national carriers.

Some 15 airlines, accounting for over 70 per cent of intra-African air travel, have signed up for the AU’s unified air market. They include Kenya Airways, Ethiopian Airlines, EgyptAir and South African Airways.

Tripartite free trade area

The current size of the SAATM is comparable to the Comesa-EAC-SADC tripartite free trade area, with 26 countries, a population of 527 million persons, GDP of $624 billion and per capita income of $1,184.

The AU agreement for the establishment of the SAATM has competition rules that prohibit any agreement or practice that negatively affects the liberalisation of intra-Africa air transport services and which has as its object or effect the prevention, restriction or distortion of competition.

African governments’ excessive protection of their national airlines has been blamed for the high cost of travel on the continent and the deteriorating volume of trade.

SAATM is a flagship project of the African Union Agenda 2063, an initiative of the African Union to create a single unified air transport market, the liberalisation of civil aviation in Africa and as an impetus to the continent’s economic integration agenda.

Among struggling airlines are state-owned South African Airways, which is facing bankruptcy, and Kenya Airways, which hopes that its direct flights to the US will boost its financial position.

In January, Ethiopian Airlines announced that it had finalised a shareholders’ agreement with Zambia for the relaunch of Zambia Airways.

Under the deal, Zambia retained the majority shareholding of 55 per cent while Ethiopian Airlines took up a 45 per cent stake.

Zambian Minister of Justice, Given Lubinda said the Comesa Seamless Airspace Programme will contribute to bringing down the cost of air transport in the region.

“I am glad that, apart from considering draft legal instruments that will strengthen governance, we are beginning to move to instruments that will help us tap into the trade in services,” he said.

“The draft legal instruments aimed at the implementation of the Comesa Seamless Airspace Programme speak to this.”

Losses

According to the International Air Transport Association (IATA), African carriers are expected to continue to make losses of $100 million in 2018 following a collective net loss of the same amount in 2017.

The association argues that although stronger economic growth will help in 2018, the continent’s governments need to liberalise their airspace to promote growth of intra-Africa connectivity.

IATA is the trade association representing approximately 275 commercial airlines worldwide, accounting for more than 83 per cent of total air traffic.

Restrictive regulations and protectionism which obstruct intra-country travel has caused leading African airlines to lose an estimated $800 million worth of business in 2016.