African aviation needs infrastructure, better laws, quality support services

Tuesday January 16 2018

Hassan El Houry, group CEO of National Aviation

Hassan El Houry, group CEO of National Aviation Services (NAS). PHOTO COURTESY 

By ALLAN OLINGO
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The group chief executive officer of National Aviation Services, that operates in 30 countries worldwide, Hassan El-Houry, spoke to Allan Olingo on how the continent can take its place in the world’s aviation space.

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What must African governments do for the continent’s aviation industry to deliver maximum economic and social benefits?

Africans make up 12 per cent of the world’s population but only 2 per cent of the world’s passengers. To close the gap and deliver economic and social benefits, the governments have an important role to play by championing intercontinental aviation as well as shaping a dynamic African aviation sector.

First, they should liberalise, which will lead to three valuable outcomes: new routes and more frequent flights, better connections, and lower fares. These improvements will increase the number of passengers, which will have both direct and indirect positive effects on trade, business travel, and tourism.

In turn, this will impact the broader economy, generating more tourism revenues, jobs, productivity and ultimately, enhancing the GDP of African countries and uplift the welfare of ordinary Africans.

Indeed, a study by InterVISTAS Consulting, shows that in South Africa, liberalisation could yield an estimated 15,000 new jobs and generate $284 million in national revenues.

Secondly, how about a visa-free Africa? Difficulties in obtaining visas for intra-Africa travel obstructs the aviation industry because African countries have some of the most restrictive visa policies in the world. If the sector is to be fully liberalised, a continent-wide effort is needed to loosen visa restrictions.

Do nations need to separate the roles of regulator and operator in aviation, in line with global best practice?

Regulators enforce civil aviation policy, while operators handle the running of airports. Each has an important role to play, but these should not become confused or intertwined.

In too many cases, these functions are merged, hampering economic development and negatively impacting quality.

Côte d’Ivoire and Rwanda, however, are making strategic moves by employing best practices to grow aviation. Successful operators in Cote d’Ivoire, Rwanda, Liberia are proof of public–private partnerships and investments.

However, countries that operate a national carrier should let operations be managed separately.

Take for instance Ethiopian Airlines. It has the right governance structure as it is shielded from politics and treated as an independent entity, with a board that follows a clear mandate. Due to this, they have a clear strategy, run by a professional management team that has plotted the airline’s success.

At the other end of the spectrum are the national carriers of South Africa and Kenya that are government-owned and an extension of government. These carriers get sucked into the political dynamics that spill over into airline policies.

In some instances, national laws discourage foreign investment (starving them of smart capital). In Malawi, for example, it is illegal for a foreign airline or private investor to own more than 49 per cent of the national airline.

This prevented Ethiopian from purchasing more than a 49 per cent stake in Malawian Airlines. Such laws hinder foreign investment.

The Yamoussoukro Decision which aims to liberalise intra-Africa travel has not been fully implemented. What’s the reason for this?

Although the Yamoussoukro Decision was signed in 1999, it has made slow progress. The intention of the heads of state who signed the declaration was to break down artificial barriers to air transport services, especially between African nations.

However, none of the accords signed in Yamoussoukro have been implemented in any meaningful way. Despite the goodwill they generated and the positive intentions of everyone involved, it has been a challenge moving from the declaration to implementation phase.

One reason is the desire to protect some existing players at the expense of an entire country. Some people believe that the national carriers may be at risk if the market were to be opened up to competition.

However, while that may be true, opening up would give passengers alternatives perhaps at better fares. While the declaration may not have been 100 per cent successful in its first attempt, it is in no way a failure.

The signing was the first step but it is a challenge to get 54 countries with separate political agendas, economic policies, culture, languages, people, needs, demands and size, to make the declaration a reality.

So obviously it is not going to work fully on its first attempt but we are confident that there is movement in a positive direction and will prove very successful when fully implemented.

How can the continent deal with these limitations to achieve its full aviation potential?

Aviation can play a tremendous role in helping turn Africa’s potential into real prosperity considering it is a sector that requires many connected industries to work together. All the different elements, including infrastructure, support, and packaging services, must develop in a co-ordinated fashion.

To achieve this, Africa needs to open its doors for private capital investment. Governments should implement regulations that encourage growth of the aviation sector. With improved infrastructure, better legislation and high quality support services, aviation in Africa can soar.

As we wrote in Fly Africa magazine, we believe that the future of aviation lies in Africa. As the continent grows and economies develop, we will see opportunity for new business models.

Africa has much to learn, but it also has much to teach. With vision, co-operation, and commitment, we believe Africa’s aviation potential will be fully realised.

Africa’s aviation industry is dominated by a few carriers, of which only one is profitable. Why is this?

Many of Africa’s state-owned airlines were initiated soon after the countries gained Independence in the 1960s. While the world has evolved in favour of private airlines, most African airlines, including major carriers, are state-owned in some way. This is probably one reason for the low profitability.

Lack of penetration by low-cost carriers, as seen in the Europe and US is a symptom of this problem.

The high cost of travel is another reason.

This is a factor of high fuel costs and exorbitant taxes. Aviation was formerly seen as a means through which the government could tax the rich since flight was a luxury only a few could afford. Today, however, flying is an economic necessity that can uplift an entire country.

Poor connectivity and lack of liberalisation also affects intra-Africa business which in turn hits airline profitability. FastJet started off as Fly540 and over time evolved into FastJet.

Armed with ambitious plans, a sizeable treasure chest, years of experience, and access both to its existing bases in Kenya, Tanzania, Angola, and Ghana and to hubs in Europe, the company sought to stake a claim to the last frontier of aviation.

Fastjet, however, did not reckon with stiff competition from the legacy of state-owned carriers and the governments that owned them. Fastjet could have increased its network and brought reliable travel, if not for the protectionism it encountered.

Do you think Africa’s aviation players are doing enough to ensure there is a pool of workers with the right skills to run airlines, manage airport systems and facilities?

The aviation sector is labour-intensive and as demand for aviation services in Africa increases, there will be also growing demand for skilled and experienced employees.

However, there is a lack of skilled labour across the continent. So while there are job opportunities, aviation players do not find the people to match the job.

As a major aviation services provider in Africa, National Aviation Services has taken steps to overcome this challenge through training. We hire locals in each of our African operations and offer them opportunities to help them grow their careers.

Of course, there are others doing the same and the Ethiopian Aviation Academy, established by Ethiopian Airlines is a perfect example. Recognised as Africa’s largest aviation academy, the institution focuses on pilots, ground staff, maintenance technicians, cabin crew, and leadership roles training.

Given that governments have been done little to prop up the aviation industry, are the private sector initiatives positioned well enough as alternatives to grow this sector?

Definitely. All key stakeholders need to work together to develop African aviation. A free, thriving and transparent private sector can contribute a lot to make it sustainable.

Examples of this are Fastjet, a low-cost airline and VIA, a flight support company. Public-private partnerships will also help.

The Abidjan International Airport is an outstanding example. In 1996, management and operation of the terminal in Côte d’Ivoire was privatised and awarded to a French company named Aeria.

Ownership of Aeria is shared by private investors (65 per cent), a technical partner (25 per cent), and the state of Côte d’Ivoire (10 per cent). The company has invested in infrastructure and delivered quality service, impressing the government so much that the concession has been extended.

Private capital also means that companies can seek greater efficiency, higher revenue, and better quality service which requires financial discipline and eliminates corruption.

Bio

Background: Aviation industry expert and author who spearheaded the company’s expansion into Africa, Asia and the Middle East.

Experience: He has been with National Aviation Services since 2009, and also serves on the board of several emerging market companies, such as United Projects Co., Royal Aviation, and National Real Estate Company.

Under his leadership, National Aviation Services has received numerous awards, including the prestigious “Best Ground Handling Company in Emerging Markets” multiple times.

Works: Hassan was honoured by the World Economic Forum in Davos as a Young Global Leader for his contribution to aviation and airport services.

His debut book – Fly Africa – highlighting how aviation could become one of Africa’s greatest strengths made it to the bestsellers list in the aviation and Africa category on Amazon.

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