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Africa’s middle class ready to fly but aviation industry remains grounded

Tuesday January 20 2015
plane

Today, as Africa’s economies are poised to take off, the aviation sector, despite the collective promise that it holds, seemed “grounded.” PHOTO | TEA GRAPHIC

In 1988, 44 African countries convened in the Ivorian capital to discuss ways of taking the continent’s aviation sector forward.

Named after the city that hosted the meeting, the Yamoussoukro Declaration was born. It was seen as a landmark protocol for the continent. It stated that, “We commit ourselves, individually and collectively to make all the necessary effort to achieve the integration of our airlines within a period of eight years.”

A three-phase approach was decided on. There was the call to greater information sharing on aircraft and facilities, greater connectivity between airports, greater collaboration between airlines, harmonisation of routes, among other issues. Simply put, the YD, as it is commonly referred to, is aimed at opening up Africa’s skies to make travel cheaper, faster, almost seamless and improve safety compliance. Africa was gearing up for “open skies.”

Ten years later, in 1998, the Yamoussoukro Decision was adopted following the recognition that protectionist policies that sustain national airlines were having a detrimental effect on the industry and hampering growth.

Today, as Africa’s economies are poised to take off, the aviation sector, despite the collective promise that it holds, seemed “grounded.”

“The performance of the African aviation industry is lagging behind the rest of the world. The growth is heavily constrained by the poor safety perception, slow implementation of the YD, high industry costs, inadequate infrastructure at several airports, lack of a single traffic rights negotiating body with respect to third parties like the European Union,” says Dr Elijah Chingosho, the secretary-general of the African Airlines Association (Afraa).

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Speaking at the annual general assembly held in Algeria in November last year, Dr Chingosho noted that despite the challenges facing the industry, more Africans were travelling both within and outside the continent and more goods were being flown in as well. There is a greater demand for air transport on the continent, however, it is deemed to be suppressed.

Over 70 million Africans were flown by African airlines in 2013 compared with 10 years earlier, when 40 million Africans were flown in a single year. More of us are flying within our countries, regions and across the continent. But it still isn’t all “plane” sailing.

I recently flew from Nairobi to Marrakesh in Morocco. I took a five-hour flight out of the continent to Qatar, transited for three hours and then endured an eight-hour flight to Casablanca, transited there for two hours and then flew the last leg of my trip for 50 minutes.

Total travel time: roughly 19 hours. If there was a direct flight between the two cities, it would have taken nine hours.

It is a lot easier to fly from Nairobi or Addis Ababa in Ethiopia, to West Africa or from the east of the continent to the south or from West Africa to North Africa. Frequent travellers on the continent are baffled as to why travelling within Africa is often arduous and costly.

However, the African airspace has changed tremendously and continues to change, bringing with it both positives and negatives.

The sector has seen many national carriers relegated to the annals of history. Uganda Airline, the West African giant that was Air Afrique, Zambia Airways, Ghana Airways, Nigeria Airways, Air Zaire, Cameroon Airlines, Royal Swazi, Air Lesotho and Air Malawi no longer exist.

READ: Global agency wants Uganda aviation body overhauled

Many of these airlines saw their demise in the late 1990s to early 2000s. More often than not, they were symbols of nationalism; inefficient, heavily subsidised white elephants that were run for pride and not profit. Few have survived, thanks to privatisation and restructuring.

New wings

Sub-Saharan Africa’s big three legacy airlines have morphed and are seen as formidable. South African Airlines, Ethiopian Airlines and Kenya Airways have stamped their prints on many runways across Africa. Since the mid-1990s, the trio have embarked on rigorous route expansion on the continent.

Ethiopian Airlines boasts 42 destinations within Africa, South Africa has 24 and Kenya Airways has 36 destinations. In North Africa, Egypt Air, Royal Air Maroc, Air Algeria and Tunis Air are the key players in the Maghreb, but they have not expanded their operations as aggressively across the rest of the continent.

Smaller national carriers that are still in operation but are leaner in terms of operation and size are LAM from Mozambique, Air Mauritius, Air Seychelles, the fledgling Air Tanzania, Air Namibia, Air Botswana and TAAG from Angola. Subsequently, there are new airlines — albeit smaller like — RwandAir, ASky that is based in Togo, Nigeria’s Arik Air, Senegal Airlines.

It has become apparent across the continent, and the world, that state-run, national carriers are being relegated to the past.

“Governments should no longer be in the business of running airlines. That should be left in the hands of business. Governments need to support the operators and uplift the industry,” said Fastjet’s CEO, Jimmy Kibati.

Africa accounts for less than three per cent of the global air market and its growth has been hampered by restrictive and protectionist intra-Africa regulations. Adding to the growing liberalisation chorus.

“To exploit these opportunities, there is a need to tear down the pillars of stagnation which include poor safety oversight in some few states, the need to fully liberalise Africa airspace for Africa carriers, the need to improve infrastructure to cope with growing traffic,” said Dr Chingosh from Afraa.

Observers say that governments need to make it easier for Africans to travel within the continent, either by scrapping visa fees or making visas available on arrival. There is also the aspect of high fuel costs, landing fees and exorbitant taxes.
According to the global aviation body IATA, on average, fuel costs are around 21 per cent higher in Africa than elsewhere in the world.

“The burden of tax on the airline is very high in this part of the world. If we are bringing people into a part of the country where they are going to spend money, why are the airlines being taxed? We are facilitating trade and commerce,” says Arik Air’s Conor Prendergrast during an interview with the magazine, African Aerospace.

“The burden of operating in Africa needs to be lightened. It’s a barrier to competition and it doesn’t incentivise trying new routes.”

Privately-owned airline, Arik Air, is West Africa’s largest airline and is often described as Nigeria’s de facto national carrier. Despite its prominence in the region, Arik Air flies to only two other African cities outside of West Africa.

The east-west route sector is dominated by East African Airlines, Ethiopian Airlines and Kenya Airways. RwandAir has also gone West, capitalising on the under-served market.

The airline sector, through regional bodies like Afraa, is encouraging players within the sector to implement the YD, a position reiterated by Air Algerie’s chairman Mohammed Salah Boultif, at the conclusion of the Algiers meeting,

“We must accelerate the pace of the implementation of the Yamoussoukro Decision while at the same time promoting a community convergent approach towards the implementation of the realistic and effective mechanisms capable of guaranteeing that the airlines will be the main beneficiaries of the liberalisation process.”

There is a growing realisation within the sector that the aviation industry will play a key role in helping Africa “rise.” Airport hubs like Casablanca, Addis Ababa, Accra, Nairobi and even Kigali have become windows to the continent, thanks to the Africans who transit through these hubs.

Many of these travellers are traders either from or to the Middle East; or to Europe. Of the total passenger traffic on the continent, 42 per cent was intercontinental, 31 per cent intra-African and 27 per cent domestic.

The catch-up game that the African aviation sector has to play also needs to be done on the ground. As of last year, it was reported that there were 40 new airport projects on the continent. Governments across the continent are beginning to realise that years of neglect are also hampering growth in the sector.

Thanks to the World Cup in South Africa in 2010, the country was able to see its key airports upgraded. Mauritius recently opened its modern terminal at the Sir Seewoosagur Ramgoolam International Airport which will cater for up to 4.5 million passengers a year, thus doubling the capacity of the country’s international airport. A second terminal is being built at the Julius Nyerere International Airport in Dar es Salaam, Tanzania.

READ: Rwanda civil authority plans upgrade of local airports

ALSO READ: Airports to invest in technology to cope with growth in sector

Kenya’s Jomo Kenyatta International Airport in Nairobi also unveiled a new terminal last year. Eleven of Nigeria’s main airports are undergoing renovation and modernisation. Mozambique has unveiled a new airport in the port city of Nacala and has upgraded its Pemba airport, cashing in on the investor interest in their provinces.

Rwanda’s Kigali Airport is on its way to becoming a regional hub. Its capacity has grown by over 50 per cent from handling close to 600,000 passengers annually to a projected two million passengers. Kigali Airport’s recent upgrade has made it a more convenient airport to transit through.

However, a concept that should be taking root is that of the privatisation of airports. Airports would be forced to market themselves to airlines with the hope that this would modernise terminals, improve safety standards, develop ICT, lower handling costs and attract more airlines and passengers. Cases of under-utilisation of airports would be minimised.

Swaziland’s King Mswati III airport which receives only three flights a day and handles 70,000 a year has been criticised for not having a credible business plan and that it would need to handle six times its current number of passengers to recoup its construction and operational costs.

On the other end of the spectrum two of the continent’s busiest airports namely OR Tambo in Johannesburg and Cairo International are proposed as future sites for airport cities or aerotropolises. Both airports are seen as key contributors to the growth of their host cities.

The Egyptian government announced in 2013 that it would ear-mark $14.5 billion towards the construction of an airport city around the Cairo airport.

Meanwhile, a master plan for an aerotropolis in Johannesburg is part of the municipality’s growth and development strategy. Thanks to the solid flow of traffic and broad mix of airlines at these airports, it is believed that these two factors would lower levels of risk on investment and attract potential investments from the private sector.

For now, the upgrading of many of the continent’s airports remains the responsibility of respective governments. Many of these were built in the 1960s and 1970s and are in dire need of extreme makeovers. But they need to be run as business units.

“When it comes to infrastructure both on the ground and in the air, there is a lot of inefficiency and [a] lot that governments can do. We need affordable infrastructure; let’s not go and build grandiose projects and end up charging airlines for them,” said Titus Naikuni, former chief executive of Kenya Airways, in an interview with Air Transport World magazine.

“Governments should avoid the mind-set that air transport is for the rich. In Africa we have poor road infrastructure and air transport should be a means of mass transport. This is the only way we can promote air transport in Africa,” said Dr Chingosho.

For too long, air travel in Africa has been the preserve of the rich, civil servants, tourists from the West, development workers and corporates. The “real Africans” either use road or rail.

However, a few new entrants are opening up air travel to regular folk and predicting dividends in the long run. Low cost carriers are capitalising on their home turf advantage.

Fly540 in Kenya is the closest rival to Kenya Airways in the country’s domestic market. The airline sees itself as a niche carrier, consequently opening up parts of the country that were previously unreachable. KQ has established a subsidiary low cost airline, Jambo Jet that is trying to cash in on the country’s growing middle-class that can now afford to fly.

Meanwhile, Flyafrica.com is committed to revolutionise air travel in Africa. This South Africa-based company announced at its launch that it will not apply any fuel surcharge to fares on its airlines.

“We are committed to reducing the cost of flying in Africa and our launch markets the end of the high fares and unjust surcharges designed to exploit passengers,” says Adrian Hamilton Manns, the CEO of Flyafrica. The group has set-up two airlines Zimbabwe Flyafrica and Namibia Flyafrica, and are boasting of air fares as low as $9 dollars!

Looking at becoming a regional low-cost carrier is Tanzania’s Fastjet. Since it took to the skies two years ago, the airline is building a reputation of consistency in a market that is known for its unreliable air carriers.

In the past two years, Fastjet boasts having flown 880,000 passengers, both locally and within the region. Fastjet’s entrance into the Kenyan market is eagerly awaited.

In 2013, there were a total of 27 million domestic passengers flown, proving that there is local demand within some countries.
South Africa has the continent’s largest domestic market dominated by only two airlines, South African Airways and Comair. As a way of cementing their share of the local market, both airlines own subsidiary airlines that either compliment or supplement their operations. This serves to lock out start-ups from breaking into this lucrative market. Since deregulation took place in South Africa in 1991, only one private airline has survived out of the 11 that had been set up.

Don Smith of Fly540 states that cracking a domestic market, if done properly, is possible and profitable.

Apart from being one of the continent’s oldest airlines and being wholly state-owned, Ethiopian Airlines, is Africa’s most profitable. The airline reported a net profit of $2.3 billion in 2013.

Ethiopian Airlines has not shied away from pushing a multi-hub strategy that will complement its Addis Ababa operations. New hubs have been opened up in Lome, Togo through Asky Airlines and in Lilongwe, Malawi through the recently established Malawian Airlines. The airline states that a fourth hub in Central Africa is on the cards.

A recent report commissioned by the International Air Transport Authority (IATA), notes that implementation of the YD in the 12 African markets it surveyed would create an additional 155,000 jobs and add $1.3 billion in annual GDP.

Furthermore, airfares are predicted to be reduced by at least 25 per cent. Other anticipated gains include massive time savings due to new routes, greater frequencies and greater convenience as more cities will have direct services.

For the proponents of a more “open skies” policy, the proof is in the pudding. For instance, it would take five hours to fly from Lagos to Algiers, if there was a direct flight instead of 17 hours with one stop-over in Casablanca, Morocco. In the early 2000s a more liberal agreement between Kenya and South Africa led to a 69 per cent rise in passenger traffic between the two countries.

Until bilateral agreements are done away with, African airlines will be prohibited from serving new markets on the continent.
Regional West African carrier, ASky was birthed after the collapse of its predecessor Air Afrique and despite flying to 22 destinations in the region, it still found it difficult to penetrate some markets, according to its chief executive Yissehak Zewoldi.

“That was a real challenge. Still, we have some bilateral issues. The YD is not fully implemented because they (governments) want to protect their own carriers,” said Mr Zewoldi in his interview with Air Transport magazine, lamenting the difficulty African airlines are encountering just to fly within the continent.

It is apparent that there is a change taking place in the African air sector. It is not just passenger numbers that are growing, so is the movement of cargo. Airlines are improving on their cargo handling capacity and dedicating whole aircraft as freighters.

Our airports are showing as much continental diversity as the corridors of the African Union headquarters and more is expected if and when the YD is implemented.

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