Most constituents in the global air transport industry agree that there is enormous potential in developing the African aviation market. But they also agree that actually realizing it will prove much harder.
Some fundamentals are pointing in the right direction. Economies are growing strongly in important countries on the continent, and middle classes are emerging as a consequence, with an increasing number of people now able to afford airline tickets. Unlike in other regions, there is no real competition to air travel—flying is often the only viable transport mode, sometimes via a European hub for routes from West to East Africa, for example. And strong local players such asand are emerging, superseding the numerous miniscule carriers with flawed business models.
However, African aviation is still challenged by a lack of infrastructure, horrible safety standards, an almost general lack of investment, corruption, high taxation, political instability or stagnation and, in some cases, geographic disadvantages.
Whether progress will prevail will largely depend on concerted action by the continent's governments—to ensure the necessary legal framework and operating conditions—and on airline managements to take advantage of new opportunities where they arise.
The(IATA) chose Cairo as the location for its annual general assembly in 2011 but was eventually forced to move the event to Singapore in the immediate aftermath of the Arab Spring uprising. By holding the general assembly this year in Cape Town, IATA seems to be arguing that the time is ripe for Africa's breakthrough.
But here is what Africa must overcome to achieve it. By world standards it is very dangerous to fly in Africa. Globally, there was one hull loss for five million flights involving Western-built jets in 2012, but for airlines in Africa that ratio was one hull loss for every 270,000 flights. “World-class safety is possible in Africa,” says Tony Tyler, IATA secretary general and CEO. “The key to this is integrating the best safety practices of the industry.”
IATA, the African Airlines Association (Afraa) and the International Civil Aviation Organization (ICAO) among others have developed an African Strategic Improvement Action Plan. Its objectives are:
•The establishment of independent and sufficiently funded aviation authorities that will be able to effectively and transparently monitor African airline standards.
•Completion of the IATA Operational Safety Audit (IOSA) by all African airlines.
•Accident prevention measures, particularly focusing on runway safety and loss of contro.
•Adoption of flight data analysis tools and safety management systems more broadly across the sector.
The main target of this industry/government initiative has been picked up by African governments in the so-called Abuja Declaration, in which African transport ministers committed industry and governments to raise African safety performance to the global average by the end of 2015. The commitment was reinforced by the African Union. While that is by no means a guarantee of success, at least it is a sign that air transport has some political attention.
And progress is being made in formerly under-performing countries. For instance, Nigeria rebuilt its civil aviation oversight in recent years, although it was set back in 2012 by two fatal crashes.
Further attention is crucial in other areas, too. African states have in principle agreed on an open-skies-like regime, as laid out in the 1999 Yamoussoukro (Cote d'Ivoire) Decision. But the old (and failed) business model of many of the mostly state-owned airlines in the region is based on government protection in the form of direct subsidies or blocking of home markets.
Yamoussoukro was meant to change that. Charles Schlumberger describes the agreement in his extensive 2012 study of African aviation as a “relatively progressive and radical move away from regulating air service between states on the basis of restrictive bilaterals.” That is the theory. In reality on the pan-African level, little has happened, and “many of the key policy elements are still missing or exist only on paper,” he writes. But many countries are applying Yamoussoukro content on the bilateral level. In fact, Schlumberger believes that “about two-thirds [of African countries] are willing to apply the Yamoussoukro Decision because they see little value in protecting their own markets from outside competition.” That kind of liberalization has been seen around regional economic common markets initially.
There are concerns that broader liberalization will make bigger carriers even bigger at the expense of smaller operators, leading to less competition. Schlumberger points out, though, that the now-open South African domestic market has grown strongly since it was liberalized.
Africa accounts for 12% of the world's population, but only less than 1% of air travel, he notes. But market growth through liberalization can happen here, as it has elsewhere. A 2006 study on selected air transport markets that have been opened up found passenger numbers increased 69-fold in six years on the Nairobi-Johannesburg route once it was liberalized. The domestic market in South Africa grew by 80% in 1994-2004. When Zambian Airways entered the Johannesburg-Lusaka route—previously monopolized by South African Airways (SAA)—air fares dropped by as much as 38% and passenger numbers increased by 38% at the same time.
But the protectionists still exist. Mozambique has not opened up yet, and, according to the World Bank, air fares for a similar stage-length flight are 163% higher than in South Africa.
Many governments are still imposing very high departure taxes—close to $100 in some countries, such as Ghana—and while their economies have enjoyed double-digit growth rates for years, taxation is still holding down demand. Tanzania-based low-fare start-up Fastjet has backed off plans to launch an operation in Ghana simply because it has failed to negotiate lower departure levies. Of course, taxes that are twice as high as the air fare are a serious hindrance for any airline model.
Although West Africa is the most densely populated region on the continent and is also rich in natural resources, none of the developed African carriers is based there. It has seen a number of high-profile failures, such as Virgin Nigeria, that gave up because of political pressure and, ultimately, violence. In spite of its potential, quick progress appears unlikely.
A potential role model for developing air traffic in West Africa is Asky Airlines, according to Seabury consultant Stephan Heinz. He argues that the days of the small national carriers are over, because of their weak economics, small networks and few connecting opportunities, and that there are some limited chances for low-fare airlines to grow. “The ability of a small carrier to simulate stronger connectivity through a partnership is evident in the Asky case,” Heinz writes in his study of African airline models.
Asky is a joint venture between Ethiopian Airlines and local private investors. Ethiopian holds a 40% stake and provides management expertise. The airline was set up in 2010 and operates six aircraft mainly from its base in Lome, Togo. Its schedule is harmonized with Ethiopian departures for Addis Adaba, providing vital air links between West and East Africa connecting through the mini-hub.
Up to 42% of its revenues are now coming from passengers flown in and out by Ethiopian connecting services. That is the case in Lome, but contributions are also significant in Bamako, Mali (38%) and Accra, Ghana (20%).
While the Asky model may work well, the carrier is also an example of the inability of the African airline industry to establish services freely. Ideally, Asky would be based in Lagos, Nigeria, a far bigger market that could be developed into a very lucrative base, if political circumstances allowed.
Africa's airlines are also feeling the effects of shifting market forces. Historically, European carriers have been the strongest competitors on long-haul routes and now Middle Eastern airlines have to be taken into account, too. All three major Persian Gulf carriers—, and Emirates—are expanding aggressively in the region both by adding new destinations where possible in the framework of bilateral air service agreements and through partnerships. Etihad has just added two of Africa's big four— member Kenya Airways and member SAA—to its growing portfolio of code-sharing partners. Emirates has announced its intention to team up with Fastjet, although that cooperation is being stymied by the low-fare carrier's current inability to grow significantly beyond its existing base in Tanzania.
Middle East airlines are a particular threat because the majority of long-haul travel growth is coming from new traffic flows such as Asia-Africa, for which the hubs in Dubai, Abu Dhabi and Doha are ideally located. Much assuffered from being an end-of-the-line carrier on the “Kangaroo Route” connecting Australia and Europe, carriers such as SAA are put at a geographic disadvantage. And it seems that they are reaching similar conclusions: Qantas teamed up with Emirates; SAA is now working with Etihad. In addition to code-sharing with Etihad, Kenya Airways is looking for ways to exploit the North Africa-Asia market through Nairobi, as is Star Alliance member Ethiopian Airlines through Addis Ababa.
Tap the icon in the digital edition of AW&ST to see a breakdown of available seat-kilometers between Africa and the Middle East, Europe, Asia and North America this month, or go to AviationWeek.com/africanairlines