How Single African Air Transport Market Could Finally Wake the Sleeping Giant?

Mapping Africa’s natural resources [Al Jazeera]

July 26, 2018//- Africa is rich with breath-taking tourist sites and natural resources, ranging from minerals to oil and water. It is undoubtedly easier to travel and explore the African continent today than 20 years ago and infrastructure is improving in many regions enabling more visitors and a better business environment for corporations.

But, significant efforts still have to be achieved in specific regions where infrastructure, protectionism, high taxes, safety or regulatory issues continue to undermine commercial aviation and possibilities for efficient intra-African travel.

The road from Yamoussoukro to SAATM

One of the most common phrases heard at conferences and seminars concerning Africa is the need to develop a ‘United Africa’.

This would certainly have benefits when it comes to air transportation. Africa covers more than 30 million square kilometres and is home to more than a billion people.

Due to its challenging terrain, air transport is often the best — sometimes the only — way to connect the continent. Africa needs safe, efficient and affordable air transport links to make the most of its people and resources.

It is clear that to facilitate air transport growth there is a need for enhanced connectivity and cooperation within the Continent. Indeed, African ministers responsible for civil aviation themselves acknowledged this back in 1999, when they adopted the Yamoussoukro Decision, named for the Ivorian city in which it was agreed.

This committed its 44 signatory countries to deregulate air services and open regional air markets to transnational competition and followed up on the Yamoussoukro Declaration of 1988, in which many of the same countries agreed to principles of air service liberalisation.

In 2000, the Decision was endorsed by head of states and governments at the Organization of African Unity, and became fully binding in 2002. However, progress has been painfully slow .

It has been a long journey but it hasn’t really got very far with lots of talking but very little action, albeit there has been limited liberalisation in certain regional economic blocs and between certain markets. Now, the industry in Africa appears to better understand the economic benefits of a more liberal regime and moving from a general protective stance of state interests.

Solemn declarations from 22 nations saw the Single African Air Transport Market (SAATM) formally revealed as a path for liberalisation at the Africa Airline Association (AFRAA) annual general assembly in Kigali, Rwanda in November 2017.

Together these nations have a population of over 600 million and cover 75% of the intra-African air transport market. When it came to being formally launched by the African Union (AU) in late January 2018 the signatories had risen to 23, comprising: Benin, Burkina Faso, Botswana, Cabo Verde, Republic of Congo, Côte d’Ivoire, Egypt, Ethiopia, Gabon, Ghana, Guinea, Kenya, Liberia, Mali, Mozambique, Niger, Nigeria, Rwanda, Sierra Leone, South Africa, Swaziland, Togo and Zimbabwe.

SAATM is a flagship part of the African Union’s Agenda 2063 reform package and is meant to boost connectivity between African states, reduce fares and stimulate economic growth through air transport and tourism.

But today there remains no certainty on who has actually signed up officially to the project. Some major nations like Nigeria, an alleged signatory, have subsequently dismissed SAATM as offering no benefit to the nation, while others have called for more time to develop local entities before opening the market to competition.

We have been on the verge of progress many times before and despite promises they failed to deliver change. Whatever the outcome of SAATM, a clear air transport strategy is required across the Continent and this should be based upon strong analytical evidence and must be implemented with precision.

We are now certainly the closest we have ever been to allowing Africa to fulfill its aviation potential, but we need to stop talking and take action. And with a clearer aviation strategy we can be a little more confident the African aviation market will finally see a new dawn.

Africa has the potential, but does it have the will to change?

The aviation landscape is continually evolving across the globe. We have seen the arrival of low cost carriers, new hub operators in the Middle East, consolidation and the reinvention of the traditional legacy airlines, to name just a few of the recent developments, but one thing has remain constant, the undeniable potential to develop new air connectivity across the vast African continent.

Industry body International Air Transport Association (IATA) has forecast that many of the fastest growing passenger markets over the next 20 years will be in Africa – Malawi, Rwanda, Sierra Leone, Central African Republic, Tanzania, Uganda and Ethiopia are among them.

Many of the fastest-growing markets are achieving a compound growth rate of more than 7.2% per year, meaning their market will double in size each decade.

Once again, Africa dominates with this list above also including the likes of by Benin, Mali, Togo, Zambia, Senegal, Ivory Coast, Chad, Gambia and Mozambique.

IATA’s outlook shows plainly that Africa is set for strong expansion in air connectivity with passenger growth to average 5.9% between now and 2036 during which time it will see an extra 274 million passengers a year for a total market of 400 million passengers. But a range of factors continue to ground the sector from growing freely.

Building connectivity through new intra-African routes

Growing direct air service is an absolute priority in Africa. Route development is a major function for economic development because it represents existing and future revenues, customers, and market viability.

The fortune of a city, region or country can be enhanced, by relying upon a successful airline or airport strategy and enhanced relationships between the two sectors.

It is our firm belief that African airlines can help unlock the continent’s tourism potential by introducing intra-African flights that enhance connectivity between various destinations and encourage domestic and regional international travel.

The challenge for tourism for a long time has been the issue of connectivity and in Africa, more than anywhere else in the world, it is difficult to move easily from one country to another.

A clear example of this was seen in late June 2018 when Ethiopian Airlines announced its intent to reintroduce flights to Eritrea within a couple of months, two decades after a border conflict upended relations between the Horn of Africa neighbours.

The two countries’ capitals Asmara and Addis Ababa are just 700km apart, but a road journey between them – which involves a trip into Sudan – is twice that distance (1,695km) and around a 15 hour journey.

The resumption of flights will clearly enhance connectivity and trade between the nations, but to attend a state visit for peace talks to end Africa’s longest war and to discuss the new flight connectivity Eritrea’s president Isaias Afwerki and his delegation flew with Emirates Airline – a routing via Dubai would have been a 17 hour 30 minute journey, slower than by car!

The quickest link is actually an 11 hour 35 minute offering by flydubai and Ethiopian Airlines, again via Dubai. The new non-stop flight due to start in July 2018? Just under 90 minutes!

Flying the flag for national pride or simply haemorrhaging state funds?

Part of the reason for Africa’s current under-served status is that many African countries continue to restrict their air service markets to protect the share held by state-owned air carriers. This practice originated in the early 1960s when many newly-independent African states created national airlines, in part, to assert their status as nations.

But forms of protectionism are not just limited to Africa. Countries such as Canada, France and Germany, for example, have maintained more restrictive bilateral air service agreements with some nations.

The recent high-level spat between the US majors (lead by Delta Air Lines) and the Gulf hub carriers (Emirates Airline, Etihad Airways and Qatar Airways) over the open skies agreements that have allowed open air access between USA, the UAE and Qatar certainly put the topic top of the political agenda.

While all other regions of the world are seeing profitable returns for the world’s airlines, African carriers are still reporting losses.

Earlier this year IATA reported that African airlines together contributed to a USD100 million loss in 2017 and a similar result is anticipated for 2018.

This actually reflects a positive performance as the industry continues its very slow emergence from the 2014 low point (USD900 million loss) of financial performance.

There are some bright spots. Ethiopian Airlines is now Africa’s largest and most profitable airline, earning more than all its rivals combined.

But the cash positive operations like that of Ethiopian Airlines are significantly outnumbered by those making losses, including the former giants of the Continent such as Kenya Airways and South African Airways.

Many African nations have recognised that the strict regulatory protection that sustains national air carrier monopolies has detrimental effects on air safety records, while also inflating air fares and dampening air traffic growth.

In recent history it has actually led to the collapse of a number of flag carriers across the continent. Significant challenges remain and there’s a big difference between regulations and the reality, said Nile Air CEO, Ahmed Aly, at AviaDev Africa 2018.

He said that as an independent airline competing with a state operator, he has seen this disparity first hand. Learning from a seven year lobbying process to launch domestic flights in Egypt, he said: “While there is actually nothing from a regulatory base to stop you, in reality it was very different”.

He added that “there is a need to continuously lobby” to see any progress.

Moving from a national mindset to taking a pan-African approach to connectivity

Some have argued that opening up Africa’s skies will weaken African airlines, but more traffic and more services opens up greater opportunities for all.

Speaking at AviaDev Africa 2018, Raphael Kuuchi, IATA’s vice president for Africa said: “What Africa needs is not more airlines, but more connectivity. What we need in Africa is improved connectivity to make us more efficient and to make travel more affordable.”

African governments retain an affinity with their national carriers and ongoing talks of new national carriers in Uganda and Nigeria highlight this. The arrival of widebodies into the fleet of RwandAir has been a challenge for the East African carrier and there are more aircraft to come.

The ex-Malaysia Airlines Boeing 777 that arrived in Harare for Zimbabwe Airways and since returned to Kuala Lumpur after sitting idlily on the ground, remains an anomaly. We have now even seen a first Boeing 787 Dreamliner for Air Tanzania arrive in East Africa.

The step to adopting a pan-African strategy is already seeing some movement. The successful establishment by Ethiopian Airlines of a major hub in Addis Ababa and a wider African multi-hub development strategy spreading into west and southern Africa is a clear step to enhanced connectivity – its latest initiative being the planned relaunch of Zambia Airways in October 2018.

fastjet also has had limited success with its attempts to open air access across African borders, but showed some benefits new entrants can bring, enhancing the customer offer while also stimulating air traffic demand.

fastjet chief commercial officer, Sylvain Bosc, speaking at AviaDev Africa 2018 said that the low cost model in Africa in particular requires a pan-African approach if it is to be successful. “It’s very difficult to achieve low costs in Africa. You are not really a LCC [Low Cost Carrier] when you are flying a 50-seat Embraer ERJ-145 that is a high cost aircraft per seat. We are trying to stimulate the market with a low fare rather than low cost offering.”

He added that a LCC strategy in a single country is a “risky investment and a difficult business,” and added: “If you want a LCC to work in Africa it has to be a panAfrican operation to protect you from the market shocks of individual countries.”

The economic benefit of enhanced air connectivity is clear to see

Aviation already supports 6.9 million jobs and more than USD72 billion in GDP across Africa while the linked tourism industry employs over 21 million people, accounting for 6.5% of the total workforce in the African continent and an estimated USD160 billion in GDP.

That is almost 8% of total GDP, exceeding the contributions from manufacturing and banking sectors. But the frequently referenced economic research from InterVISTAS for IATA demonstrates that liberalisation will create opportunities for further significant employment growth and economic development.

The additional services generated by intra-African liberalisation between just 12 key markets would provide an extra 155,000 jobs and USD1.3 billion in annual GDP, the study from the respected aviation, transportation and tourism consultancy shows.

The research also suggests that a potential five million passengers a year are being denied the chance to travel between these markets because of unnecessary restrictions on establishing air routes.

Airports, airlines, destinations and stakeholders all have a role to play in defining the future of the industry. For example, Airports Company South Africa (ACSA) chief operating officer, Fundi  Sithebe, said at AviaDev Africa 2018 “airports can be a key catalyst in driving regional competitiveness, especially when physical, economic and material connections are optimised between airports and their respective cities”.

She added: “Airports have always had a significant role to play in enabling regional economic growth. They contribute many benefits to the wider economy and society at large, including access to markets, jobs, social progress and global connectivity. They also allow connections between cities, which in turn catalyses economic activities.”

Collaboration is a key tool to build a sustainable aviation strategy

Experience from other parts of the world shows the aviation economy requires coordination involving all stakeholders for it to be successfully developed.

Airports, Tourism Boards, Civil Aviation Authorities, Ministries, Hotel & Tourism Associations, Investment & Trade Agencies, Partners & Suppliers, Financers, need to all speak with one voice to develop air services and offer an attractive marketplace driving success to all countries and regions on the continent.

It is clear that Governments across Africa need to take the lead on air service development issues, but also involve their stakeholders – airports, tourism authorities and airlines – to develop clear aviation strategies which are right for each country market.

For some countries this may be to develop a major regional hub, for some it may be to develop a spoke strategy to ensure it is connected to the global hubs, whilst others may have an inbound leisure focus, or an aggressive low cost strategy.

The host of AviaDev Africa 2018 is among the pioneers of this with Cape Town Air Access, a focal point for international air route development in the Western Cape and an impressive collaboration between the Western Cape Provincial Government (WCG), the City of Cape Town (CoCT), Airports Company South Africa (ACSA), Cape Town Tourism (CTT), South African Tourism (SAT), Wesgro and private sector partners.

The primary mandate of the air access team is to promote, develop and maintain international air routes in and out of Cape Town International Airport through route retention (ensuring the success of existing routes); route expansion (increasing frequencies and capacity on existing routes); and new route establishment (facilitating the establishment of new routes).

At AviaDev Africa 2018 Tim Harris, CEO of Wesgro, described the division as “a truly collaborative approach to air route development”.

Unusually, the initiative is being led by Wesgro, the tourism, trade and investment promotion agency for Cape Town and the Western Cape, rather than the airport. But the model is clearly working.

The partnership started three years ago with a target of winning three new air services. Since its inception Cape Town has secured 13 new routes and 17 route expansions. It has doubled seat capacity at the airport by adding 750,000 inbound seats and leading to 16% international terminal passenger growth in 2016 and 20% growth in 2017.

International air cargo also grew 52% in 2017. Helen Zille, premier of the Western Cape province of South Africa, said that Cape Town’s air access initiative has been “critical to attracting investment”.

She added: “In the last year alone, we have seen 20% growth in international terminal passengers at the airport with an estimated ZAR4 billion in direct tourism spending added to the economy of the Western Cape. Our vision remains to not only make the Western Cape the gateway to the rest of Africa, but the easiest place to do business on the continent. We will continue building strategic partnerships that create jobs and drive economic growth.”

Gwenvael Ronsin-Hardy, senior project manager, airport operation at EGIS Projects, supports the collaborative approach. “It is not just up to airports to reduce costs,” he said and acknowledged that while airports need to look at operating costs to support different airline requirements, “everyone in the industry must be in line”.

He added: “Our partners need to all align. Why should we reduce our costs when other stakeholders in the industry don’t follow”. These partnerships should not just take cross-sector form, but increasingly airlines and airports need to collaborate.

Airports across the world are now increasingly working together to share knowledge and experiences, while airlines are a lot further down the line with alliances and marketing co-operations. Nile Air CEO, Ahmed Aly, said at AviaDev Africa 2018 that “partnerships are a key tool for growing in a competitive landscape.”

Having recently agreed a codeshare with Turkey’s Pegasus Airlines on the Cairo – Istanbul Sabiha Gökçen route and interline with the UAE’s flydubai, he said the Egyptian airline is now “talking to Ethiopian Airlines and Tunisair to build future partnerships”.

Mr Aly noted that running an airline “is challenging enough” without adding external factors, including the significant number that have hit Egypt over the past few years. If you’re looking to travel to Egypt, you can read the House Solution Practical Guide on House Solution Egypt Blog.

ACSA is investing in Cape Town International Airport’s success

The collaborative approach is working in Cape Town and schedule data from OAG shows that the number of international frequencies there have grown by 21-22% each year for three consecutive 12-month periods, so that the number of international flights is almost double the number three years ago.

This is a classic case of good route development practice being rewarded with new air services. Located as it is on the southern tip of the African continent, there is not much scope for connecting traffic. In fact, the proportion of traffic connecting at Cape Town in a recent month was less than 2%, according to OAG.

This means that virtually all the new traffic comes from a combination of pent-up demand for travel to and from the city or has been stimulated by the availability of new air services. A clear sign of the potential was in the fact that almost three-quarters of all international traffic flew via another airport to reach Cape Town, with almost a third of passengers connecting at Johannesburg’s O R Tambo International Airport.

Interestingly, the new international services Cape Town is enjoying have not made much of a dent on its connecting traffic; in March this year a hefty 71% of all international passengers were still connecting at another airport.

However, there does appear that there has been an impact at Johannesburg which handled 32,000 passengers connecting from Cape Town in March 2018, 23% of the total, compared to 37,000 in March 2015, which was 31% of all connecting passengers at Cape Town.

Airports Company South Africa (ACSA) is now already planning for the future at Cape Town International Airport and chief operating officer, Fundi Sithebe, confirmed at AviaDev Africa 2018 that over the next five years there will be a ZAR7 billion investment  at the facility.

“We have a number of projects planned to make sure that we are able to meet the extensive growth which we’ve seen,” she explained.

These include a new runway project which received approval from the Department of Environment Affairs earlier this year. “This project is critical. It’s a project that is not only about the growth of the airport… we need to move the runway so that we are able to develop the airport for future years,” she said. The project will allow the airport to not just boost capacity but to handle bigger aircraft.

Other key projects planned are expansions to both the international and domestic terminals, according to Ms Sithebe.

Addressing the blocked funds barrier and establishing a mutual trust

Among the hurdles to growth in Africa is the issue of some individual countries failing to abide by international agreements and treaty obligations to enable airlines to repatriate revenues from ticket sales and other activities.

On a global scale the amount of airline funds blocked from repatriation totaled USD4.9 billion at the end of 2017, according to IATA, a number dominated by Venezuela where airlines have been unable to repatriate USD3.78 billion.

The South American nation’s debt is taking some attention away from Africa, where many of the worst remaining culprits exist.

There have been some recent successes as a USD600 million backlog in Nigeria has been cleared and a USD120 million impact has been made in a USD500+ million backlog in Angola, but big balances remain across Africa, including in Angola, where approximately USD386 million remains blocked; Sudan, where USD170 million is blocked and Zimbabwe, where USD76 million is blocked.

It is clear that worries over the repatriation of ticket sale revenues is a genuine factor in airlines’ network development strategies and is impacting the growth of new international connectivity into some nations.

Low cost airlines are flying in a high cost environment in Africa Aviation and travel across Africa is a high cost business. Taxes, fuel and infrastructure charges are higher than the global average.

Additionally, insufficient safety oversight, failure to follow global standards, and restrictive air service agreements all add to the burden that stands in the way of aviation’s economic and social benefits.

It is a high cost market to fly and is the reason why the Low Cost Carrier (LCC) market, so prevalent in other parts of the world, has found it hard to succeed.

Many argue that low costs are impossible to achieve in Africa and therefore the development of what effectively is a low fare operation in a high cost environment is not really a sustainable solution.

Data shows that Africa lags every other part of the world in the development of low cost aviation. This phenomenon, which has shaken up the world of legacy airlines over the past 20 years and transformed the way we travel, now makes up a considerable part of the market.

The global low cost share of capacity reached 29% in 2017, up from 18% ten years earlier. Meanwhile, Africa as a whole languishes behind other world regions with the low cost share of capacity at just 12%.

It’s not all bad news. This is a massive improvement from a decade ago when it was only 6%, so at least we can say that the share of capacity operated by low cost airlines has doubled in the Continent, and only the Middle East and Asia Pacific have seen the relative share of low cost capacity grow at a faster rate.

The model has seen some success across the Continent although there is variation between different parts of Africa. The North and Southern Africa had the highest proportion of low cost capacity in 2017, at 15% and 17%, respectively, buoyed by activity in the liberalised Morocco and in domestic South Africa, but the low cost share of capacity in both Eastern Africa and Central/Western Africa was just 6%.

But the data doesn’t actually tell the full story from an intra-African connectivity perspective – 80% of the low cost capacity in North Africa and 41% in East Africa is operated by airlines not domiciled in Africa, mainly European and Middle East LCCs, respectively.

Speaking at AviaDev Africa 2018, fastjet chief commercial officer Sylvain Bosc, said he believed “there is a future for LCCs in Africa,” but warned “it is just not easy to find it” as all countries are different. “It is finding the right business model for each individual market,” he added.

According to Mr Bosc, SAATM “doesn’t change anything in reality” for LCCs in the Continent as in reality low cost travel is currently only really active in the domestic sector. “Discounting is not going to ultimately deliver traffic flows that will sustain high density high frequency routes in this market.

SAATM is good for big network carriers and will give better access to feed their hub, but for a LCC it makes very little difference,” he added.

According to Mr Bosc, if the LCC phenomenon is to be successful in Africa “it has to go through the private sector”. He warned that “nobody is going to put money in unless they will get a good return” and noted that governments need to make an attractive environment for potential investors. “We need to convince each jurisdiction that this is an environment to launch and grow the market,” he added.

The doubling of the LCC sector over the past 10 years, albeit from a low base, would seem to indicate that there is consumer demand, but you need to acknowledge that a proportion includes visitors to the Continent coming in on foreign LCCs.

But this highlights that if African carriers can’t get their act together, then they will find these foreign LCCs will steal a march on them, taking as much of the low cost market that is theirs to develop.

Maybe this will only ever be the traffic to and from points outside Africa, but if those are the more lucrative routes for Africa’s legacy carriers, where will that leave those flag carriers which Africa is so fond of maintaining?

In all this, it is the African consumer and the African economy which are the losers. Low cost air travel has stimulated markets elsewhere and where people travel to and from more, they also do more business with, they trade more and they invest more.

While tougher to develop than in other global markets is low cost, or more realistically low fare really an opportunity Africa can afford to pass by? So, are there lessons to be learned?

Yes, and as elsewhere in the world, the basis of successful LCC development is all in the business model and getting the basics right. Certainly some adaptation is needed in local markets but ignore the cost fundamentals and there is no business.

That means right-sizing the aircraft. It means fleet commonality. It means high aircraft utilisation. Get those all right and Africa could yet have a robust and thriving LCC industry.

IATA’s five priorities to deliver maximum economic and social benefits for Africa While there is strong optimism for change in Africa and the Continent offers great aviation potential, it will, as a whole, remain the only loss making region of the world.

According to airline body, IATA, safety, connectivity, blocked funds, air traffic management and human capital are the five priorities which must be addressed for aviation to deliver maximum economic and social benefits in Africa.

Raphael Kuuchi, VP Africa from IATA offered a closer look at each of the five priorities during discussions at AviaDev Africa 2018.

Here’s what he had to say: Safety in Africa has improved, but there remains a gap to close to meet global standards such as the IATA Operational Safety Audit (IOSA), while only 22 African states have reached or surpassed the implementation of 60% of the International Civil Aviation Organization’s (ICAO) standards and recommended practices (SARPs) for safety oversight.

 Intra-Africa connectivity could finally be opened as nation’s finally progress the African Union’s SAATM initiative, a long time after the original Yamoussoukro Decision to liberate African skies was first signed.

African economic growth is clearly being constrained by a lack of intra-Africa air connectivity and opportunities are being lost simply because convenient flight connections are not available.

Blocked funds remains an issue in Africa and airlines experience varying degrees of difficulty repatriating revenues earned in Africa from their operations in Angola, Algeria, Eritrea, Ethiopia, Libya, Mozambique, Nigeria, Sudan and Zimbabwe.

Air Traffic Management could be a big problem following decisions by Rwanda to leave the Dar-Es-Salaam Flight Information Region (FIR) and South Sudan to leave the Khartoum FIR and could deliver a future fragmented approach to flying around Africa.

Human capital could limit Africa’s growth potential and need for a much expanded labour force. A skills shortage could be on the cards unless processes are put in place to support the development of the future talent needed to deliver the benefits of aviation growth.

Is an airport infrastructure crunch hampering growth in Africa and is there funding to support future development?

 In the week ahead of AviaDev Africa 2018, IATA revealed at its AGM that an infrastructure crisis will impact the growth of aviation across the globe… and that spreads to Africa too.

“We are facing a capacity crisis,” said IATA’s director general, Alexandre de Juniac, highlighting that the majority of airports are already facing capacity constraints.

With governments known to historically struggle to move quickly on this issue and the cash-strapped state of many of their finances, it has fuelled a trend of looking to the private sector for a solution.

The AviaDev Africa 2018 panel session on airport infrastructure in Cape Town provided some insights into the subject of airport infrastructure and in particular the financing of projects.

Of particular note Alexander Herring, private sector liaison officer at World Bank Group, explained that there is plenty of global financing available to support airport projects in Africa.

“In the world currently there is money available for investment and financing,” he confirmed, but for airports or institutions seeking that money “it can be hard to find the right way of sourcing it”, noting that “the legal framework” can sometimes make it hard to access, particularly in the case of Public Private Partnerships (PPPs).

Agness Chaila, director airport services at Zambia Airports Corporation, said combined USD800 million projects at its main gateway in Lusaka and the Copperbelt International Airport, a greenfield site in the north of the country, have both been financed by the ExIM Bank of China, while previous work at Livingstone, close to the Zimbabwe border, was supported by a commercial loan.

“It has not been difficult for us to find the financing,” she said. Similarly, terminal development work at Roberts International Airport in Liberia has been financed by the ExIM Bank of China, while financing for runway work was secured from the Saudi Fund and the Arab Bank for Economic Development in Africa (BADEA), outlined Wil Bako Freeman, managing director, Liberia Airport Authority. Financing is available to support African projects… but it can be hard to find the right way of sourcing it.

The west African facility also looked at a PPP for its cargo terminal. “We had interest, we were ready, but going through the bureaucracy took about two years before we could finalise that.

It’s a challenge that certainly needs to be worked on,” Mr Freeman added. Having also supported some recent projects in Zimbabwe, why is Africa turning mainly to China to support its airport projects?

Acknowledged as ‘the elephant in the room’ during the panel discussion, “the fact of the matter is their money is cheaper,” Ms Chaila openly acknowledged.

It has been suggested that an airport capacity crisis could impede the growth of air travel, but Ms Chaila argued that there is no crisis in Africa despite significant work taking place at airports across the Continent.

“Everywhere you look today in Africa, airports are a site of construction,” she said, and while the likes of Johannesburg and Nairobi have worked to overcome capacity issues, in smaller countries and airports across Africa “we would really say we have not suffered any capacity crisis”.

These investments are mainly based around a need to upgrade dated facilities that have seen little investment since their construction many decades ago.

“We mostly sit on infrastructure that was built years ago. We should perhaps be talking more about a configuration crisis, which delivers its own challenge,” she explained.

African airports are also investigating alternative revenue streams based around nonaeronautical revenues to provide some positive return on any investment.

Ms Chaila said plans at Lusaka’s Kenneth Kaunda International Airport include wider hotel and shopping centre activities to make better use of land assets, a model also under development at Roberts International Airport in Liberia.

Behind all this dialogue there is, however, one shining example of privatisation that could become a roadmap for others in the Continent to follow. This is the USD700 million public-private deal signed in July 2017 to build the new Bugesera International Airport in Kigali, Rwanda.

Initially due to be developed by China State Construction Engineering Corporation, it was replaced as contractor by Mota Engil Africa, the Dutch based subsidiary of the Portuguese company, and which opted not only to build the airport but to operate it under concession for 25 years with an optional extension of 15 years.

Will SAATM deliver a sustainable solution to Africa’s connectivity needs?

Africa is seemingly pinning its future development on the successful outcome of SAATM, but we have been here before. The signing of a commitment to deliver the single air transport market could turn out to be yet another unfulfilled landmark in African aviation

unless the industry works closely with governments to break the barriers that are restricting the continent from reaching its true potential. But, do we dare actually use the ‘L’ word?

After all, the agreement can only be seen as progress once a full roadmap for its adoption is formulated. SAATM was obviously a reoccurring theme throughout AviaDev Africa 2018 encapsulating both the hopes and frustrations of African connectivity.

As Africa airline expert and former CEO of Ethiopian Airlines and former Chairman of RwandAir, Girma Wake, noted, it is disappointing that the Continent’s largest nations have not fully committed to SAATM.

Speaking about a recent formal signing ceremony for the project, he said: “It is most disappointing South Africa, Nigeria, Kenya and Egypt did not sign.

The mega-traffic originating countries and the mega-carriers are shying away. Doesn’t Africa want its population to travel freely? Why are governments not delivering on what they have committed to?”

While 23 African countries were initial signatories, the maps below show the alignment and mis-alignment between those countries signing up and those with the largest international aviation markets.

While it might be assumed that reluctance to be a signatory to SAATM is related to a perceived need to protect the local airlines, the data shows this may not be so.

There seems to be no generalised pattern to determine which countries have signed. Some signatories have major international aviation markets and major national airlines, while others have much smaller markets with only a fraction of seats operated by airlines based in the country. For the long tail of countries with limited international air capacity, the question needs to be what is there to lose?

Opening the doors to new technology and using it to drive profitability

There is no doubting that the world is moving fast. Technological change in business is partly responsible for this great acceleration with new digital platforms, user experiences becoming exponentially easier and disruption being contagious.

Companies not heard off just a decade ago are now household names – Uber has grown from nothing to a USD58 billion valuation, whatsapp has over one billion users.

The pace is exhilarating, and expectations are high, but just like a fairground rollercoaster what goes up, can soon twist back down and organisations are appearing and disappearing at a faster rate than ever before.

Digitalisation is disrupting all industries and it is obviously very important in the aviation sector that attention is paid to how it can be applied.

Digital disruption or transformation crosses the use of data, new technology, and artificial intelligence. These are all important areas that we should continue to pursue to see how the industry can benefit from them.

It is clear, in particular at airports, that digital transformation is taking off with biometrics and blockchain taking the technological lead. Meanwhile, at airlines it is the introduction of New Distribution Capability (NDC) and ONE Order, new important standards for the industry, that are dominating technology talk. NDC continues to be a focus for airlines and technology providers around the world, not to mention travel agencies who are directly impacted by the technology.

According to IATA, the NDC Standard is designed to enhance the capability of communications between airlines and travel agents.

Across the globe aviation businesses are increasingly looking to create chief customer officer and chief digital officer positions as part of a digital innovation trend often referred to as the fourth industrial revolution. For most airlines, this transformation is still in the very early stages, but things are moving quickly.

In Africa it is the mobile revolution that is leading the way and shockingly across much of sub-Saharan Africa, mobile phones are actually more common than access to electricity.

Mobile phones could actually account for almost one-tenth of African GDP by the end of the decade, delivering a major economic, social and political impact on the continent.

In recent years, according to economic estimates, the rise of mobile internet access is acting as a new game-changer for business, bringing many online who don’t have access to desktop machines or fixed-line broadband.

Africa already has a much better mobile booking conversion rate than developed nations where individuals are quite happy to use mobile for research, but return back to desktop or laptop devices to make the final bookings.

That means airlines and airports across Africa have to be mobile focused to appeal to key traveler markets. Looking further ahead… aviation, urban disruption and a trip down the electric avenue Just ten years ago and the name Uber was little known outside of perhaps the minds of a small group of individuals that were seeking to reduce the price to hire luxury cars and drivers.

While that original model has morphed into something that has become affordable to the masses and a major competitor to private hire taxis and road hailing cabs, Uber has become an almost USD60 billion business.

Delegates at AviaDev Africa 2018 learnt that established as one of the most successful technological disruptors, Uber is now facing its own disruption… from itself!

Well, in the form of Uber Elevate, which is effectively looking to take the ride-sharing model to the skies above our biggest cities.

It’s ambitious, needs major investment and a change in thinking, but is a logical solution to the problem of congestion we are seeing in the major cities across the world and many of Africa’s capitals are among the worst affected.

But, while we may only slightly raise an eyebrow to the use of a drone to deliver our shopping, the idea of ferrying commuters around the city in a four-seater air taxi, building major skyports above motorways to feed the system is a bit more extreme.

Uber is not alone in its thinking. Hundreds of millions of dollars is already pouring into technological start-ups working to build new small, passenger-carrying aircraft.

An increasing number of new ventures are emerging pursuing various approaches to electric, vertical take-off and landing (eVTOL) technology, including household names such as Airbus and Embraer, the latter also highlighting at AviaDev Africa 2018 its eVTOL aspirations.

Raul Villaron, vice president of commercial aviation sales for Middle East and Africa for Embraer, said Embraer X, an organisation dedicated to developing disruptive businesses, is engaged in several projects, including the development of eVTOL concepts through a cooperation with Uber and other companies to explore business opportunities within the Uber Elevate ecosystem.

“Embraer X has three fundamental pillars, which are the shaping of the future user experience of air transportation, the application of Embraer know-how, and the generation of disruptive products, services and business models,” he explained.

2018 Aviation Development Conference (AviaDev Africa 2018) whitepaper

 

Leave a Reply

*