Unpacking the Complexities of Africa’s Aviation Sector

South African Airways

February 11, 2019//-The African region makes up at least 12% of the world´s total population and yet only constitutes 2.5 % of the global passenger air traffic, according to the Organisation for Economic Co-operation and Development (OECD, 2018).

The region is supported by 731 airports and only 430 operating airlines catering for so such a large population. However, taking into account that air travel in Africa is still characterised by high fares, lack lustre service performance and poor connectivity within intra-route networks and further exacerbated by weak airport infrastructure.

This however, will soon become historical evidence as the equation of economic progress starts to tilt signaling positive compounded annual growth rate of at least 5%.

According to the International Air Transport Association (IATA 2017), Africa is set to become the world´s fastest aviation growing market in the next 20 years. But, what lies underneath this growth trajectory are some complexities that may impede even faster growth.

Although these growth projections are optimistic, challenges and complexities may impede faster progress.

Let us examine these impediments: • Airport infrastructure is significantly under developed and not prepared to absorb the growing volume of passengers and cargo within the continent.

This means that necessary facilities and infrastructure need to be in place to match the potential growth in air traffic.

  • The pressing issue has been associated with securing the much needed capital to finance airport infrastructure development. This is a coherent joint effort that requires a high degree of expertise and collaboration of public-private equity investments.
  • The majority of airlines and airports are run as state entities and operational efficiency is relatively poor with only a few carriers like Ethiopian Airlines, Kenya Airways and South African Airways have made somehow headway progress.

The struggling national carriers are characterized by a lack of efficient operations and a rather unreliable erratic and infrequent service.

According to IATA [2018] African carriers have been haemorrhaging cash and continue to operate as loss making entities after a collective net loss of $100 million in 2017 with a $1 loss to each passenger flown. Also, ineffective competition in service and quality also is an issue.

  • Ownership and control is still a major hurdle for most investors. Airlines like Air Malawi has restrictions on more that 49% on ownership structure. With so many carriers bleeding cash, reconfiguring the ownership structure will pave way for access private capital that could enhance the airline´s performance effort.
  • Lack of market access has also been problematic and continues to put a challenge on African carriers. However liberalisation of air transport in Africa could open a myriad of opportunities for airline carriers, allowing them to increase their network reach with no restrictions.

Of course the Single African Air Transport Market [SAATM] which has been dubbed a seismic event in terms of opening up Africa´s air transport market will have fundamental impact on the continent. – Stimulation of economic growth – Boost air transport connectivity Etc.

However, groundwork is required for effective policy integration and creation of an open wide air transport market. This calls for harmonizing civil aviation regulations.

But obstacles are still visible:

 Obstacles and dilemmas

  • Some African governments are reluctant to cede control to truly autonomous National Civil Aviation Authorities • Who will benefit from a liberalized air transport market? African airlines or foreign carriers?
  • Can a developing country promotes an “Open Skies” policy and still protects its own airline industry?

 Intra-connectivity

Africa’s failure to integrate and liberalize its intra-regional air transport market has been cited as a significant reason why growth in the air transport market has not reached its huge potential.

Most countries rely on restrictive bilateral service agreements. This is a paramount reason why insufficient integration and lack of non-restrictive open skies policy present a major barrier to air transport growth in Africa.

Open skies agreements not only enable better competition, it allows carriers of two or more countries to operate any route between the countries without interference in decisions about routes, capacity and pricing.

The result is better service provision, affordable airfares an efficient service for the consumers. Since the air transport markets in Africa are small and dispersed, airfares are exorbitantly high. As result, landing fees, fuel costs and airport taxes are also very high.

The significance of correlating airport development and improving air connectivity is paramount to the prosperity of the region and the welfare gains to the African passenger.

Let us look at the fundamental benefits intra connectivity will bring to the continent and the following gains in facilitating economic activity:

– New routes and increased frequency

– Shorter travel times for passengers

– A significant drop in airfares

– Inward investment flows

– Foster an increase in intra-regional trade

Concluding remarks

Finally, strategic collaboration through code sharing agreements within Africa´s continental carriers could also provide a vehicle for better intra-connectivity. This means African policy makers have to foster a more liberalized and integrated intra-African air transport sector.

As already mentioned in early parts of this paper, the drivers for growth are visible and a coherent action plan is now required to facilitate intra-connectivity within the region through airline network cooperation.

Prepared by Prof. Dr. Eyden Samunderu for AviaDev Conference – 24-26 April 2019 – Cape Town

Dr Eyden Samunderu is a leading expert in the area of air transport with extensive consulting experience. He currently holds a PhD in Strategic Management and is a Program Director for a Master´s program at the International School of Management in Dortmund Germany.

 He is also sitting as an Advisory Board Member for the Hamburg Aviation Conference. His research interests include: aviation, multimarket contact, strategic groups and competition dynamics, container logistics and maritime economics.

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