International Air Transport Association (Johannesburg)

20 November 2012

African Airlines Struggle to Make Profits


Notes for a briefing by Mike Higgins, Regional Vice President: Africa, International Air Transport Association, delivered in Johannesburg:

Next June IATA will hold its Annual General Meeting (AGM) in Cape Town, South Africa. It will be our first AGM held in Africa since Nairobi in 1991. So in the run-up to this event, this is an opportunity to explore with you our agenda to strengthen African aviation.

Air transport is vital for the economic and social prosperity of Africa.

Including aviation-related tourism, air transport generates $67.8 billion in GDP for Africa, supporting 6.7 million jobs. With the right policies in place, this footprint will grow substantially in the years to come: aviation's direct contribution to GDP in Africa will increase by 5% a year over the next 20 years, leading to an additional 66,000 jobs.

But these opportunities are only going to be seized if airlines in Africa are profitable. And unfortunately our October forecast showed that once again African airlines will collectively make no profit this year. This is despite air traffic growing strongly in Africa. So we need to understand the challenges facing aviation in the region.


On safety we've seen tremendous progress with some carriers. In 2011, the total accident rate of African carriers on the IATA Operational Safety Audit (IOSA) registry was almost at the same level of other IOSA carriers worldwide. But on the other hand, we cannot escape the fact that Africa still faces a considerable safety gap compared to other regions. Last year, for Western-built jets, a hull loss was suffered every 305,000 flights in Africa, compared to every 2.7 million flights in the rest of the world.

In June, the Transport Ministers of the African Union agreed the Abuja Declaration. Once it is ratified in January, we will have a collective commitment from the African Union states to match the global safety average by 2015. The plan will prioritize

The adoption and implementation of an effective and transparent regulatory oversight system, including

* requiring the implementation of IOSA to all airlines

* The implementation of runway safety measures

*Training on preventing loss of control

* The implementation of flight data analysis, and

* the implementation of Safety Management Systems

IATA is absolutely focused on helping government agencies and airlines to implement these objectives.


With security, we need a new security paradigm to improve the level and experience of security for both passengers and freight.

Over the last two years, IATA has been refining the concept for a Checkpoint of the Future. We have formed an alliance of stakeholders committed to taking this forward. Checkpoint of the Future will reduce security queues while also improving security, through a combination of new technology and a risk-based approach. We are particularly keen to avoid creating another one-size-fits-all security model, based on assumptions about infrastructure and capabilities. A Checkpoint of the Future at an airport in Central Africa may look quite different from one in Western Europe. The important thing is that they have the same purpose.

Similar progress is being made in cargo security. Shippers, forwarders, airlines and regulators need to work together to create a sterile transportation trail, starting with the manufacturing process and continuing through the shipping chain until the object reaches its destination. Through programs like 'Secure Freight' we are well on the way to achieving this. Our pilot in Kenya has been a great success, increasing the security, speed and flexibility of air freight.


Aviation takes its environmental responsibilities very seriously. We are still the only global business sector to agree tough collective targets for reducing CO2:

- 1.5% fuel efficiency improvements per year to 2020

- Capping net emissions through carbon-neutral growth from 2020

- Cutting net emissions 50% by 2050, compared to 2005.

Together with the four-pillar strategy which comprises technology, operations, infrastructure and positive economic measures, we are on course to deliver on our commitments. And we were pleased to see that these goals were echoed by the International Civil Aviation Organization (ICAO) Assembly in 2010, which undertook to develop options for a global framework of market-based measures for reducing aviation emissions.

The extent of ICAO's progress towards a global solution was recognized in a very important announcement last week. The EU agreed to "stop the clock" on the inclusion of international aviation in its Emissions Trading Scheme (ETS). This significant step creates an opportunity for the international community. Previously, Europe's plan to tax non-EU carriers for their emissions in foreign and international airspace had been seen as an attack on sovereignty, and a roadblock towards agreeing to a global solution for aviation emissions. Now the EU has created some space for negotiations to move forward in time for the ICAO Assembly in September next year. We expect proposals for a global framework for market-based measures to be on the table.

Infrastructure, Charges and Taxes

Across Africa, we see a patchwork of taxes and charges, usually on fuel and passengers, which damage competitiveness and connectivity. Of course, infrastructure must be paid for, but governments need to understand that the cost-benefit of developments must be compelling if the competitiveness of the industry is to be preserved – and ICAO principles must be followed.

The future of distribution

I want to conclude by looking at one of our most interesting challenges – Distribution. 60% of air travel is still sold through travel agents, and they rely on the information provided to them by Global Distribution Systems (GDS). This information offers very little differentiation beyond the class of service codes.

We have to modernize this situation. The current generation of internet-savvy customers expects to have the option to personalize their journey, just as they personalize their hotel booking with views, spa treatments, and so on. So IATA is proposing to develop a foundation standard for a New Distribution Capability (NDC), to give airline customers access to the same flexible options. The NDC is a set of standards that will allow airlines to make their inventory available to the outside world, in the way airlines wish to sell it. We are working to have some pilot projects operating within the next 12 months, so by the time of the AGM next June I am sure there will be some interesting results to show you.

To conclude, the prospects for aviation growth are bright in Africa. The region is developing fast and expanding its trade links to rapidly-growing markets around the world. If we can collectively resolve the safety, security and infrastructure issues – as I believe we will – then aviation will be well placed to be the driver of even greater prosperity. IATA stands ready to work with all aviation stakeholders to deliver this exciting future for African aviation. And I look forward to seeing you all at IATA's AGM in Cape Town next year, to further this agenda for growth and change.

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