The Reporter (Addis Ababa)

30 November 2013

Ethiopia: Challenging Times for African Airlines

The African airline industry creates 6.7 million jobs and contributes 6.8 billion dollars to the continent's GDP. However, various factors are undermining the development of the industry, Kaleyesus Bekele reports from Mombasa, Kenya.

Early this week African airline CEOs and civil aviation authorities gathered in the resort town of Mombasa, Kenya, to discuss the challenges and look at the way forward at the African Airlines Association (AFRAA) annual general assembly held from November 24 to 26 at the Leisure Lodge found in the beautiful south coast town of Mombasa. In the course of the meeting leaders from the African Airlines industry agreed to work closely together to better serve the African air transport market and connect Africa to the rest of the world. To facilitate this, the airlines called for unrestrained intra-Africa market access (where demand exists), regulatory alignment among African states and an even playing field that encourages fair competition among players. The three-day conference was held under the theme "Challenging times - Africa's strategic alignment" and brought together over 360 high profile delegates from 55 countries across the world.

Opening the Assembly, the governor of Kwale county, Mr Salim Mvurya, lauded the role of African airlines in making travel more accessible to the majority of the people. He challenged African

airlines to be more aggressive and innovative in their service delivery while managing their costs to ensure competitiveness and encourage more people to travel by air. The governor urged airlines to work together and make travel across the continent seamless and affordable. Governor Mvurya called for the implementation of the key recommendations and resolutions that will emerge from the conference. He further called upon industry stakeholders in Africa to work together and seek partnerships to broaden their network and take advantage of the growing air transport market.

Welcoming delegates to the meeting, the president of AFRAA, MD and CEO of Kenya Airways, Dr. Titus Naikuni, noted that the slow pace of air transport liberalisation is hurting the growth and development of Africa. Though some airlines may not be prepared for competition in a liberalized environment, protecting such airlines sets the whole industry back. He assured airlines of Kenya Airway's support in areas that it has capacity.

In his opening remarks, the secretary general of AFRAA, Elijah Chingosho (Ph.D.) singled out excessive airport taxes, charges and fees, above industry average fuel prices and poor infrastructure as major challenges confronting airlines. Chingosho said that, "The generally high cost of operations is making African airlines less competitive". He called on African states to take their safety responsibility seriously and together with the African Union engage the European Union on the unfair banning of African airlines.

On the role of government in the development of air transport in Africa, the AFRAA Assembly called upon governments to demonstrate commitment towards liberalizing the air transport industry and creating a favorable environment for airline operations. This will increase regional and domestic traffic and create a bigger Africa-base market for the airlines. Governments should remove barriers to cooperation between carriers and put in place policy and regulatory framework that facilitate beneficial cooperation.

Appointment of officers:

The 45th AGA appointed Monwabisi Kalawe, CEO of South African Airways as Chairman of the Executive Committee while Abdehahmane Berthe, CEO of Air Burkina and Abd Elmahmoud Suleiman Mohammed, CEO of Sudan Airways elected First and Second Vice Chairmen respectively of the Executive Committee. The AFRAA Executive Committee has oversight responsibility for the association and crafts policy as well as oversees implementation of projects and programs by the Secretariat.

The Assembly also elected two new members to replace those whose term of office on the Executive Committee expired at the close of the 45th AGA. Abderahmane Berthe was re-elected to represent the West/Central Region while Monwabisi Kalawe CEO South African Airways was elected to represent the Southern Africa Region. Both members will serve for a term of 3 years each to the close of the 48th AGA.

Host of 46th AGA:

Air Algerie was elected by the 456th AGA in Mombasa, Kenya as host of the 2014 AFRAA AGA. The Assembly announced that the 46th AGA will be held in a yet to be named venue in Algeria from 02-04 November 2014. As a prelude to what delegates should expect next year, a short video on some of the facilities and attractions that will be sampled during the AGA was played by Air Algerie.

AFRAA Awards:

The Managing Director and Chief Executive Officer of Kenya Airways, Titus Naikuni (Ph.D.), was conferred the coveted AFRAA Distinguished Service Award for his outstanding service to the African aviation industry.

Ethiopian Airlines was crowned Airline of the year for its impressive growth, profitability and partnership with regional airlines in Africa. Luis Felipe de Oliveira of International Air Transport Association (IATA) was recognized for distinctive contribution in spearheading lobbying efforts in Africa to reduce taxes, charges and fees on aviation fuel and for supporting the development of air transport in Africa through lowering taxes on Jet A1 fuel.

The government of Angola and the Civil Aviation Authority of Ghana both received AFRAA Distinguished Service Provider Awards. Kwame Mamphey received the award on behalf of his organization.

The awards were conferred at a colorful beach front with a gala dinner at the Leisure Lodge Resort. Things to fix

The AGA was not only a stage for receiving accolades. There were genuine and constructive critiques forwarded by concerned authorities. One of the notable dignitaries that was critical of African governments and airlines was Tony Tyler, director general of IATA.

Tyler said that African governments levy cumbersome airport fees and taxes on jet fuel and airfares. He mentioned Kenya and Ethiopian governments as those which levied high taxes on jet fuel. He said governments' conflicting rules hindered the airline industry growth.

Mr. Tyler said aviation's economic and social benefits can be undermined by the unintended consequences of government action which are not aligned with the established framework of global standards.

"Global standards are the foundation on which a safe, secure, and integrated global air transport system are built. The system is so reliable that we don't often think about the enormous coordination that makes it possible. That is why we need to remind governments of the value of global standards that support aviation and the vibrancy of their economies," Mr. Tyler said.

Safety is the prime example of what can be achieved with a consistent, global approach. The IATA Operational Safety Audit (IOSA) is the global standard for airline operational safety management. Over the decade since it was established, there is a clear trend that the aggregate safety performance of airlines on the registry is superior to those airlines that are not on the registry. African airlines on the IOSA registry are performing in line with global averages. And in 2012 there was not a single Western-built jet hull loss by any of IATA's 25 African member airlines.

"Improving safety is the biggest issue on the African agenda, and global standards play a crucial role in this area. Last year, nearly half of the fatalities on Western-built jets occurred in Africa. African governments recognized the need to improve safety in the Abuja Declaration's goal of reaching world-class safety levels by 2015. IATA is actively contributing its expertise and resources to all the Abuja Declaration's commitments," said Mr. Tyler.

Key elements of the Abuja declaration include the completion of IOSA by all African carriers, the establishment of independent and sufficiently funded civil aviation authorities and the implementation of effective and transparent safety oversight systems. To broaden the base of IOSA carriers (outside of IATA's membership), IATA is working with the International Airlines Training Fund to provide in-house training for ten African airlines.

"Governments must also up their game with more effective safety oversight. As of the end of 2012 only 11 African states had achieved 60% implementation of ICAO's safety-related standards and recommended practices (SARPS), according to the Universal Safety Oversight Audit Program (USOAP). There has been some significant progress. But, to be very frank, overall I have not yet seen sufficient urgency in dealing with this fundamental issue. Meeting the Abuja Declaration's 2015 commitment will require a major acceleration in the pace of implementation," Mr. Tyler said.

Connectivity and Regulation

"The overall profitability of the African industry is hovering around break-even, making USD 100 million in good years and losing USD 100 million when times are more difficult. Africa faces many unique challenges, but as Africa's economy takes off, breaking even will not be enough to generate the investments needed for African aviation to seize the emerging opportunities and play the important role of stimulating development across the continent." said Tyler.

To unlock the unique transformative powers a thriving aviation industry can bring to African economies, a better alignment of global standards is needed in the approach of governments to regulation, taxation and the provision of infrastructure. "Today - possibly without realizing it - governments are weakening the integrity of the air transport system by introducing different and sometimes conflicting passenger rights regulations, overly onerous taxes and charges."

Mr. Tyler focused on the need for more robust consultation by governments with industry to avoid unintended consequences of regulations, taxes or charges increases. He noted several areas where government policies breech ICAO principles:

Fuel: The competitiveness of African aviation is being compromised by the exceptionally high price of aviation fuel on the continent. On average jet fuel is about 21 percent more expensive in Africa than the global average. Kenya and Ethiopia are key players in African aviation and both have onerous levies on international fuel which do not comply with ICAO policies and standards.

Security: In several cases airport security charges recover more from users than is required to keep air transport secure. In Chad, for example, passengers pay USD 80 round-trip. And similar situations exist in Senegal, Côte d'Ivoire and Equatorial Guinea. Among the causes is private sector security companies that lobby governments to develop national security regimes with funding from air transport.

Recently, IATA engaged the Tanzania Civil Aviation Authority over proposed steep increases in air navigation and safety oversight charges. "By engaging in a dialogue we agreed on a much more reasonable increase that provides value for money. Dialogue is critical to reach mutually beneficial outcomes," Tyler said.

Future Opportunity

The future of aviation in Africa has the potential to be very bright. The African population of 1 billion people is spread across a vast continent with a wealth of untapped resources. The African economy is rapidly developing, its people are growing wealthier and governance is more stable. "Africa is the continent of opportunity for aviation. The future is still being created. By keeping global standards at the heart of our efforts, I am convinced that the future will be bright," Tyler said.

The CEO forum

African airlines CEOs held a lively discussion at the AGA. Ethiopian CEO, Tewolde Gebremariam, Taitus Naikuni, CEO Kenya Airways, Monwabisi Kalawe, SAA CEO, Inati Ntshanga, CEO SA Express, and Abdrehaman Berthe, CEO Air Burkina, were the panelists. The CEOs deliberated on the challenges facing the airline industry in Africa. Non-African carries have dominated the African airlines skies. Eighty percent of the passenger traffic on the intra Africa route is carried by non African carriers. How can African airlines regain leadership of African skies were the question the CEOs were asked.

Tewolde said that African carriers were operating under unfriendly regulatory framework. Tewolde said that markets are protected by bilateral air service agreements. "Unfortunately there are African countries that prohibit African airlines not to fly to their countries. There are countries that deny African airline traffic right and grant rights to non-African airlines," Tewolde lamented. According to him African nations should open their skies for African airlines. "We need to wholeheartedly implement the Yamoussoukro Declaration (A 1988 agreement by African countries to open their skies for African airlines).

SAA's CEO, Kalawe, stressed the need for cooperation among African airlines. He cited the high cost of doing business in Africa as the major challenge for African airlines. He said that aviation fuel price was much higher than the world average. "In some countries airport fees are exorbitant and these have to be reviewed," he noted.

Inati of SA Express said that instability is a major problem for African airlines. "Airline management is changed now and then. CEOs are removed more often. In some countries the management of the airline is changed when there is a change in the government," Inati said. "There should be continuity in leadership. Look at Taitus: he led KQ for 12 years. Look at Tewolde he served Ethiopian since 1985. When a person stays with an airline he will have the time required to implement his vision."

Naikuni said that there are two kinds of problems - internal and external. "Safety is a major concern. If we have an unsafe airline nobody is going to fly us. We have to admit that. This an internal problem. Of course inappropriate government policies affect airline operation. Change in governments also impact airlines managements. We have four or five elections in Africa every year and these could have their own effects on the countries' stability and that translates to the airlines performance. Naikuni said that African airline community should work with the African Union on the full implementation of the YD.

Inati called upon the four major African airlines - Ethiopian, SAA, KQ and Egypt Air. "If these big African airline collaborate among themselves there could be a possibility that they might support the small airlines. If the big airline cooperate we, the small airlines will follow suit," Inati said.

Naikuni, who said that it is only once a year that the CEOs of these major airline sit down for discussion during the AFRAA AGA, assured Inati that he would take the initiative to organize a meeting among the CEOs of the four major airlines. After 12 years of service as CEO of KQ Naikuni will call it a day after a year.

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