10 May 2014

East Africa: Cheap Airfares Soon Cutting Across EAC Borders, Let the Market Reign


THE EAC Heads of State recently directed officials from their respective countries to look into the possibility of lowering the cost of cross-border air transportation within the region.

This is laudable for, in the interest of business or leisure, the prospects of low cost fares are immense for investors, tourists and locals alike.

But, as a business proposition, it may not require the EAC Heads of State to have seen the need for it. The market should be dictating.

The reality is that the African aviation industry is projected to boom. And regional and international airlines are alive to the fact that the market has been ripe for some time now.

This has drawn international investments in the aviation sector, such as from the UK-based pan-African investment group, Lonrho, which acquired Fly540 operations in the region and set up FastJet, modeling it to Europe's budget carrier, EasyJet.

According to the FastJet website, costs for one-way flight can be as low as US$20 within Tanzania or US$100 from Dar es Salaam to Johannesburg, though the customer has to pay for airport fees and taxes, raising the fare.

Last month, Kenya Airways' low-cost carrier, JamboJet, entered the fray with one-way tickets within Kenya going for as low as Sh2,850 ($33), inclusive of taxes and fees.

Customers for the low cost airlines, however, have to book early and are only allowed hand luggage. They are required to pay for extras, like food and baggage.

While FastJet includes a route to Lusaka, Zambia, from Dar es Salaam, with an eye to expand in the region, Jetlink, another regional airline, is waiting in the wings.

JamboJet has similar regional ambitions, beginning next year, and already holds a licence to ply 22 routes to major cities in the EAC and the larger Eastern Africa, including South Sudan, Somaliland, Ethiopia, the Comoro Islands, Madagascar and the Democratic Republic of Congo.

According to JamboJet's earlier estimates, the fares could go as low as Ksh6,000 (US$70) on Eastern Africa routes.

This is a complete shift from the traditional market, for which current return airfares in the region are in the range of US$315 (Kigali-Entebbe) to US$370 (Kigali-Nairobi) and US$430 (Kigali-Dar es Salaam) - give or take.

That the aviation sector should draw local and international interest suggests the potential for low-cost model.

Globally, the low cost business model is profitable and was pioneered by the likes of Southwest Airlines, having started in 1971, and flying over 49 of the US states.

As an example of the figures at stake, one of the most lucrative is Irish airline, Ryanair, which started in 1985, and averages US$60 one-way ticket over 29 countries across Europe, grossing US$629 million in 2012 alone.

Regionally, the trend has been towards international carriers forming subsidiaries to handle local routes, enabling them to reap cost savings from leaner operations.

Examples include British Airways with a majority stake in Comair, which serves southern African nations including Lesotho, Namibia, and Botswana.

However, despite the international investment, it is the larger regional carriers such as Kenya Airways and South African Airlines (which runs the local Mango Airline) that may hold sway.

This side of Africa, competition from Kenya Airways and its bold ambitions with its new carrier, JamboJet, will rattle other established airlines in the region including its partner Precision Air in Tanzania, Air Uganda, and RwandAir.

Be that as it may, the upshot of it is that regional officialdom, the highest pinnacle of which is the EAC Heads of State, seems politically united to come up with a workable plan to lower airfare costs as a matter of regional policy.

However, the regional policy, currently in the making, can only be regulatory and laissez faire to allow competition - by allowing the economic and market forces reign.

This way it should work in the interest of all - the airlines, governments and, especially, the long suffering mwananchi.

The writer is a commentator on local and regional issues.

Copyright © 2014 The New Times. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.