As the world gets used to new forms of interconnectedness, Africa is not left aside. Today, more than 700 million Africans are subscribed to mobile services with many wealthy Africans proudly displaying more than one cell, a symbol of a newly acquired social status. The proliferation of mobile networks has transformed communications, businesses or banking, enabling a jump unimaginable just a few years ago. Thanks to technology we are witnessing new forms of integration.
Is aviation going to be the next big integration magnet?
Unfortunately, even though Africa is home to 15% of the world's population it only accounts for a relatively small proportion of air traffic, in fact less than 3% of the world's total. Small as this may be, the African aviation market is growing fast.
International air passenger numbers have grown consistently year on year since 2004 except in 2011 where the numbers dipped as a result of political instability in parts of North Africa. From less than 40 million passengers carried in 2004 by African airlines, passenger numbers increased to 73.8 million in 2013. Domestic passenger numbers within the region also increased significantly reaching 28 million in 2013[1]. This growth is projected to continue. Boeing's long term forecast for 2014-2033 indicates that, driven by a positive economic outlook, increasing trade links, and the growing middle class, traffic to, from, and within Africa is projected to grow by about 6 percent per year for the next two decades. This demand will translate into a demand for an additional 1,170 new airplanes, valued at USD 160 billion[2]. But as with all good things the proof of the pudding is in the eating.
According to the Air Transport Action Group[3], in 2014 the aviation industry in Africa supported 6.8 million jobs and contributed USD 72.5 billion to Africa's GDP. This accounted for 11% of the jobs and 3% of the GDP supported by the air transport industry worldwide.
These encouraging developments however do not reveal some of the major obstacles still faced by the aviation industry in the continent. It remains one of the most unsafe regions to fly, it has lagged behind others on skies liberalization, its airport infrastructure continues to require massive investments and the training of skilled personnel is not being properly planned.
African airlines consolidation is another challenge. During the 1970s and 1980s there were about 36 African airlines of which 26 had intercontinental flight services. Today there are only about 12 African airlines with intercontinental operations. Over the last two decades a total of 37 new airlines were launched in Africa but almost all of them failed. Most countries continues to act solo and motivated by choices other than economic. We continue to see attempts to create or sustain national carriers, opposing international trends. It is true that Middle East carriers and the good performance of Ethiopian Airlines contradict the doomsayers of state-owned airlines, but these are exceptions that need to be understood in their plenitude. 80% of the continent's long haul traffic is dominated by non-African carriers.
The average cost of a flight in Africa is higher than anywhere else in the world. High landing fees, exorbitant taxes levied on airfares as well as above average aviation fuel prices, almost 30% higher than in Europe, do not help.
Funding access for the aviation industry is uneven. Dubai, Abu Dhabi and Qatar-based airlines have reportedly enjoyed a host of benefits valued at more than USD 42 billion over the past decade. That includes subsidized access to capital and sponsored first class infrastructure. American commercial aviation has also benefited from its government's support valued at USD 155 billion, since 1918. Obviously African airlines are not in the same league and have been left to fend for themselves. Without the same easy access to capital markets, export credit financing (which can cover up to 85% of the actual aircraft price), or insurance subsidies, African airlines either have to finance the difference from their own funds or opt for junior loans with punitive rates from commercial banks; or lease aircrafts at an even heavier cost. The financing options open to African carriers dwarf their chances for expansion. It is therefore hardly surprising mega carriers are doing so well, including in their operations in Africa. They have the advantage to expand quickly, with space to build a market from scratch, increase market shares and continue investing heavily in service and marketing.
Intra –African connectivity is so mediocre that any passengers have to travel thousands of miles out of the continent just to be able to make a connection to another African destination. A quarter of the intra-African routes are actually served by just one airline. Despite African states signing up for a full liberalization of the regional market at Yamoussoukro in 1999, restrictions and protectionism instead of being eliminated are becoming rather rampant.
What could constitute a good base for a turnaround? With regards to safety accidents 2014 marked a significant change. Despite aviation disasters dominating headlines that year, African airlines actually stood out for zero jet hull losses (write-offs) per 1-million flights compared to 2.22 in 2013 and 4.63 in 2012[4]. This is encouraging news, suggesting regional measures to improve safety records are working. Ethiopian Airlines is already leading the way amongst its continental competitors in terms of establishing ambitious targets meet them and turn a profit. With 93 destinations across 5 continents, including 53 in Africa its future looks promising. Having experienced a phenomenal 700% growth in its revenue since 2005, Ethiopian Airlines has demonstrated the strength to face difficult competition. However, as long as Africa fails to establish a single aviation market and countries continue to restrict African carriers while welcoming the European and Middle East competitors, the performance of Ethiopian Airlines may remain an exception.
Africa must move towards embracing a conducive and smart regulatory framework that liberalises its skies in order to realise a profitable and globally competent airline industry. A truly competitive sector will need to be innovative and prioritise the continent's interests over national flags. An open skies policy would drive the cost of tickets down and increase substantially the number of flyers. According to IATA by just deregulating and liberating African air services in 12 key markets, an extra 155,000 jobs and USD 1.3 billion could be generated[5].
Evidence shows that open skies agreements have worked in other regions. For example in Europe, it increased exponentially the number of routes and provoked a 34% decline in ticket fares. Indeed where African nations have liberalised their air markets, either within Africa or with the rest of the world, positive benefits have resulted. For example the agreement of a more liberal air market between South Africa and Kenya in the early 2000s led to a 69% rise in passenger traffic. The 2006 Morocco-EU open skies agreement led to 160% rise in traffic with the number of routes operating between the two multiplying four fold[6]. Just allowing the operation of a low cost carrier service between South Africa and Zambia (Johannesburg-Lusaka) resulted in a 38% reduction in fares and 38% increase in passenger traffic. The continent has to create more space for low cost flying. As of 2013 the penetration of low-cost airlines in Africa was the lowest in the world, representing less than 10% of the continent's total.
In an interconnected world, air travel is no longer a luxury, it is a necessity for a prosperous continent.
Published as an op-ed in the East African on 12 September 2016
[1] Chingosho, E. (2014). 46th AFRAA Annual General Assembly. Report of the Secretary General. 10 November 2014, Algiers, Algeria
[2] Boeing Commercial Airplanes (2015). Current market outlook
[3] Air Transport Action Group (2016), Aviation: Benefits Beyond Borders report
[5] IATA (2014), Press release on the Significant Benefits of Liberalized African Air Marketshttp://www.iata.org/pressroom/pr/Pages/2014-07-07-01.aspx
[6] InterVISTAS Consulting ltd (2014).Transforming Intra-African Air Connectivity: The Economic Benefits of Implementing the Yamoussoukro Decision. Prepared for IATA in partnership with AFCAC and AFRAA
