Africa’s aviation industry represents a huge market that the continent’s airlines need to exploit more fully; however over the years, the sector has competed unfavorably with other international carriers. This is because of high air transport costs, poor intra-Africa connectivity/market access limitations as well as the high costs of operations.
Last month, the African Aviation Industry Group (AAIG) held a high-level webinar to weigh in on practical solutions to reduce the high cost of air transport operations in Africa. The webinar themed “Achieving Affordable Air Transport across Africa”, saw stakeholders converge to determine what ails the industry as well as recommendations to propel the industry ahead.
Aside from the adverse effect of Covid-19, the aviation industry also has been dealt a blow from high operational costs stemming from excessive and unjustified taxes, charges and other government-imposed fees and levies on international aviation that have negative impact on the industry’s competitiveness and national economies. This happens despite there being a clear set of guidelines by the International Civil Aviation Organization (ICAO) on taxation on international air transport. These reference documents which can ensure that all States levy fully justified aviation charges and taxes include; Policies on User Charges and ICAO’s Policies.
Generally, the African aviation sector also faces a high cost of financing, and the sector, being very capital intensive, requires access to competitive financing which will contribute to reduce the operating cost to African airlines.
“The risk perception is very often biased and leads to high interest rates, which generate high cost of ownership and high fares, if any financing at all. African financing Institutions have a role to play in de-risking the aviation sector, in order to allow more favourable terms for the sector.” A statement from the webinar reads.
Air Transport Affordability
Air ticket fares in Africa are certainly high compared to those of other regions for equivalent distances, yet due to the prevailing low GDP in most African States, its citizens cannot afford to fly as often as citizens from other continents.
According to the Secretary General of the International Civil Aviation Organization Dr. Fang Liu, African governments need to embrace full liberalisation of the aviation sector.
The SG invoked the Yamoussoukro Decision (YD), which established an arrangement for the gradual liberalization of intra-Africa air transport services.
“Nigeria today has all its bilateral air service agreements with the YD and was also among the first ten countries that signed a commitment to implement the Single African Air Transport Market (SAATM),” he said.
SAATM, a mechanism of the Yamoussoukro Decision, is an African Union flagship project to create a single unified air transport market in Africa that will advance the continent’s economic integration agenda.
African Development Bank’s Director for Infrastructure and Urban Development, Amadou Oumarou, noted that the sector had been ailing even prior to the onset of the pandemic, plagued by market restrictions and high prices, as well as a poor record of safety and security. “Of the 200 airlines the EU had blacklisted in 2016, over 50% were African,” he noted.
The European Union (EU) bans air carriers from entering the airspace of any of its member states for failing to meet EU regulatory oversight standards. Blacklisting is when airlines have failed to meet the set EU standards of compliance.
The webinar which was attended by a multi-sectorial engagement of all concerned stakeholders including airlines, service providers, governments and policy makers called for appropriate measures to be taken by governments to reduce the cost of aviation to make travel more affordable for African citizens. That has the potential to reduce costs so that the air transport sector can be made accessible and more affordable to a wider demographic of travelers across Africa.
“In addition, the removal of other recently introduced passenger costs, such as PCR test and quarantine, will no doubt accelerate traffic growth. To achieve the objective of aviation sustainability and air transport affordability through the growth of air traffic and revenues for all industry players, specific targets should be set.” A statement released the end of the Webinar noted.
The affordability of air transport is also dependent on the economic prosperity of the population.
The joint interventions of industry stakeholders and governments have resulted in improved safety performance for Africa. The ICAO requirement of 60% Effective Implementation (EI) performance for SAATM implementation underlines Africa’s commitment to maintaining safety as the first aviation priority in the region.
Safety: To address public perception about the safety of African operators, aviation stakeholders need to continue coordinated efforts to safeguard the commendable performance achieved from 2015 to 2018. States are urged to implement the Abuja Aviation Safety targets, the ICAO, Universal Safety Oversight Audit Programme (USOAP), Audit findings and the Namibia Declaration on aviation security.
Intra-African connectivity: Full implementation of SAATM complemented by AfCFTA rollout will unleash the multiplier benefits of air transport for economic growth and leapfrog the inclusion of isolated African countries or regions in the international market. States and airlines that are prepared to proceed are encouraged to do so.
Infrastructure: Much of the aviation infrastructure in Africa is below international standards yet attracts higher user cost than elsewhere. Infrastructural development should take into consideration the industry’s traffic needs and dynamics of the markets to build functional, environmentally friendly and cost effective infrastructure.
Airline economies of scale: Whilst remaining competitive, African airlines must increase their level of cooperation. They must put in place appropriate strategies to reduce their costs and increase their frequencies and improve connectivity.
This takes place ahead of the Aviation Africa 2021 conference slated for July 7th and 8th in Kigali Rwanda.
An analysis from the Centre for Aviation, part of the Aviation Week Network (CAPA) shows that in Africa, the airline seat capacity was up by 4.3% in 2019. This is more or less in line with the 10 year compound average rate of 4.5% p.a. between 2009 and 2019.
Ethiopian Airlines is Africa’s biggest airline by far. It is largest in terms of seats, with 52% more capacity than EgyptAir, at number two and 80% more than third placed Royal Air Maroc, and almost double the size of the fourth ranked, once market leader, South African Airways.
“A decade ago, Ethiopian was ranked fourth and South African was number one, but the two have since swapped places. SAA, which was number one in Africa as recently as 2015, has cut its capacity by 30% over the past five years.” The analysis from CAPA reads.
In addition to these four, the list of top 10 airlines by 2019 seats in Africa also includes two others based on the continent: fifth placed Air Algérie and eighth ranked Kenya Airways.
The aviation industry as a key enabler, most especially for the tourism and to a lesser degree, of the freight industry, will slowly but surely recover from the effects of the pandemic and with the rollout of the AfCFTA, there is much to look forward to with intra-African trade and tourism.