Open skies would lead to growth of Africa’s airlines

PUBLISHED ON March 6th, 2019

Open skies would lead to growth of Africa’s airlines

Experts at the aviation summit in Kigali said that African governments will need to depoliticise aviation, shelve sovereignty and support airlines financially to build stronger inter-bloc co-operation.

Up to 397 African airlines have gone under since 1960, and more could shut down if they don’t evolve fast.

Aviation industry captains and regulators have been pushing for open skies and making air transport affordable in Africa, but these have largely remained pipe dreams even as the number of new flyers grows.
For most Africans, it takes about three weeks’ salary on average to travel by air on the continent, whereas it takes only a three-day salary to fly the same distances in other parts of the world like Europe and the US.

African airlines incur the highest operational costs globally due to prohibitive fuel costs, taxes and other charges, unfriendly Customs regimes and monopolistic environments.

Although up to 28 countries have already signed up to the Single African Air Transport Market (SAATM) treaty, only two have implemented it fully.

“It is a form of colonial hangover that many countries still suffer from. It’s just a matter of time and everyone will see the benefits of an open air space and join,” said Ladislaus Matindi, the CEO of Air Tanzania.

African airlines were accused of neglecting co-operation with others on the continent in maintenance, training and operational services, opting to work with foreign airlines instead.

“Even when requesting additional frequencies or stops, you are blocked in many African countries. There is no way we are going to advance if we are working in isolation. We need to put the formula right, and fast,” said Rwandair CEO Yvonne Makolo.

Intra-African connectivity has fallen to its lowest in 10 years at just 43 per cent, from 46.6 per cent in 2007. In Europe it is 67 per cent, in southeast Asia (ASEAN) it is 79 per cent, and in North America it is 78 per cent.

One of the fears has always been that when African countries open their skies to their peers, their smaller airlines will be cannibalised by the big players, something Girma Wake, an African airline expert, disputes.
“Open skies serve both the big and smaller airlines better if they work together. The smaller ones should serve their markets to grow their traffic,” said Mr Girma, who is a board member of Ethiopian Airlines.

The International Air Transport Association (IATA) in its recent forecasts predicted that Africa would remain the weakest airline region in the world in 2019.

African carriers are expected to report a $300 million net loss in 2019 — slightly improved from the $400 million net loss in 2018, with an expected net loss per passenger of $3.51.

The only airline that has recorded success is Ethiopian: Its net profit in the 2017/18 financial year rose almost 2 per cent to $233 million.

All other regions are expected to report profits in 2018 and 2019, with carriers in North America continuing to lead on financial performance, accounting for nearly half of the industry’s total profits.

Financial performance is expected to improve from 2018 in all regions except Europe, where improvement has been delayed by increased fuel hedging.

North American carriers are expected to deliver the strongest financial performance in 2019, with a $16.6 billion net profit (up from $14.7 billion in 2018), representing a net profit of $16.77 per passenger.

African air traffic is expected to grow by 15 per cent annually for the next 20 years, but the aviation industry may not benefit from that growth if it does not liberalise.

“Aviation is no longer only for the wealthy, it’s now a utility like electricity, water, Internet. We need to synchronise our priorities as a continent. Without this, it will be hard to optimise the gains,” said Silas Udahemuka, director general of the Rwanda Civil Aviation Authority.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.