Poor Policy Implementation and Growth of African Airlines

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ChineduEze writes that most African airlines are financially weak and cannot play in the big league of international carriers owing to poor policy implementation by governments One of the things people took away from this year’sAkwaaba African travel market was the exposition and insight given about African airlines and why it lags behind other regions in the world.

Both the International Air Transport Association (IATA) and the African Airlines Association (AFRAA) agreed that Africa is a potential market in air transport; that with the burgeoning economy and the tendency to become the fastest growing economy in the world, Africa needs more development in air transport.

However, they agreed that presently less than half of the continent’s countries are interconnected to boost trade, social and economic interaction and tourism.

At the Second Akwaaba African Market Travel and Tourism Conference, which took place at recently, the former Managing Director of the Federal Airports Authority of Nigeria (FAAN) Richard Aisuebeogun in his presentation at the conference, noted that poor policy implementation among other factors are the major reasons why the continent is behind in airline business. Being the second largest continent in the world, aviation experts believe that interconnectivity would boost the region’s economy through trade, encourage manufacturing, as it would be easier to move manufactured goods among the countries in the continent than to import from Asia, Europe and the Americas. It would also boost tourism.

Policy Failure

The former Managing Director of FAAN said the inability of states to implement policies that would encourage and enhance airline growth in many countries in Africa has led to the failure of many airlines in the continent both state and privately carriers.

Aisuebeogun said that many of these failed airlines litter many airports in Africa and identified these airlines to include, Air Gabon, Sierra National Airline, Air Afrique, Nigerian Airways Limited, Cameroon Airlines, Chanchagi, ADC Airlines, Bellview Airlines, Air Zimbabwe and others.

“A report of survey carried out in May, 2016 says over the past 12 years nearly 37 airlines were launched in Africa, and almost all of them had failed – 25 of which are from Nigeria. Today only about 12 Africa Airlines have inter-continental operations. The more we realise that airlines are not a luxury but a necessity in our remote villages and hub cities, the more we can change our thinking and make sustained efforts to ensure that airlines are supported and developed for the accelerated development of our economies and improvement of our livelihoods,” Aisuebeogun said.

He noted that the potential of aviation in Africa is underutilised, which means that there are huge opportunities for the sustainable airlines to thrive, but for the region to realise these latent possibilities, aviation – particularly, commercial air transport – must be prioritised by government.

He disclosed that today, air transport is recognised as an important element in the achievement of the United Nation’s Vision 2030 Sustainable Development Goals which seeks to improve individual livelihoods in all corners of the globe, adding that air transport is also vital to achieving the African Union’s (AU) Agenda 2063, which seeks to transform Africa’s economy from its current largely underdeveloped state to hugely develop economies.

According to him, Africa has the potential to be a significant force in aviation on the back of robust economic growth forecasts, with Africa having among the fastest growing economies worldwide, but African airlines carry only l.3 percent of global air cargo.

“These small proportions contributed by Africa to global air cargo indicate that Africa has a huge potential to grow,” he said.

He also observed that the performance of the African aviation industry is lagging behind those of the rest of the world at less than 3 percent of global revenue passenger miles (RPKs).

“The growth is heavily constrained by the high industry costs, inadequate infrastructure at several airports, slow implementation of the Yamoussoukro Decision (liberalization of Africa’s airspace), lack of a single traffic rights negotiating body with respect to third parties like the EU. Nonetheless, demand for air transport has increased steadily over the past years with passenger numbers and freight traffic growing significantly,” Aisuebeogun said.

Costs and Operating Environment

Aisuebeogun said cost of operation in Africa’s environment is among the greatest challenges to African airlines and these include relatively high taxes, charges and fees. IATA has also pointed out that these high charges are part of the reasons why airlines have short life span in Africa.

So Aisuebeogun called for the diversification of local economies to create economic empowerment for the indigenes, and economic attraction for foreign business people and traders flying in for business, etc. He said that governments should ensure this is achieved to support African airlines and suggested the creation of understanding through proper education of ministries of interior, trade and investment, to stimulate real sector to drive production to feed cargo airlines.

He said there should be political will to support airlines in times of meeting their needs through bailouts, waivers, but there should be efforts to ensure that waivers are implemented and not only on paper.

“Till today in Nigeria, airlines have to lobby and call high powers to free their engines and aircraft spares from the 10 percent duties and tax slammed on these imports. i.e. 5 percent duty and 5 percent vat. Governments should not see airlines as cash cows, but rather as vital economic catalysts to be supported to drive the larger economy,” he said.

High Cost of Jet A1

Aisuebeogun quoted IATA, which said that in 2012 on average, fuel accounted for 33 percent of total airline operating costs, although higher in some regions. In Africa for instance, fuel accounted for between 45-55 percent of operating costs, placing sustained pressure on the airline industry profit margin.

So IATA urged African governments to tackle the excessive surcharges on fuel, which can make fuel purchases on the continent up to 20 percent more expensive than the global average. It noted that airlines operating to Ethiopia, Gabon, Ghana and Kenya are particularly affected by above market fuel costs.

“These surcharges increase airlines’ cost burden when they are already operating in a challenging environment. They also hinder growth in an industry that delivers extensive socio-economic benefits,” IATA said.

Improved Airport Infrastructure

Aisuebeogun reacted to the current agitation in Nigeria that by the nation’s population and high passenger traffic, the country should naturally be a hub in the West Africa sub-region, noting that population and geography only do not make a country a hub, if not Nigeria, Ghana and Senegal would have been mega hubs.

“Your facilities and operating environment including economy, policies etc. give you a hub. Consider Hong Kong, Singapore, Dubai, Abu Dhabi, etc. without large populations, but with air traffic many times more than their entire populations. Singapore has 5.6 million population, but Changi Airport processed 50 million passengers in 2015,” Aisuebeogun said.

He therefore called for smarter regulation and political will to support airlines in times of need, adding that regulation of the airlines industry in Africa must be African friendly and align with the International Civil Aviation Organisation (ICAO) standards.

“While AFRAA, IATA and airlines groups continue to call for improved regulations, African Civil Aviation Authorities (CAAs) must attune their regulation not to stifle African airlines growth and sustainability. They should create clearer understanding through continual education of ministries of interior, trade and investment, to improve aviation policies, stimulate real sector to drive production to feed cargo airlines,” he said.

Unfair Competition

Aisuebeogun remarked that competition and liberalisationare excellent but airlines must be equipped to compete, noting that with adverse economy, low currency, charges, taxes and fees airlines in Africa already lose a lot and disadvantaged before they go into competition. That is why even with the best aircraft among African airlines’ fleets, they can hardly compete but pull out of lucrative routes.

“Despite dozens of Bilateral Air Service Agreements (BASA) signed by African states their airlines can hardly exploit these BASA routes so the states depend on controversial royalties levied on foreign airlines, which fly unrequited without reciprocity.

Air Cargo the Future

With the encouragement to go into agriculture and the recent development of investment in cash crops, which has increased perishable goods exported by Nigeria to Europe and North America, Aisuebeogun said cargo export is the future for African airlines.

According to him, with concerted effort to bolster economies and expected political support to improve the economies in Africa, especially under the AU Agenda 2063, the cycles of economic rebounds in various African States would produce vibrant economies with strong demand for air cargo.

“This is evident in Southern Africa already where cooperation within the South Africa Development Commission (SADC) region gives hope to airlines.
CEO of Air Botswana, a fast-rising regional carrier is looking to adding cargo services as the airline anticipates increased cargo demand in the region.

AU Passport

The AU common passport and trend of dismantling of travel barriers exemplified by Rwanda, Ghana, etc. would open the floodgates of economic activities intra-Africa, hence driving air travels in the continent,” he said.

State of African Airports

AisuebeoAirlinesgun said airports in Africa are going through a period of transition and even as a commercial and or private entity, African airport are going to be well positioned to play a significant role in supporting the aviation sector as a whole to develop new and improved facilities for passengers and airlines experience. He however noted that there are certain facilities that must be in place in these airports to ensure safety and to keep with the standards.

One of these criteria is perimeter fence. He noted that many of the secondary African airport have either only operational or perimeter fences. Another requirement is power supply. He said inadequate dedicated power supply to airports has led to epileptic power outage and this has become a major challenge facing the airports in the continent.

“Therefore it has become imperative that the government tackles the challenge and also ensure that airports built do not compromise on civil aviation standards.

According to him, African airports have evolved overtime from the use of old archaic state of infrastructure to a much more modern state of the art buildings and structures.

“African Airports should extend its portfolio by building an Airport Services Business (ASB) that will operate across several airports in the region.
New automated system can also be developed, for example, self-service kiosk should be available to passengers travelling. A management information system (MIS) to monitor passenger queues at the airport security check-points which will convey waiting time information to Flight Information Display System (FIDS),” he said.

The failure of governments in Africa to implement, most often, ideal policies has given rise to failure of airlines in the continent and the dominance of foreign international carriers in the region.