Cautious Optimism as 23 Countries Embrace AU Open Sky Agreement

Last week, the African Union launched the liberalisation of the continent’s airspace for airlines registered in Africa. Chinedu Eze examines the gains and pitfalls of the policy for Nigerian airlines

Last Sunday in Addis Ababa, during the 30th Ordinary Session of the Assembly of Heads of State and Government of the African Union, member-nations inaugurated the Single African Air Transport Market. SAATM is meant to relax aviation rules and regulations to create a free market environment for airlines registered in the continent. It is also known as the liberalisation of Africa’s airspace or open sky for Africa. 

President Paul Kagame of Rwanda, who is the current chair of the 55-member AU, and Chairperson of the AU Commission, Moussa Mahamat, unveiled the plaque at the commission’s headquarters in Addis Ababa, marking the inauguration of the SAATM.

 

About SAATM

 SAATM is a flagship project of AU Agenda 2063, which aspires to create a single unified air transport market in Africa, liberalise civil aviation in Africa, and motivate the continent’s economic integration agenda. According to the AU, the launch of SAATM is expected to facilitate opportunities to promote trade and cross-border investments in the production and service industries, including tourism. These would then lead to the creation of an additional 300,000 direct and two million indirect jobs.

Eleven AU member states, including Nigeria, championed the Declaration by signing the Solemn Commitment to actualise the Yamoussoukro Decision creating the single market. Signatories to the agreement have increased to 23 countries.

In May 2016, the AUC wrote to states that had signed the Solemn Commitment to highlight a number of measures they should take as soon as possible to initiate operationalisation of the single air transport market in the continent. Among the measures is that each country should officially publish in accordance with its national regulations or gazette that they are committed to the immediate implementation of the Yamoussoukro Decision under the terms of the Declaration of Solemn Commitment in line with the AU Agenda 2063.

Nigerian Airlines 

Appraising SAATM, Nigerian airlines under the aegis of Airline Operators of Nigeria appealed to the federal government not to go ahead with the full implementation of the policy. The operators said while the idea might be noble on paper, government should not lose sight of the facts and the dangers of the decision on the Nigerian economy and the future of the country’s youth.

AON chairman, Capt. Nogie Meggison, in a statement said, “We are concerned that the timing is not right, as there are several unresolved issues and challenges being faced by Nigerian aviation that will ultimately undermine the perceived gains of this treaty that might be an illusion for our beloved country.”

Meggison enumerated the challenges the Nigerian aviation faced, which would not allow the sector to benefit from the liberalised African airspace.

He stated, “The basic issue of free movement of people and trade is an integral aspect of the declaration that will go a long way to determine the fairness of the SAATM project. Sadly, it is a well-known fact that Nigerians require over 34 visas to travel within Africa alone. This is an issue that first needs to be addressed, before opening the skies, open the visas.”

 

Incentive 

 The AON chairman called on the government to come out with a clear policy that would position Nigerian airlines to take full advantage of the open skies. He said that Nigerian airlines were exposed to high bank interest rates of 28 per cent and above, contrary to the access to cheap funds provided and guaranteed by the governments of many African carriers at a maximum of two per cent.

Nigerian airlines pay VAT while most African carriers don’t pay VAT both in their countries and here in Nigeria, Meggison said. 

According to Meggison, “Airlines in Nigeria don’t have access to forex. We only get allocation per percentage of our bids which takes an average of six months. Most of the African carriers are subsidised and are being funded by their government.

“Nigerian airlines are at a disadvantage to other African Airlines that are largely government-owned and heavily subsidised. For instance, South African Airways got on the average about $350 million yearly in the past decade; Kenya Airways got about $600 million in 2016, while RwandAir has never published its financial results for over a decade. Yet they will be competing against Nigerian airlines with private finance at 28 per cent interest.”

The operators lamented that Nigerian airlines were subjected to multiple charges, taxes, levies and fees.

According to the airline operators, for the open air policy to work in Nigeria, there should be uniform customs duty and tariffs among member-countries; all landing charges and taxes must be the same, no matter which country the airline is coming from or flying to. Every airline registered in the continent must be given equal opportunity and treatment.

“In the European Union, tariffs are the same, landing and parking charges are the same and they even have single currency. But in Africa, each country is protecting its own airlines and when you want to fly to their country they will make it extremely difficult for you,” said one of the operators, who preferred anonymity.

 

Benefits 

A fortnight ago, African Civil Aviation Commission, which is saddled with the responsibility of executing the open sky policy for Africa, also known as Single African Air Transport Market by the African Union, spearheaded a sensitisation exercise for Nigeria’s aviation industry on the need to embrace the open sky policy. AFCAC launched the sensitisation campaign at a  workshop hosted by the Nigerian Civil Aviation Authority. Secretary-general of AFCAC, Mrs. Iyabo Sosina, identified the 23 members that had embraced the policy to include Benin, Burkina Faso, Botswana, Cape Verde, Republic of Congo, Cote d’Ivoire, Egypt, Ethiopia, and Gabon. Others are Ghana, Guinea, Kenya, Liberia, Mali, Mozambique, Niger, Nigeria, Rwanda, Sierra Leone, South Africa, Swaziland, Togo, and Zimbabwe.

Sosina explained that the 23 countries that ratified the policy had a combined population of about 670 million, more than half the population (57 per cent) of the continent as at 2015. She said the combined Gross Domestic Product of these members was $15 billion in 2015, which was over 65 per cent of the continent’s average $1888 per capita.

Besides the fact that some countries have refused to embrace the policy, some airlines in the continent are kicking against it. For example, in Nigeria, domestic carriers allege that it is an opportunity for established airlines in the continent to exploit the market at the expense of others.

Sosina said during the workshop that Nigerian airlines should prepare themselves to compete; otherwise, they would be overtaken by the new policy, which is projected to boost the economy of the continent. 

However, she said AFCAC was talking to those countries to review downwards their charges and open up their processes to allow the single market policy to work.

 

Implementation 

The International Air Transport Association welcomed the launch of SAATM and said that enhanced connectivity would stimulate demand, improve the competitiveness of the African airline industry, and make air travel more accessible. In turn, this would enable higher volumes of trade, expanded tourism and growing commerce between African nations and with the rest of the world.

IATA’s Vice President for Africa, Rapahel Kuuchi, said, “The SAATM has the potential for remarkable transformation that will build prosperity while connecting the African continent. Every open air service arrangement has boosted traffic, lifted economies and created jobs. And we expect no less in Africa on the back of the SAATM agreement. An IATA survey suggests that if just 12 key African countries opened their markets and increased connectivity, an extra 155,000 jobs and $1.3 billion in annual GDP would be created in those countries.

“We commend the 23 states that have signed up to SAATM.  It is an important step forward. But the benefits of a connected continent will only be realised through effective implementation of SAATM—firstly, by the countries already committed, and also by the remaining 32 AU member-nations still to come on board.” 

The international body said one of the main obstacles to the implementation of previous open skies pledges – 1988 Yamoussoukro Declaration and 1999 Yamoussoukro Decision – was the absence of an underpinning regulatory text. IATA welcomes the AU’s adoption of the regulatory text of the Yamoussoukro Decision – also the framework for SAATM – which covers competition and consumer protection and dispute settlement, as these safeguard the efficient operation of the market.

Kuuchi stated regarding the open sky policy, “Today’s decision is momentous. SAATM is a decisive step towards greater intra-African connectivity and delivers the framework on which to achieve it. Now it’s time to get down to the work of implementation. Greater connectivity will lead to greater prosperity. Governments must act on their commitments, and allow their economies to fly high on the wings of aviation.”

However, many industry experts in Nigeria are not very optimistic about SAATM, as they believe it would be difficult for member-countries that have adopted the new policy to resist the temptation to protect their own airlines, accept uniform tariff for aviation charges, and open their airspace benevolently to other airlines in Africa.