African airline industry weakest

 

One exception to this story has been Ethiopian Airlines. Its net profit in 2018/19 financial year stood at $400 million. All others including Nigerian carriers are loss making ventures, further signposting the precarious situation of the continent’s airline industry writes WOLE SHADARE

Dire straits

African airlines are in dire straits and it does not take extra lessons to discover that the carriers in this part of the world are sick and need more than surgical operations to bring them back to life.

Many African countries restrict their airspaces to prop up state-owned air carriers. That’s why it is notoriously difficult for private airlines to succeed in Africa. They are quite literally de-winged before they’ve even had a chance to explore the skies due to protectionism, high taxes, and restrictive regulations.

But these national airlines offer little to be proud of. The majority of state-owned airlines have failed, not being able to make enough revenue to cover their costs. Today, there are only three major sub-Saharan intercontinental airlines: Kenya Airways, Ethiopian Airlines, and South African Airways.

Ethiopian, an exception

The only profitable one is Ethiopian Airlines (it’s not managed by the government), but the others incur hundreds of millions in losses every year, and survive on government bailouts.

Besides the overwhelming evidence that state-owned airlines waste resources, costing the continent millions of jobs and billions in revenue, the dream just won’t die. There are initiatives to re-boost defunct carriers across the continent, including Nigeria, Uganda and Zambia. Uganda has already refloated Ugandan Air.

The worst part of the disastrous state of African skies is that for the last 50 years, there have been multilateral agreements in place that could transform aviation on the continent. They only need implementation.

Unforced errors

Fifty years ago, the newly independent African nations founded the African Airlines Association (AFRAA).

Created to facilitate the integration of African skies and make African airlines more globally competitive, AFRAA is no closer to that goal today than it was in 1968. African governments just can’t seem to be able to stop getting in their own way.

Indeed, African politicians are particularly skilled at attending summits on the urgent need for freedom in aviation, while having no will to implement them. In 1988, 20 years after the creation of AAFRA, African states signed the Yamoussoukro Decision, a multilateral agreement with 44 signatories, to liberate African skies. In 2018, this agreement has not yet been implemented.

Penultimate year, the Yamoussoukro decision was replaced by yet another agreement that will likely not be implemented, the so-called Single African Air Transport Market (SAATM). Launched in January 2018, SAATM has the same noble goals of opening up Africa’s skies. Except this time, instead of the 44 signatories from 30 years ago, only 23 states bothered to make the commitment.

Role of air transport

Air transport plays a critical role in facilitating business, international trade and tourism. When governments regulate airline industries to buttress national carriers, private sector innovation is hampered.

In African skies, safety is subpar, sometimes deadly, routes are circuitous—one often has to fly through Europe or the Middle East just to get from one African city to the next, fares are expensive, and airport landing costs are incredibly high.

Africa as a whole only has about two per cent  of global passenger traffic. Regulations might prop up national carriers and buttress some misguided sense of national pride, but they tear down African economies.

Africa’s market is controlled not by Africa but foreign airlines. Many years before now, the market control was even at 50-50 percentage ration.

 

 

BA, Emirates dominate continent’s route

When it comes to generating revenue in Africa’s airspace, global carriers are the biggest winners with only two African airlines in the top 10 most lucrative air routes in Africa.

Topping the list was Emirates, whose flights to cities including Johannesburg, Cairo and Cape Town earned it over $830 million between April 2018 and March 2019.

British Airways, which runs the most flights in the world’s only billion-dollar route, earned almost half a billion dollars in its annual flights to South Africa’s major urban areas.

Connections to West Africa appeared only once in the list with Air France’s Abidjan-Paris ranking $175 million.

Conspicuously missing from the list was Ethiopian Airlines, Africa’s biggest carrier. The state owned airline is not just the largest by passengers and number of fleet, but by revenue and profit too.

Thanks to major political reforms and relaxed visa rules, Ethiopia last year overtook Dubai as a transfer hub for long-haul travel to sub-Saharan Africa too.

There are thought to be up to 100 African airlines, all competing for the same market. This is dominated by international carriers, accounting for 80 per cent of passenger numbers.

Kinshasa, the capital of the Democratic Republic of the Congo, is one of the biggest cities in Africa, with an estimated population larger than London and a skyline that peers over the wide, snaking Congo River.

But if a traveler wants to go from there to Lagos, Nigeria’s commercial capital and Africa’s largest metropolis, it’s impossible to fly non-stop. Roughly 1,100 miles separate the two megacities—about the same distance as New York to Minneapolis.

There are no direct flights. Instead, a traveler will need to change planes at least once and pay a minimum of $1,200. There’s a good chance the journey will take well over 12 hours.

Poor connectivity, low load factor

Across Africa, the situation is similar. Commercial flights are infrequent, expensive, and circuitous. To get from one country to another, an African traveler may have to go thousands of miles out of their way and transfer through the Middle East or Europe.

Consulting Director, Technical and Operations, African Airlines Association (AFRAA), Mr. Gaoussou Konate, in his remarks at the just concluded MRO Africa summit held in Addis Ababa, Ethiopia, attributed the struggle of the continent’s carriers for market share, stressing that African airlines charge less US Cents per passenger-kilometer than European air carriers, on equivalent travel distances.

Adding the applicable charges and taxes, the AFRAA chief stated that fares to be paid by passenger become double in Africa compared to Europe; yet, African operators’ cost of the availability seat-kilometer is twice expensive compared to European airlines.

Another reason for the anomaly, he said, was the fact that airlines from the region operate with an average load factor lower by 10 percentage points compared to the world average; while European airlines’ load factors are higher than the industry average.

His words: “Consequently, flight operations are profitable for European airlines and African airlines have made losses year after year since 2010.

“Furthermore, European middle class citizens with high per capita income and lower fares undertake 26 trips per year while their African counterparts with lower income and higher fares can afford only one trip per year.”

Last line

Aviation is prone to the most minute situation in the economy, ranging from weather, politics and others. Governments need to come to their aid as they are of systemic importance to the continent’s economy.

 

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