Africa’s empty skies aided by low propensity to fly

This basic concept of own-price elasticity of air travel in different market segments suggests that if air fares are reduced on Nigeria’s domestic routes, demand for air travel is likely to increase, since these routes are short-haul, and the prohibitive costs of air travel exclude several potential consumers of the service, writes WOLE SHADARE

.

The disclosure by the International Air Transport Association (IATA) last week, lamenting the high cost of flying’s disruptive impact on the African aviation industry and the bottom line of the continent’s carriers, has brought to the fore how the low propensity to fly hampers the continent’s airlines. It added that low propensity to the magnitude of the disruption harms air travel.

This is actually true considering that despite the potential air travel can bring to bear on the continent, the clearing house for over 300 airlines is equally worried that about 80 per cent of Africa’s routes are unserved or at best served by non-African carriers dominated by European and Middle East airlines.

Unified regulatory body

Unlike in regions like Europe, which have a single aviation market, Africa lacks a unified regulatory body to oversee air travel, leading to inconsistent and volatile tax rates and fare structures across different countries.

Various fees and tax schemes also contribute to big-ticket prices. Taxes on fuel in some countries are more than twice the global average.

The pre-tax base price of a KLM ticket from Freetown, Sierra Leone, to London is roughly $350. But several hundred dollars in fees and taxes are added by the time it’s purchased by the passenger, pushing the sticker price up to $1000.

The largely empty African skies have a tangible economic impact on the people below: the economies of the planet’s poorest continent are missing out on more than $1 billion in potential growth.

Many governments prioritise protecting their national carriers, often through restrictive bilateral air service agreements and protectionist policies, which hinder competition and open skies initiatives.

In addition to air travel challenges, many African countries still impose visa requirements that complicate movement for African citizens, even as some nations work to implement free movement protocols.

Seamless connectivity

These issues result in expensive intra-African flights, which are a major obstacle to trade, business, and tourism growth across the continent.

The lack of seamless connectivity means that African economies are missing out on significant economic opportunities that could arise from easier movement of people and goods.

Most Africans don’t have disposable income or savings for travel. Those who work in the cities are only able to save to celebrate holidays with their families in the villages. There is also no tradition of travelling, even within the countries.

Huge population, meagre traffic

What affects the inability for Africans to fly is the same drawback that has held many Nigerians down and encumbered them from taking to air travel amid the burgeoning over 240 million population.

The Nigerian domestic market is robust and has elicited wide acceptance by many as one of the biggest in Africa and unarguably the biggest in West Africa, propelled majorly by a huge population.

The less than ten per cent of 240 million people who travel by air in Nigeria is helped by fear of insecurity, coupled with bad roads in some parts of the country, despite the skyrocketing cost of air transport and the incessant flight delays and cancellations that have dogged the sector lately.

Price elasticity suggests that if airfares are reduced on Nigeria’s domestic routes, demand for air travel will likely increase since these routes are short-haul. Nigeria has the lowest air travel propensity among peer economies like Venezuela and Egypt with similar population sizes.

Consequently, the high fares on many of the domestic routes have made road transportation the option for many who cannot afford airline tickets, despite the dangers on the roads.

While the country’s domestic market is growing and has potential for further growth for the indigenous airlines, the same cannot be said for the international market, as many of the domestic carriers have been dwarfed by foreign mega carriers even in the environment they own.

Foreign airline dominance

This is not limited to Nigeria alone. Foreign airlines are spreading their wings to Africa, which is regarded as the last frontier for domination by many of the mega carriers.

Lack of strong interconnectivity, despite being a signatory to the African Union (AU) policy of the Single African Air Transport Market (SAATM) and other initiatives before now, has shown that virtually all African airlines, except Ethiopian Airlines, have the capacity and capability to compete.

It even speaks volumes that many of the cities in Africa have to be connected by travelling to Europe or the Middle East before connecting to another African nation.

One African nation that appears to be eager to tap its air power is Ethiopia. The state-owned airline is the only profitable African carrier and has some of the best reach across the continent. Ethiopia is also investing heavily in a massive new airport, as well as an expansion of the current hub outside of Addis Ababa.

Not a few believe that it is easier in some cases to travel from Africa to Europe than from one destination to another in Africa. That says so much about how poorly Africa is connected by air.

Promise

Many Nigerian carriers like Ibom Air, ValueJet and Overland Airways have repeatedly stated that they should be counted out of international routes outside of West and Central Africa.

These airlines recently, at different fora, said there was a huge market in Nigeria’s domestic aviation market and the regional market.

They showed contentment with what these routes in West Africa and Nigeria offer them. They said it was a sheer waste of resources and amounts to fetching water into a basket by venturing into routes like London, Frankfurt, Paris, Dubai, and the US because of the huge costs the destinations offer.

Nigerian carriers are highly constrained and have so many things stacked against them, including low-level finance to acquire many of the aircraft that would help them compete with big European carriers.

Experts’ views

The Chief Executive Officer of Belujane Konsult, Mr. Chris Azu Aligbe, explained that Nigeria was large enough that it could have about three formidable airlines in the global space, but lamented that a situation where “we don’t have an airline of note is something very much uncalled for.

To think that some people still believe that we should not have a national carrier baffles me”.

“But the fact of the matter is that foreign airlines that are operating have left us with not much hope in terms of the progress the country is making in the airline sub-sector. Our airlines need assistance; they need some help, but the fact of the matter is that they have not shown that we can move forward. They have not demonstrated capacity. When you say capacity, people think of the number of aircraft. It’s not the number of aircraft.’

“Capacity in the industry is multidimensional. Even managerial capacity and managerial competence is critical to it because even if you have five aircraft or ten aircraft, the way you manage those aircraft and keep to schedule and everything is enough to show that you are on the incline.”

“After all, Ibom Air does not have too many aircraft, but Nigerians believe that so far, so good, it is better managed. Overland is a niche carrier, but it has stayed firm in its niche, showing signs of grappling with the challenge of managing an airline. ValueJet is showing promising signs.”

“We know that aviation is a driver of interregional trade,” said Adefolake Adeyeye, a research fellow at NTU-SBF Centre for African Studies in Singapore. “We know that it’s very useful for landlocked developing countries.”

Last line

As the continent looks towards the future, it’s expected to undergo a massive population boom: By 2050, Africa’s population of working-age people will triple to 1.25 billion, and its middle class is expected to grow significantly. Nigeria is projected to overtake the United States as the world’s third most populous country.

Google+