Do or Die – African Carriers Have to Decide

One topic dominated the 47th Annual General Assembly of the African Airlines Association – AFRAA in Brazzaville on 8-10 November: how to best open up the skies spanning a continent of one billion inhabitants. Only then, passenger and cargo carriers based there will have a future, that was the main conclusion of the conference.

Group photo with President Denis Sassou N’Guesso of the Republic of Congo (center) and AFRAA Chief Fatima Beyina-Moussa, surrounded by officials and industry leaders that attended the Brazzaville-held congress of African airlines  -  picture: AFRAA
Group photo with President Denis Sassou N’Guesso of the Republic of Congo (center) and AFRAA Chief Fatima Beyina-Moussa, surrounded by officials and industry leaders that attended the Brazzaville-held congress of African airlines - picture: AFRAA

A wealth of productive ideas, many suggestions as to what must be done to foster a cooperative climate among African carriers to weather the international storms and an array of visionary concepts to fundamentally change the industry's situation to the better were produced at the meeting last week in the capital of the Republic of Congo.
Was it worth attending AFRAA? Definitely yes. Will the big dreams unveiled at the conference lead to big action? Question mark! Only time will tell.
But time isn't something most African Airlines have got any more. The sector accounts for only three percent of the global air traffic with the tendency pointing further downwards. A shameful situation for a continent of one billion-plus inhabitants. If nothing is fundamentally changed, the airlines will be cannibalized by non-African carriers, predominantly the rapidly expanding Gulf players, becoming their appendix or – at worst – vanish from the landscape. 
So what concepts did the industry leaders deliver to the almost 500 participants of the AFRAA meeting in Brazzaville, in order to escape this fate and enable local passenger and cargo airlines perspectives for not only their survival but growth on the long run? A lot!

“We don’t need airlines to survive, we need airlines that grow,” urged Rwandair’s Chairman and AFRAA moderator Girma Wake  -  courtesy Africa Hotel Investment   -  picture hs
“We don’t need airlines to survive, we need airlines that grow,” urged Rwandair’s Chairman and AFRAA moderator Girma Wake - courtesy Africa Hotel Investment - picture hs

Liberalization is key
Above all stood the liberalization theme. This magic word was mentioned repeatedly and vigorously by almost all AFRAA panelists. Like moderator Girma Wake, the former CEO of Ethiopian Airlines and Chairman of the Board of Rwandair. By liberalizing air traffic only in one dozen of the 53 African states, around 155,000 jobs will be created, an amount of 1.3 billion dollars could be added to the 12 nations’ GDP, and passenger numbers along with cargo traffic would increase substantially, outlined Girma. Today, however, most African states still oppose any open skies approach. Instead, they follow an outdated protectionist policy that dates back to the days of independence when national airlines were built. State protectionism creates a comfort zone making carriers lethargic and immobile. Concluded Girma: “Because of decades of state protectionism a number of big African airlines have meanwhile become small.”
Nowadays, however, the ice seems to be broken since 11 states have firmly committed to the unconditional implementation of the Yamoussoukro Decision as of January 2017 – 11 out of 46 AFRAA registered countries. At least it’s a beginning! Next to come, announced Elijah Chingosho, AFRAA’s Secretary General, is a masterplan to establish a single African transport market.

Secretary General of the African Civil Aviation Commission Iyabo Sosina found very clear words  -  photo hs
Secretary General of the African Civil Aviation Commission Iyabo Sosina found very clear words - photo hs

Only then intra-African connectivity will be improved and both airfares and cargo rates on domestic routes will sharply drop. Touching this issue, Iyabo Sosina, Secretary General of the African Civil Aviation Commission referred to the merit of a liberalized market environment experienced by North American and European carriers on their home turf. “They have relaxed or abolished capacity and frequency restrictions leading to more competition among and between airlines and the lowering of costs, while travelers have benefitted from lower fares and better services.” As consequence, air travel was stimulated and cargo transport went up. 
“What we need is a fundamental cultural change,” exclaimed Edmund Makona, CEO of Air Zimbabwe. Only then, transformation of the aviation sector will be possible, he said.


Lowering costs, increasing earnings
However, implementing the Yamoussoukro Decision and fostering an open skies policy is only one side of the coin. The other seems to be just as difficult: lowering the mountainous costs of airlines. High fuel prices is one of the main cost driver African airlines have to shoulder, accounting for 30 percent of their expenditures. This burden has to be lowered, enabling carriers to earn money for investing in future growth, demanded Tony Tyler, IATA’s Director General and CEO in his address to the AFRAA delegates.

Average margins below one percent are way too little, said IATA Chief Tony Tyler  -  picture hs
Average margins below one percent are way too little, said IATA Chief Tony Tyler - picture hs

A jumble of taxes
But high jet fuel taxation is not all. In addition, there are passenger taxes, solidarity taxes, tourism taxes, fiscal stamp taxes, value-added taxes, sales taxes, and transportation taxes. Stated Tyler: “The jet fuel prices together with all the above mentioned taxes adds up to a costly burden on African airlines. And that’s before we get to the issue of charges, which at some African airports are among the highest in the world.” 
No wonder that many carriers are operating at margins that are too little to live but high enough to enable them only a marginal existence. “Average margins of only 0.8 percent are the lowest of any region of the world,” said Tyler.
The IATA helmsman rubbed further salt into the many open wounds of Africa’s aviation sector, urging airlines to adopt to international security standards and weigh their expenditures cautiously, preventing investments in prestigious airport projects that are of no real benefit for the industry.


Fatima prefers the cooperative approach
For Fatima Beyina-Moussa, CEO of the Brazzaville-headquartered carrier ECAir and President of AFRAA the answer for an upswing of aviation on her continent lies in competition and cooperation: competition based on level playing field conditions, cooperation between smaller and larger airlines to the benefit of each of them. “As ECAir we have negotiated commercial agreements with a number of other African airlines and will soon sign a code-share agreement with South African Airlines.” According to Fatima, this will create synergies and offer passengers and cargo players better intra-continental connectivity which at this point of time are still in a state of infancy.

Fatima Beyina-Moussa  heads Congolese carrier ECAir and presided over AFRAA until last week  -  photo hs
Fatima Beyina-Moussa heads Congolese carrier ECAir and presided over AFRAA until last week - photo hs

Will Yamoussoukro lead to the Promised Land?
Henok Teferra, Chief of Lomé-based Asky Airlines strongly supported this approach, demanding an alignment of airlines, airports, and national civil aviation authorities to pave the way for seamless regional cross-border traffic. Only then hubs and sub hubs can be set up by airlines, enabling tightly knit trans-national networks, feeder services and improved connectivity.
If this will be an effective protective shield avoiding the cannibalization of African aviation by massively state aided and thus capital-rich non-African carriers remains to be seen.
The internationally much respected industry veteran Girma Wake concluded by saying: “Yamoussoukro is not leading us into the Promised Land but it’s an important step in the right direction for African airlines.”

Air Zimbabwe is hosting next year’s AFRAA
A final recommendation for African carriers and decision makers came from IATA Chief Tony Tyler: “I’m sure I speak for all of us in urging African nations to adhere to global best practices in order to improve their competitiveness and give their airlines a fighting chance.”
The 48th AFRAA General Assembly will be hosted by Air Zimbabwe and held from 20 -22 November, 2016 in Victoria Falls under the direction of Edmund Makona who succeeds Fatima Beyina-Moussa as head of AFRAA.


Heiner Siegmund

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