African airlines projected to make a profit by 2017

by Edgar Brandt

African airlines projected to make a profit by 2017

 

Dublin

While the majority of African airlines are still struggling to turn a profit, this should soon change, as projections by the International Air Transport Association (IATA) indicate that by 2017 African airlines’ combined performance will begin to show a profit. African aviation is estimated to support some 6.8 million jobs on the continent.



IATA’s vice president for Africa, Raphael Kuuchi, attributes these positive projections to growing traffic on the continent, as well as improved efficiency by African airlines.

Speaking on the sidelines of IATA annual general meeting in Dublin, Ireland, last week, Kuuchi said these factors, coupled with new technology and reducing costs in other areas, will finally see African airlines out of the red and into the black.

During a discussion with journalists from a number of African countries, Kuuchi also revealed that IATA is in discussion with the African Development Bank to sign a memorandum of understanding (MOU) that could see airlines benefit directly from the continental development agency.

“Over the years, ADB has focussed a significant amount of its resources in developing airport infrastructure and not to specifically develop African aviation or African airlines. Through the MOU we want a framework where we can advise the bank on why it is important to actually not just support the infrastructure, but to also support the airlines through funding,” said Kuuchi.

He elaborated that IATA is preparing to sign the MOU with the ADB and that the draft agreement is ready. “The reviews have been completed by legal departments of both the bank and IATA. Once the MOU has been signed it will provide IATA with a framework of collaboration with the bank on various projects,” said Kuuchi.

He further noted that flying on an airplane is not the preserve of the rich or famous, and for this reason IATA conducted a study on the benefits of aviation. The outcome of the study, conducted amongst 12 sub-Saharan African countries, indicated that 155 000 jobs could be created and US$1.3 billion added to the GDPs of these 12 countries’ economies. Five million people, who could not previously fly would be able to travel by air, because of increased competition, which could bring down airfares by up to 35 percent.

“This is a significant diversion from the previous outlook that stipulated that airlines only benefit those who can afford it. Now governments can see the benefits in terms of employment creation, GDP contribution and business facilitation. We use this [report] as a tool to engage with governments to tell them you are actually constraining aviation. Why are you over-taxing aviation, instead of making it more competitive so that you can have people move around and use that to leverage better economies of scale?” Kuuchi asked.

Commenting on the continent’s relatively high aviation taxes and charges, Kuuchi added that IATA has been engaging with governments, specifically those countries where aviation taxes are astronomically high to the extent that in some countries aviation taxes and charges are more than twice what they are on a global scale.

“We forget airports in neighbouring compete against each other. We need to be careful to make our airports more attractive. If our airports are more attractive then more airlines will come. If the cost of flying in these countries is cheaper, taxes are less and visa acquisition is easier then many more passengers will come.”

He used the example of high cargo charges in West Africa, where many traders prefer to carry their cargo as baggage and rather move it via air cargo.

“Even though it is more expensive as excess baggage, for traders the clearance process is easer. You just arrive, pick up your baggage, go to customs, declare and you go out. If it goes to the cargo side then it could take weeks to clear that same cargo. Why can’t we facilitate this process so more cargo can go through,” Kuuchi asked.

Kuuchi continued that low cost airlines play a critical role in the aviation industry, as they have a tendency to stimulate additional demand and come up with a new market segment that in most cases have not flown before.

“Low cost business is based on low price and high volumes. Most markets in African countries do not have the volumes to justify low cost carriers. Within Africa the volumes are a challenge. The second limitation for low cost airlines is a lack of agreements with neighbouring countries. However, a liberalised market would create more opportunities for these operators,” Kuuchi stated.

In terms of priorities, safety is currently the number one focus area for African aviation.

“The region’s safety record has been improving steadily in recent years, but the level is still not up to the global average. Today we have about 7.88 accidents per million sectors, which is far above the global average. And we want to see this come down to below 3. To achieve this IATA is providing training support for many African airlines,” Kuuchi explained.

He mentioned that the second area of concern for African aviation is connectivity.

“Many people who have travelled across the continent can attest to the challenges of moving around. We are urging African governments to open up their markets to allow the free movement of people and goods and enable and enhance competition amongst operators in the region.

“Fortunately at the African Union Commission Heads of State Summit [in 2015] governments agreed amongst themselves to have an understanding for states, who are ready and willing to open up their markets to do so bilaterally through the signing of a solemn declaration. To date 21 African countries have signed this declaration,” he noted.

 

 

IATA’s vice president for Africa Raphael Kuuchi

IATA’s vice president for Africa Raphael Kuuchi

 

 

 

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