Expert: Small fragmented African airlines will continue making losses

Participants at the Aviation Africa Summit that kicked off at Kigali Convention Centre yesterday. Village Urugwiro.

Like it has been the case in previous years, the global aviation industry is expected to register a growth of profits. In 2019, global profits are estimated at about $35 billion with the exception of Africa.

The African continent’s aviation industry, on the other hand, is projected to register a loss of about $300 million according to statistics from the International Air Transport Association (IATA).

The losses, however, are not a shock, or surprising given the status of the sector on the continent and its approaches.

Among the reasons that have led to this is continued operation of small fragmented airlines which often render them unprofitable.

For instance, the African aviation sector only receives about 3.1 per cent of all passenger movements and about 3.4 per cent of all total revenues.

This, according to the chief executive of Qatar Airways Akbar Al Bakar, is largely due to the fragmented nature of African airline operations.

With many airlines on the continent working independently and often against each other, policymakers and governments have been accused of hindering the growth in the sector.

Although Africa makes up 16 per cent of the world’s population, it only captures approximately 2.5 per cent of the world’s total number of air travelers.

“Despite an average GDP growth of 4 per cent in the past five years, only 1.6 per cent of the global freight tonnage was carried through Africa in 2017.

Africa’s performance does not reflect the potential of the continent. For that to be realized, there is need to support regional initiatives to improve  Africa’s position, human capital, trade opportunities and connectivity, tourism potential,” Baker, who is also the current chairperson of IATA, said.

He added that among the biggest bottlenecks was lack of liberal policies which have made it expensive and difficult for airlines to expand into regional markets.

He also noted that negative competition, as opposed to cooperation, has further hurt the profitability of African airlines.

Rather than adopt negative competition practices, he said that it would make more sense to work in partnership especially when engaging suppliers of the aviation sector.

Global share

“Joining forces to obtain better prices from suppliers will have a direct positive effect on the bottom line and long-term profitability,” he said.

Lack of cooperation and integration have also seen African airlines lose a significant share of the market to global airlines.

“We also need to take a closer look at the current market environment which is dominated by a few airlines and protected hubs. When compared to the global aviation industry, Africa represents only 2.5 per cent of total passenger movements and just fewer than three per cent of total revenues,” Baker said.

Statistics show that even a majority of flights within the continent are by foreign airlines.

In 2018, approximately 220,000 passengers were carried to, from and within Africa, generating almost 34 billion US dollars in revenue.

Some 55 per cent of these passengers originated or ended their journey outside Africa, and interestingly accounted for 74 per cent of the total revenues. This means that intra-African air services currently only contribute to 26% of the total industry revenue.

Going forward, among the aspects that could see a turnaround of the sector would be the investment in hubs within the continent that would support the growth of African airlines.

That would also ready the number of African airports that can support international traffic and growing demand for logistics.

IATA statistics show that currently, 10 airlines operating to and from a total of 7 hubs on the continent have captured over 80 per cent of the African market, both in terms of passenger movement and revenues.

This among other things shows the negative impact of the dominance of a few players.

With an estimated 320 international airports in Africa, 10 airports in 7 countries account for 49 per cent of total seat capacity and 50 per cent of the total revenues of the entire aviation market to and from Africa.

Among the opportunities to improve the conditions, he said, include emergence of medium-sized airlines in under-served markets as well as the development of medium-sized super-connecting hubs adopting the latest airport.

Baker also called on more African countries to join and implement the Single African Air Transport Market (SAATM) initiative that was launched by the African Union in January last year.

The Minister for Infrastructure, Claver Gatete, said that there is a big opportunity for Rwanda and African countries with an increased demand for air services.

“75 per cent of international tourists travel by air while about 35 per cent of all trade (with a value of over 6 trillion) is supported by air,” he said.

He said that with the African continental Free Trade area agreement set for implementation, efficient air transport linking the continent will be further on demand.

According to Zoureatou Tchakondo, the Minister of Infrastructure and Transport of Togo, currently, 28 African countries are part of the Single African Air Transport Market (SAATM) initiative.

If effected, she said that it will reduce long-standing challenges, create new commercial links and reduce unnecessary costs imposed on African operators.

editorial@newtimesrwanda.com

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