A common theme across the African air transport sector over the past two decades has been calls to unlock the continent's growth potential through opening up its skies.
But various efforts to reignite the stalled implementation of African liberalisation, as envisaged under the Yamoussoukro Decision, have made little headway. Small wonder that as World Routes made its debut on the African stage in Durban last month, the lack of progress on open skies continued to dominate the agenda.
Speaking at the Strategy Summit held during the event, World Travel and Tourism Council chief executive David Scowsill underscored the continent's potential, noting African tourism's forecast growth of 4.9% per annum over the next decade. That is the same rate as Asia-Pacific, the industry's benchmark for growth, and ahead of the world average of 3.9%.
"The world has been mostly focused on Asia as the fastest-growing region, but our figures clearly demonstrate that Africa is ripe for investment and development in travel and tourism," says Scowsill.
He says that to realise the potential the continent offers for travel and tourism, African countries must collectively focus on areas including expansion of investment in tourism infrastructure, security, common visas – and most importantly – improved connectivity and liberalisation policies.
"The single biggest opportunity for Africa is to fully liberalise its air travel," says Scowsill. "Open-skies policies have an extraordinary beneficial impact for consumers. Africa is such a vast continent that liberalisation of aviation can really, really change the game here."
South Africa's tourism minister, Derek Hanekom, notes: "Six of the world's 10 fastest-growing economies are located in Africa, making the continent the next frontier of global economic development."
But he points to the limited intra-African connectivity. "This is reflected in the schedules of our national airlines, who tend to fly frequently to destinations outside the continent, especially Europe, with far fewer flights to African destinations. Poor [intra-African] connectivity is costly."
While he says restrictive aviation policies in the region are changing, Hanekom believes the pace of change "does not match the desire and readiness" for trade and investment from African countries themselves.
Ethiopian Airlines chief executive Tewolde GebreMariam urges the African Union to maintain its drive to liberalise the continent's air transport system and adopt a Europe-style approach to bilateral negotiations. He says the continent's airline association AFRAA has been working with the African Union on two major initiatives this year.
"The first one is full implementation of the YD [Yamoussoukro Decision liberalisation framework] which is to open up African skies for African carriers. But this isn't going to be enough. We've told the African Union that it should act as a bloc like the European Union."
GebreMariam says that adopting a similar bloc-negotiation approach would allow an African country without its own national or designated carrier to designate a neighbour's airline to fly on its behalf.
Meanwhile, the Ethiopian boss warns that with just three or four major African airlines across the continent, the market is not mature enough yet to consider consolidation along the lines seen in Europe and North America.
"Consolidation [in Africa] makes sense in terms of reducing capacity where there is excess capacity," says GebreMariam. "But we have to get ready [by ensuring] that any carrier can operate within Africa without any restrictions so that the intra-African connectivity can develop to support the economic growth in the continent."
He says that this should ensure that African airlines are able to establish themselves financially: "By then, we will have very strong global carriers in Africa which are able to compete with the rest of the world."
Ethiopian Airlines has been fast expanding and is relatively healthily placed. Profits have risen each year since 2011. The airline has more than doubled passenger numbers to over six million since 2008 and revamped its fleet. The introduction of new aircraft, including 13 Boeing 787s, has taken the average age of its fleet to around seven year, Flightglobal's Fleet Analyzer database shows.
But its fortunes have not been matched at sub-Saharan Africa's other two biggest carriers, Kenya Airways and South African Airways. The latter two carriers continue to work through restructuring. While that is familiar territory for SAA, which has posted losses over the last four years, Kenya Airways had been modestly profitable until 2012 before running into financial troubles.
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But all the while, the potential of the African market is not lost on others. Notably, European operators and more recently Gulf carriers have made big inroads into the African market.
Analysis of Innovata schedules shows the extent to which European and Gulf carriers have developed a presence in the region. Six of the 10 biggest airlines by seats in September between Africa and Europe are from the latter. These figures include North Africa, where Morocco, for example, has open skies in place with the European Union.
Gulf carriers – notably Emirates – hold sway on routes between Africa and the Middle East. The big three Gulf carriers, together with Emirates' low-cost sister Flydubai, account for just over half the seat capacity in the market.
African carriers do, though, hold a stronger position in the formative Africa-Asia market – Ethiopian Airlines and Kenya Airways accounting for more than half the capacity. But this market remains far more smaller, covering just 40 routes, compared with nearly 300 Africa-Middle East connections and over 1,000 routes linking the continent to Europe. And with strong Chinese investment in Africa, Air China's launch this month of flights from Beijing to Johannesburg could be the first of many.
Air China will replace its Star Alliance partner SAA on the route – the latter having dropped its loss-making flight earlier this year as part of its network overhaul. SAA will codeshare on the new Air China flights, a similar approach it has taken in replacing its Mumbai service with codeshares to India through Abu Dhabi with Etihad Airways and Indian partner Jet Airways.
SAA is instead putting more focus on intra-African connectivity. But development of intra-African services is made more complex by the lack of open skies within the continent. This not only hits network carrier ambitions, but has also adds complexity in expanding low-cost carrier brands beyond single markets. Carriers such as Fastjet are having to stitch together separate operations, bringing complexity and costly delays in launching into new markets.
All of which leaves the region's airlines still struggling to fulfill their potential. That pressure is compounded by both market factors, including overcapacity in some key markets and economic woes – evident in recent financial updates from Comair and Fastjet.
The South African carrier, which operates British Airways franchise flights as well as low-cost brand Kulula, says that while the "unprecedented collapse in the oil price" brought revenue growth in the first half, this was all but wiped out by the arrival of two new competitors and "very aggressive – but more-than-likely unsustainable – pricing".
That comes after the entry of two new players into the South African market, Skywise and FlySafair, in the last year. Notably the two carriers have joined the fray on the Cape Town-Johannesburg trunk route.
Boss of rival low-cost unit Mango – and, until recently, acting chief executive of its parent SAA – Nico Bezuidenhout acknowledges the economic and competitive challenges. But he believes his airline – which will disclose another profit for its year just completed – is well positioned to ride out the competition as it has done previously. "The economy is not very strong at the moment," he says, before adding that, in such a climate, "I'm happy to be sitting on the load factors I'm sitting on."
Fastjet, meanwhile, on top delays in launching Zambian and Zimbabwean operations, cites economic issues for deeper-than-expected losses this year. "African currencies have lost considerable value against the US dollar which, combined with a worldwide reduction in commodity prices, has caused an economic downturn in both Tanzania and Zambia," explains Fastjet chief executive Ed Winter.
So for many African carriers the financial outlook remains tough. Chris Zweigenthal, chief executive of regional trade body the Airlines Association of Southern Africa, says that having overcome the devastating social and economic impact of the West African Ebola outbreak, and with lower fuel prices for all but a few oil-producing African countries, 2015 should be a bumper year for airlines.
"But it's not going according to plan," he says. "Economic uncertainty characterised by labour disputes, electricity shortages, weakened currencies in some markets, a rampant US dollar in others such as Zimbabwe, and more recently the downturn in China's fortunes, have pushed those of the airlines and of the region back over the horizon."
And while African transport and aviation ministers reaffirmed their governments' commitments to opening up their markets to other African carriers earlier this year in Pretoria, Zweigenthal calls for more action.
"All this is well and good. But year in year out for the past quarter of a century we've attended talk shops where speaker after speaker lament the weak performance and lost opportunities while policymakers express renewed commitments to opening up markets and connectivity across the region. AASA and its members are appealing to governments to find the political will to make the necessary changes," he says.
"After all this time, surely it's time to walk the walk?"
Source: Cirium Dashboard
