Are African airlines’ failures aiding foreign dominance?

Are African airlines failures aiding foreign dominanceAfrican countries’ failure to manage their air transportation properly has opened the door to Gulf airlines such as Emirates, Etihad and Qatar, writes Aviation Editor, WOLE SHADARE.

Africa’s three major hubs

Each of Africa’s three major airport hubs is associated with a large, efficient state-owned carrier: South African Airlines in Johannesburg, Ethiopian Airlines in Addis Ababa and Kenya Airways in Nairobi. Seventeen other countries of sub-Saharan Africa continue to operate weak state-owned carriers in very small, protected markets. Those carriers survive, thanks to substantial government subsidies. They often represent a considerable drain on public finances. An additional 25 countries have scrapped their flag carriers in favour of private operators. The remaining three have no reported operators of their own. The combined effect of airline failures and regulatory restrictions on competition has resulted in increase on concentration, both in the total market and on individual routes. By early 2008, 15 airlines accounted for 59 per cent of all seat capacity offered in Africa. Sixteen of the top 60 routes and 66 of the total of 206 routes, have only one carrier. Ethiopian Airlines and, to a lesser extent, Kenya Airlines, have contributed to this concentration by developing new routes where they are the sole carrier.

Opportunity for foreign carriers

The lack of competition on those routes has paved the way for gulf and European airlines to make a strong inroad and contribute to lack of retention of foreign exchange by the continent’s airlines. This has equally contributed to relatively high prices: air travel within Africa is considerably more expensive per mile flown than to intercontinental travel, especially on routes of less than 2,000 nautical miles. Moreover, aircraft landing charges are generally high by international standards, partly because of the absence of nonflight revenues from airport concessions. Head of sales for Airbus Africa and Middle East, Hadi Akoum disclosed that African countries’ failure to manage their air transportation properly has opened the door to Gulf airlines such as Emirates, Etihad and Qatar Gulf airlines. Akoum further stated that these carriers are expanding their African routes but also positioning themselves as international hubs for Africa, adding that it means international travelers fly to and from Africa through Dubai, Abu Dhabi and Qatar. That translates not only into more traffic for Gulf airlines, but also more business for their tourism industries and economies.

Experts’ view

Experts told New Telegraph that emerging markets are expected to drive air traffic growth and they’re forecast to grow six per cent annually, compared to four per cent for mature markets. Right now, emerging markets account for 39 per cent of air passenger trips and also 39 per cent of aircraft in service. By 2032, Airbus says these shares will grow to 54 per cent and 51 per cent respectively. They noted that some African airlines have recognised the challenge, with South Africa Airways recognised airline for Southern Africa. Ethiopian Airways is making a strong pitch for East Africa. Kenya Airways is also strong in that region, although recent terrorist attacks undermined its position. Elsewhere, particularly in West Africa, the market is wide open to whoever wants it the most. Nigeria, despite its growing economy and huge population, has shown it’s unable to sustain a reliable, profitable airline. International Air Transport Association (IATA) figures released this week show that Gulf airlines aren’t just picking up African passenger traffic. Airfreight carried by African airlines grew 2.9 percent in April, compared to 1.1 percent the previous year.

Middle Eastern carriers, however, reported an 8.7-percent growth in demand for airfreight and 8.1-per cent growth in capacity. IATA said: “Carriers are benefiting from the upswing in developed economies and increased volumes from emerging markets in Asia and Africa. The major problems of air transport in Africa could be described as self-inflicted. Countries in Africa refused to liberalise their skies for free entry and exit for African airlines. Policies enunciated and implemented by African governments tend not to augur well for business and this affect profitability for African airlines.

Policy somersault

There is always policy summersault in many countries, whereby policies change as new aviation ministers are appointed. Most policies are not followed through, but changed midway. According to World Bank report on air transport in Africa, the continent is home to 12 per cent of the world’s people, but it accounts for less than one per cent of the global air service market. Part of the reasons for Africa’s under-served status, according to World Bank study, is that it refused to open its skies by implementing the Yamoussoukro Decision, which was adopted by African states in 1988 aimed at liberalising the continent’s airspace, as many African countries restrict their air services markets to protect the share held by state-owned air carriers that were established in the 1960s, many of which had gone under. Chief Executive of Ethiopian Airways, Tewolde GabreMariam, said bloc to bloc negotiation is there to make competitive landing scale level field for everybody, adding that because of lack of these two policy instrument; first one is the Yamoussoukro Declaration and the second one is unfair competition in the continent “and the result of it is that 80 per cent of the intercontinental traffic between Africa and the rest of the world is carried by none African airlines.” He lamented that only 20 per cent of traffic is carried by African airlines, adding that this has led to lopsidedness and should be corrected. “To correct this imbalance and unfair competition is to enact those instruments that I explained before. I sincerely wish that Nigeria would lead the change because Nigeria is a big aviation market, a big country, the most populous country, the largest economy in the continent. Nigeria has a lot of ways to drive this initiative.”

http://newtelegraphonline.com/are-african-airlines-failures-aiding-foreign-dominance/

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