Home » Aviation: Paucity of fund, increased taxation, others impede air connectivity in Africa and the realisation of SAATM

Aviation: Paucity of fund, increased taxation, others impede air connectivity in Africa and the realisation of SAATM

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With the launch of Single African Air Transport Market (SAATM) in January 2018, it was expected that the policy would address air connectivity in the African air space and unlock air travel in the continent. But the object of the policy is far from being achieved due to myriad of challenges bedevilling the industry in Africa.

According to a report by Chinedu Eze published on thisdaylive.com, when the Single African Air Transport Market (SAATM) was launched in January 2018, it was enthusiastically embraced as the key that would unlock air travel in Africa.

Although 33 countries in the continent are signatories to the project, industry observers are not optimistic that many countries in Africa would open their airspace for a single air market in the continent.

READ: Aviation: Why so many African Airlines fail within five years of operation- Sean Mendis

Commercial aviation expert and former Chief Operating Officer, African World Airlines (AWA), Sean Mendis who spoke to THISDAY on air connectivity in the continent, identified many impediments that would frustrate the success of SAATM.

He noted that currently most airlines in Africa, especially in the West, Central and South Africa exist precariously because of many factors. These, include the inability to access funds.
So, without strong and efficient airlines, these carriers would not be able to maximise the benefits of the single sky offered by SAATM, he said.

“The lack of access to local capital on reasonable terms means that most African airlines are funded by entities that lack expertise in aviation and often have different or even conflicting priorities for their investments (e.g. governments, multi-industry conglomerates, high net worth individuals, etc.). “This variable focus is a big reason why so many African airlines fail within their first five years,” he said.

Mendis noted that African governments tend to view air transport as a luxury and hence a soft target for increased taxation, high user fees, and subsidies to failing national carriers, noting that their focus should instead be on liberalisation and infrastructure development to encourage investment from the more agile private sector.

“Growth in African air travel demand will come from the bottom end of the market; primarily newly empowered middle class who have increased disposable income. The prototypical modern African consumer is young, globalised, and comfortable with e-commerce.

READ: Aviation: Former Africa World Airlines’ COO Sean Mendis reveals ‘Top 5 Trends’ in Ghana’s Air Travel in 2021

“They identify with safety, reliability, and affordability (in that order) as brand values from their preferred carriers. Airlines that can create a legitimate alternative to inefficient ground transport will be the ones who are successful.

“Too many African airlines experience early success and become greedy, resulting in unrealistic expansion plans that eventually lead to failure. Success must stop being defined as running half-empty widebodies to London, Dubai, or Paris.

“There will always be a niche to partner with larger international carriers for the ‘last-mile delivery’ within a home region at the early stages of growth. Profitability must be more important than prestige,” he said.

Mendis acknowledged that airfares in Africa are relatively high, which discourages high passenger traffic and attributed it to the high cost of operation and taxes.

“A big reason why airfares in Africa are high is that the infrastructure doesn’t permit utility of the assets as much as it does elsewhere.

“Whether it is security concerns or lack of lighting, etc.; most airlines have only a 12-hour window from sunrise to sunset in which they can reasonably fly most of their aircraft and as a result the cost of owning the aircraft can only be spread over 50-75 per cent of the amount of hours that you can run that same aircraft in Europe or North America.

“When you add to that the general cost of basic utilities and logistics in Africa (example, backup generators due to poor electricity, the need to truck fuel from refineries instead of pipelines connecting airports, etc.) then these costs add up and make things more expensive,” he said.

Mendis noted that despite the Yamoussoukro Decision, SAATM and other initiatives, many African states have signed up to the letter, but not to the principle of liberalisation because they want to take advantage of the benefits of these single markets, but without reciprocity.

“SAATM is not a buffet – states can’t just help themselves to the juicy meat, and leave the stale rice for their counterparts. State subsidies are the most blatant form of anti-competitive activity and protectionism seen in African aviation today.

“Too many African governments continue to skew the market by throwing funds at atrociously run failed entities with bad business cases, thus crowding out private sector players and discouraging investment and innovation,” Mendis observed.

He confirmed that the charges throughout the region are high, which he attributed to the availability and cost of utility.
He added that the radar system or runway construction or air traffic control tower infrastructure costs basically the same to run whether there are five flights/day or 500 flights/day, suggesting that when the region is able to increase the volume of flight operations, it can now spread these costs over a larger base and then reduce the cost paid per operation.

“Then you see the huge subsidies that some countries are giving their national airlines. Even in the ECOWAS region Air Senegal got 68m Euro subsidy last year, Air Cote D’Ivoire got 120 million Euro over five years Rwandair is getting over 150 million Euro per year; Kenya Airways needs nearly $500 million Tanzania got $90 million with just five or six planes and Uganda lost $28 million in their first year!” Mendis disclosed.

He said establishment of more national carriers in the continent would reinforce the ant-competition already existing in the continent, as government owned airlines, ill-managed would enjoy more concessions and other incentives that would not be extended to privately owned carriers, thus setting up unequal competitive environment.

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