- By DANIEL ONDIEKI
International coverage of Africa tends to be overly negative, focusing on war, disease and poverty. Unfortunately, the facts of life are that we are indeed bottom of the table as pertains most measures of economic development.
As a consequence, African consumers are extremely price sensitive. There are many consumers in Kenya who will choose one supermarket chain over another because of a shilling difference in the price of basic household commodities.
While the poorest of the poor may not be the target customers for airlines, fares between African countries are some of the highest in the world, prohibitive even for the middle-class. On paper, Africa would be the best suited for low-cost operations.
However, as of late last year there were only a handful of budget airlines in the whole continent and only three had intra-African international routes. In recent years several budget airlines have gone bust.
There are many reasons for this sad state of affairs. For a start, costs in Africa are not low. Insurance and leasing costs are higher than in developed countries due to poorer safety records and weak legal frameworks.
Of the costs that they can control, it is unclear that budget airlines have enough margin for further reductions. Techniques that have worked so well for them in the developed countries are inapplicable in Africa.
There are very few smaller secondary international airports that they can operate into.
Labour costs in most African countries are already low and contribute a smaller fraction of an airline’s direct operating costs as opposed to a European carrier.
It is also unclear whether the number of passengers necessary to drive the high fleet utilisation that no frills airlines rely upon exist due to low trade and tourism between African countries.
African countries also impose high taxes on air travel. For example, a 100 per cent rebate ticket for airline staff ticket from Nairobi to Kigali still costs Sh7,000 in taxes. This means even if a low-cost carrier charged nothing for the flight, we would still not approach the one dollar prices seen in Europe.
In any case, quite a few of the budget airlines are owned by bigger, established carriers. More than any other region, these parent companies derive a good chunk of their profits from the African market.
Despite protestations to the contrary, they would be unwilling to allow their low cost children to cannibalise their main source of income, at least not in the unfettered free market sort of way.
Probably the biggest hurdle though it the poor implementation of various open skies agreements signed by African countries. As it stands, opening a route between two African countries is an ordeal with uncertain outcomes.
Sooner or later, the markets will be opened and no-frills airlines will thrive and with them bring a new wave of growth.
Hopefully the current operators will survive the significant losses that are being incurred long enough to see that day.