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How African aviation trips itself up – expert

Jun 06 2017 13:35
Carin Smith

Cancun – African airlines typically lag the rest of the world in performance, despite the potential of its large population for growth in the aviation industry, according to Brian Pearce, chief economist of the International Air Transport Association (Iata).

“Africa as a region has such a great aviation potential,” Pearce told Fin24 at the annual general meeting of Iata, which takes place in Cancun, Mexico this week.

Economies need the benefits of good air connectivity and it seems to a large extent African governments’ lack of cooperation with each other prevents the aviation potential from being tapped more, said Pearce.

Infrastructure is another challenge aviation faces in reaching its full potential in Africa.

“It would be great if African governments would recognise the key role of aviation for economic growth,” said Pearce.

Chris Zweigenthal, CEO of the Airline Association of Southern Africa (AASA), told Fin24 that it is a difficult time for the aviation industry in general as underlying tensions in the world are causing uncertainty, which in turn impacts people’s travel patterns.

“Aviation in the southern African region is still going through a tough time. The majority of airlines in the region are not profitable and a lot of them are looking for government support. Many are trying to become sustainable and are looking for ways to restructure their debt,” said Zweigenthal.

“In SA the low economic growth is also creating a problem for passenger growth, which has dipped again. Some say there is too much capacity available, but yet there are airlines in the region making a profit. Comair, Airlink and Safair seems to be getting there, while Mango is likely the only state-owned airline that is marginally profitable.”

Zweigenthal sees the creation of an enabling environment as important for aviation in general, something he says already exists to a certain extent due to deregulation in the industry.

Raphael Kuuchi, Iata’s vice-president for Africa, told Fin24 that air traffic in Africa is indeed growing, but unfortunately African airlines are not the beneficiaries. 

This is because they are mostly either small, under-capitalised and, importantly, do not collaborate.

According to Kuuchi, one of the big challenges for African airlines is the persistent - and false - perception that they are not safe.

As for the major infrastructure challenge, he cautioned that it is important not to have infrastructure end up being too large a cost burden on airlines and passengers. Such infrastructure investments must, therefore, be planned well.

On top of that, he pointed out that many African governments are experiencing financial difficulties because of the oil price drop. They then turn to new taxes on airline passengers for revenue.

“This impacts how many passengers can travel and will make African carriers less profitable. States must, therefore, work out how to reduce these taxes,” said Kuuchi.

At the same time, Iata forecasts that Africa will be the region where aviation will grow the fastest in future. Governments on the continent must, in Kuuchi's view, understand that air transport should not be burdened by taxes.

Iata research estimates, for instance, that if 12 African countries decided to open aviation among each other, it would contribute $1.3bn per year to gross domestic product, create 155 000 new jobs and through the resultant competition 5 million more passengers would be able to fly as airfares will drop by up to 35%.

“Many African airlines grossly underutilise their capacity and therefore, with such a large open market, frequencies will increase, which will lead to unit costs dropping. That is how low cost airlines make money in Europe, for instance,” explained Kuuchi.

*Fin24 is a guest of Iata at its AGM.

iata  |  iata agm  |  aviation
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