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Opportunity rising

Airlines in Africa face multiple challenges, but the region is still the next big area of opportunity and there is optimism that things are looking up, as Keith Mwanalushi reports

Boeing’s long term market outlook forecasts that air traffic for Africa’s commercial airlines will grow 5.9% annually between 2017 and 2036, and that African carriers will need 1,220 new aircraft to meet this growth. ATR also predicts that 300 turboprops are expected to be delivered over the next 20 years including the wider Middle East region.


There have been some important developments in recent months that should boost growth in the aviation sector, primarily the launch of the Single African Air Transport Market (SAATM) initiative by the African Union (AU) to open up Africa's skies and improve intra-African air connectivity.


The current lack of connectivity coupled with higher oil prices due to taxation and the high cost of transport which also impacts fares means growth has often been slow and expensive. SAATM aims to create a de-regulated airspace, which will open African skies, potentially increasing the aviation market in Africa and reducing air transportation costs by 25%,
experts suggest.


An IATA survey indicates that if just 12 key African countries opened their markets and increased connectivity an extra 155,000 jobs and $1.3 billion
in annual GDP would be created in those countries.


Currently, 23 countries have signed up to SAATM, but effective implementation is key and the remaining 32 AU member nations still need to come on board. In an interview with Low Cost & Regional Airline Business, Raphael Kuuchi, IATA's Vice President for Africa stresses that commercial airline transport plays an important role in Africa and is set to take on even greater prominence with the implementation of both the SAATM and the Africa Free Trade Zone. 


Kuuchi is clear in that SAATM holds the potential to effect an unprecedented transformation of Africa’s industry, trade and fortunes and those of its citizens. “However, SAATM’s success depends entirely on its effective and wide adoption and implementation by all African nations. This requires political will and a determination by governments to put broader social and economic interests first.”


To date less than half of all AU members have subscribed to SAATM so IATA would like to see the other 32 sign up as soon as possible and only then will substantial and meaningful benefits accrue from the enhanced access to Africa’s markets.


To keep pace with the growth in demand for air travel to, from and within Africa, the continent will require continual investments in people – especially in education and skills development – and in modern, efficient and appropriate infrastructure, equipment, systems and processes.


For instance, Lanseria International Airport (LIA), the fourth largest airport in South Africa by passenger traffic, and popular with low cost operators, is the first airport in Africa to introduce a complete suite of self-service technology in partnership with IT Company, SITA. The introduction of this technology is aimed at maximising convenience for passengers and airline operators.


The new technology allows passengers to check in online, tag and drop their bags and improve the passenger validation process thus facilitating a seamless and quick flow of passenger traffic through the airport.


LIA has also rolled out the new baggage reconciliation technology from SITA which will enable the passengers to track bags at key points during their journey.  The airport is also upgrading its common-use kiosks and desk infrastructure to use SITA’s cloud-based solution, eliminating the need for local servers.


Airline development


IATA predicts that over the next 20 years, air travel is forecast to grow at nearly 6% per year in Africa. “This represents significant opportunity for all types of carriers serving the diverse array of markets,” says Kuuchi but he warns that fulfilling this potential will not happen by chance and strong partnerships and cooperation will be vital. “For too long, a lack of cooperation has blighted our continent’s development,” he adds.


Ethiopian Airlines is taking such partnerships and cooperation very seriously, in particular by working with smaller regional carriers and their governments especially those that lack financial clout and expertise.

After years of on and off negotiations, in January Ethiopian Airlines announced it had finalised shareholders agreement with the government of Zambia for the re-launch of Zambia Airways. The Zambian government will be the majority shareholder with 55% and Ethiopian will have 45% stakes in the airline.  The original Zambia Airways was liquidated back in 1995 and there has been no credible replacement since then. 


Tewolde GebreMariam, Group CEO of Ethiopian Airlines remarked: “In line with our Vision 2025 multiple hubs strategy in Africa, we are very happy that the discussions with the Zambian government have been crowned with success. The launching of Zambia Airways will enable the travelling public in Zambia and the Southern African region to enjoy greater connectivity options, thereby facilitating the flow of investment, trade and tourism, and contributing to the socioeconomic growth of the country and the region.”


Ethiopian has been a firm believer that it is only through partnerships among African carriers that the aviation industry on the continent will be able to get its fair share of the African market, currently heavily skewed in favour of non-African airlines, and play its rightful role in availing efficient air connectivity within Africa as well as with the rest of the world.


In Kenya, LCC Jambojet has been making headway in recent months and growing steadily since it launched operations in 2014. The airline has been gearing up towards regional expansion for several months now with the opening of new routes and the disposal of its 737-300s in favour of newer Bombardier Dash 8 – Q400s.


“For the past couple of years, we have been using the Dash 8 Q400 and we are really impressed with how the aircrafts have served us,“ said Jambojet’s CEO, Willem Hondius. “Basically, we are matching our expansion agenda with the right equipment to ensure that we deliver the best service to our growing customer base,” Hondius explained.


Jambojet is also taking up new ancillary revenue opportunities. The airline recently took tray table advertising to the skies for the first time.

The airline has already signed their first client, Safaricom who will be running the Safaricom 4G data campaign on the foldable tray tables on one of the 78-seater Q-400s. In-flight advertising has proved to be an additional revenue generator for many airlines across the globe especially the LCCs that are constantly striking a balance between low cost tickets and soaring fuel prices.


Fastjet Plc which operates a group of LCCs in different African countries has found it hard to navigate through Africa’s often turbulent aviation industry and it seems the group has not grown as quickly as it hoped.


Following a management reshuffle and ditching Airbus A319s in favour of smaller Embraer 145s and E190s, the fleet looks now more in sync with its operating environment. The Airbus equipment proved too big for the markets they served. Reportedly, fastjet in Tanzania will add three new ATR 72-600s to the fleet as part of a 10 year operating lease.


Recently, Fastjet refreshed an interline agreement with Dubai-based Emirates in line with a trend that is growing in prominence with global LCCs. The agreement sees fastjet inventory available in conjunction with Emirates inventory through Global Distribution System (GDS) Amadeus and Travelport. Both airlines share common markets in Tanzania, Zimbabwe, South Africa and Zambia.


“The agreement is historic for Fastjet,” said Fastjet CEO Nico Bezuidenhout. “Fastjet has become the first African low fare airline to engage with major global airline brands.” He added that beyond the expected growth in connecting inbound traffic volumes, the enablement of trade and tourism will be significant. “Fastjet connects international hubs with major urban centres in our markets; in Tanzania for example travellers would be able to seamlessly connect between Dar es Salaam and Mwanza, Kilimanjaro and Mbeya, all of which support various industry and tourism nodes.”


Over in South Africa, the continents largest LCC and regional market, key player Comair Limited said in its first-half performance for the 2018 financial year, that profit after tax reached R203 million ($16.1m).


Comair CEO Erik Venter said, “We’re very pleased with the results, which have been achieved despite a volatile economy and surplus capacity which restricts occupancy levels below international standards. Despite a lack of growth in the economy and the GDP, we saw a 6% growth in both revenue and passenger volumes.”


Venter noted that investment in two major aspects of the company’s operations continue to help offset the constraints experienced by the local airline sector. Firstly, the fleet renewal programme enables Comair’s two airline brands, and British Airways (operated by Comair) to operate more competitively than airlines operating older, less fuel-efficient aircraft, while enhancing customers’ experience.


Secondly, Comair’s vigorous expansion of its non-airline business continues its steady growth, contributing 13% to profit and operations to the group.

The first of eight Boeing 737-800 MAX 8s will be delivered in 2019, constituting the next phase of Comair’s fleet renewal strategy.


Safety improvements

Earlier this year IATA released data for the 2017 safety performance of the global commercial airline industry showing continued strong improvements in safety. In the report, 2017 was a very good year for aviation safety. Some 4.1 billion travellers flew safely on 41.8 million flights.


The report says Sub-Saharan Africa continued to make strong progress on safety. Airlines in the region had zero jet hull losses and zero fatal accidents involving jets or turboprops for a second consecutive year. Both the turboprop hull loss rate and the all accident rates declined against the average of the previous five years.


But there is still a large gap to cover in the safety performance of the continent's turboprop fleet, according to IATA. Global standards such as the IATA Operational Safety Audit (IOSA) are making a difference however. Counting all accidents, the performance of African airlines on the IOSA registry was more than three times better than non-IOSA airlines in the region.

That's why IATA continues to encourage African nations to incorporate IOSA and the IATA Standard Safety Assessment (ISSA) into their safety oversight systems.


IATA takes an agnostic position on aircraft. Kuuchi stresses that the primary concern is that all aircraft in which members customers travel, should be of sound design and construction and operated safely. 


“We are starting to see change,” Kuuchi says excitedly, when thinking of future opportunities in Africa.


He points to the clear majority of African leaders that recently signed a framework establishing the African Continental Free Trade Area – the largest free trade agreement since the creation of the World Trade Organisation. He says if all African countries join the area by 2030, the market size will be 1.7 billion people with over $6.7 trillion of cumulative consumer and business spending capacity.


Things are looking up, if you are in it for the long haul.

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