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While Africa is growing, the same is not necessarily true for African aviation

22nd May 2015

By: Keith Campbell

Creamer Media Senior Deputy Editor

  

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While economic forecasts for the African continent are most favourable, African airlines may not be able to benefit from the expected growth in the region’s gross domestic product (GDP), International Air Transport Association VP: Africa Raphael Kuuchi has warned. Unless various significant issues are addressed by African countries, it will not be possible to develop the African aviation sector.

First, the good news. Africa is expected to grow, in economic terms, at 4.5% this year. This will be faster than most other regions. He cited the Economist Intelligence Unit, which recently predicted that nine of the 20 fastest-growing economies this year will be African. These will include “some new entrants” such as Burkina Faso, Côte d’Ivoire, the Democratic Republic of Congo and Mozambique.

Regarding air transport, the number of African air passengers is expected to grow at an annual average rate of 4.2% over the next five years, while the rate for air cargo will be 4.4%. “But we need to be realistic and very focused,” he cautions. “Growth is starting from a very low base.”

There are three main drivers behind this forecast growth in demand for aviation. First, the population of Africa is increasing. Between 2009 and 2034, the continent’s population is predicted to grow by 55%. “This will create huge potential. Population growth supports demand, obviously.” Second, the people of Africa are getting richer. “The income growth is expanding,” he points out. “As people have more discretionary income, their ability to travel by air will increase.” Third, there are trends indicating that there will be improved interconnectivity between African air services. “This will likely bring down air fares and increase travel.”

Unfortunately, few African airlines are currently profitable. Africa is, in fact, the lowest profitability region in the world, for airlines. It is also the region with the lowest profit margin per passenger. And that profit margin is $2.51. Yes, just two dollars and fifty-one cents per passenger. “This explains why most of the airlines on the continent are struggling.

On traffic performance – over the last few years we’ve seen a declining trend by African operators. “We see there is a 2% decline, year-on-year, for African operations, in RPKs (revenue passenger kilometres),” reports Kuuchi. “But, in terms of cargo, freight operations are doing pretty well. What is more important is the share of African operators. African carriers are doing just about 3% of RPKs. “Our neighbours in the Middle East are doing about 12% to 14%. Load factors – for African carriers they are in the upper 60 per cents while for Middle Eastern and other carriers they are in the upper 80 per cents. In our share of freight traffic – we’re carrying just under 2% of global freight. The Middle East is doing about 14%.”

“But there is an interesting trend – more new aircraft deliveries on the continent,” he notes. These new aircraft are both single-aisle and twin-aisle aircraft. And new aircraft are both safer and more economical to run.

“The good news is that fuel prices have gone down by about 50%,” he highlights. “We can only pray that they stay where they are.” (Of course, they spike up and down, but the average is important.) Unfortunately, many governments burden fuel prices with taxes and fees, reducing the benefit of fuel price decreases for African operators. In fact, fuel costs in Africa are much higher than the global average. This contributes to one of the biggest burdens on African aviation – operational costs. “Taxes, charges [on aviation] are an increasing burden.” High charges will never support African aviation and if these are not cut, it will be difficult for airlines to reduce their fares.

Another critical – indeed, the number one – factor is safety. “We need to do something about this, if African operators are going to benefit.” Safety is improving, but there can be no relaxation on the issue. He urges all African airlines to become certified under the International Air Transport Association’s Operational Safety Audit.

And the sector also suffers from inadequate infrastructure, both physical and administrative. This includes inadequate airports. “The infrastructure needs to be improved significantly.” Further burdens are corruption and labour issues.

These factors are combining to demoralise the workforces of African operators. “The aviation sector in Africa is not as attractive as it used to be,” states Kuuchi. “If you work for an African airline, you are threatened with retrenchment every year! So young people are looking for better paid and more secure jobs and find them in, for example, telecommunications.”

Aviation in Africa, he asserts in conclusion, will grow. But it will do so with or without African operators. Kuuchi addressed the recent Aviations Stakeholders Convention at Emperors Palace, at OR Tambo International Airport, east of Johannesburg.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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