Despite the challenges faced by the global aviation industry, there is a lot of optimism in the African Aviation Industry. Air transport within African countries is a vital corridor for international passenger and freight flows and the efficiency of an air transport operation increases the economic competitiveness of African countries that in turn facilitates access to intra African markets and enhances regional integration.
Passenger numbers continue to grow, year on year and International Air Transport Association (IATA) forecasts average growth in traffic of 5.4% in sub-Saharan Africa between 2016 and 2035, with the total number of international passenger journeys set to reach 300m by 2035.
Despite positive passenger growth, it has been a different picture on the revenue side of things, as African airlines collectively lost $700m in 2015 and $800m in 2016, the two worst results on record. According to IATA, African carriers are expected to report a $300 million net loss in 2019 (slightly improved from the $400 million net loss in 2018). The expected net loss per passenger is $3.51 (-2.1% net margin). This makes Africa the weakest region, as it has been over the past four years.
Moving forward IATA states that performance is improving, but only slowly. Losses are expected to be cut in 2019 as fuel prices decrease. The region benefits from higher-than-average yields and lower operating costs in some categories. However, few airlines in the region are able to achieve adequate load factors to generate profits.
In 2016 the African airline industry was recorded as having the safest year for flights in a decade. According to figures from the IATA, there were no passenger fatalities in sub-Saharan Africa in the 2016 year and no jet hull losses, with an accident rate of 2.30 per 1m departures, in comparison with an average of 9.73 over the previous five years. However, we cannot ignore the fact that safety concerns continue to be raised over specific African carriers within the continent.
In view of all of the above, the launch of the Single African Air Transport Market (SAATM) by 23 African states in 2018 to open the African skies connectivity was welcome news to the African continent and has given hope to ensure that passenger growth can continue to grow and the revenue loss of a number of national African flag carriers can be reversed.
What does the SAATM agreement actually mean?. It means that under this agreement 23 African member states agreed that airlines from any participating member state can operate to airports in any other SAATM country. The member states that signed the agreement include Benin, Botswana, Burkina Faso, Cabo Verde, Congo, Côte d’Ivoire, Egypt, Ethiopia, Gabon, Ghana, Guinea, Kenya, Liberia, Mali, Mozambique, Niger, Nigeria, Rwanda, Sierra Leone, South Africa, Swaziland, Togo, and Zimbabwe.
An IATA survey suggests that if just 12 key African countries opened their markets and increased connectivity an extra 155,000 jobs and US$1.3 billion in annual GDP would be created in those countries. This is a startling statistic which should always be remembered (no doubt there will be more surveys in the future).
SAATM is not really a new concept, in 1999, 44 African governments introduced an open skies policy under the Yamoussoukro Decision. The main objective of the policy was to improve connectivity within the 44 African member states to open up heavily protected domestic sectors with aim of reducing costs, increasing competition and increasing passenger numbers traveling across African skies.
One of the main obstacles to the implementation of previous open skies pledges, in particular, the 1988 Yamoussoukro Declaration and 1999 Yamoussoukro Decision – has been the absence of an underpinning regulatory text. Furthermore, the sector’s big failing is the same as ever. Protectionism still reigns supreme.
The question is therefore what makes SAATM different?. The key difference is that the key architect of this agreement the AU has adopted regulatory text within the framework of SAATM which covers dispute settlements, consumer protection and competition to safeguard the efficient operation of the African airline industry.
It often all sounds so simplistic and easy to implement on paper, but to maximize this great opportunity, it is important to address certain topics within the context of African Governments willingness to work together.
Therefore the following points below are key in ensuring that SAATM works in terms of making air travel more accessible in Africa and improving the competitiveness of the African airline industry but also making it more affordable for the consumers;
1) To maximize this opportunity, it is important to address certain topics within the context of bilateral ASA negotiations – commonly referred to as “doing business” issues by the industry –in accordance with ICAO guidance and international best practices.
2) Application of local laws – Policy position; The adverse impact of unilateral regulations on operational matters is appropriately recognized and avoided by national government member states. Additionally, certain airlines must not obtain a preference over other airlines engaged in similar international air transport within the agreement in the application of customs, immigration and quarantine laws. It would be appropriate to state that there are many other policy positions that can be taken and could not all be covered in this article.
3) Create focus groups who are the party of this agreement in each of the 23 member state that executes documented strategic action plans within a given time frame. Accountability and execution iskey for the success of this agreement.
4) The African Union (AU) should take a lead role in engaging and encouraging the remaining 32 AU member nations to sign up. This could be done through commercial incentives that are driven to benefit national African carriers.
5) After implementation, there should be targeted goals to improve and enhance the SAATM agreement. For example move towards the implementation of multilateral Air Transport Agreements with third countries including fifth freedom rights.
I believe that SAATM has a great potential to grow and develop connectivity within the African continent to ensure a better quality of life in terms of creating job opportunities and improving economies.
While the virtues of air transport are widely known, non-physical barriers continue to impact on air transport service expansion between African member states. These barriers mainly originate from restrictive regulatory practices which dictate how the service is rendered. Owing to this trade-hindrance impact of restrictive regimes, there has been a general move toward liberalization in the world.
In light of this, the key obstacle that needs to be overcome is protectionism as some national flag carriers continue to be seen as symbols and national pride in a way that few other services are by their respective governments. Good luck and I hope that SAATM achieves success.
Adiel Mambara is a Country Manager UK and Ireland for Royal Brunei Airlines (RB),