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African aviation


African airlines may fly into oblivion, experts, CEOs worry

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Abwao Oluoch l East African Business News  Dec 11, 2007

NAIROBI, Kenya - Africa's aviation experts and airline chiefs converged in Nairobi recently to explore ways of increasing access to financing for the acquisition of aircrafts amid growing fears that Africa's airlines may be flying into oblivion.

The possibility that most countries may lose their national carriers to the intense onslaught from the rich Gulf state -airlines is increasing fears that the cost of air-travel would eventually rise eventually if the African airlines lose the competition battle.

The African Airlines Association (AFRAA) secretary-general Christian Folly-Kossi warned on Tuesday the African airlines may be up to a rough future, given the rate at which the richer gulf airlines, like Qatar Airways were penetrating the African airspace.

The African airspace is becoming a major source of air travelers crisscrossing the continent in search of new and emerging economic opportunities but African airlines, with the exception of just five, are not benefiting from the raft of new opportunities.

"Many more airlines are buying more aircrafts than the population of their countries; they (Gulf state airlines) are also poaching African managerial executives. This would kill aviation in Africa, we would prefer partnerships with foreign airlines," Folly-Kossi said.

Financiers consider African airlines high-risk investments due to the very high cost of losses associated with air disasters involving leased aircrafts. This makes access to long-term finance much more expensive for most of the airlines, added to the cost of insurance for the aircrafts.

"Africa has 16 percent of the aviation losses worldwide. Africa transported just 2 percent of the 2 billion passengers worldwide while they laid claim to just a drop of the US$644 billion total revenue of the global aviation industry, said Mark Goddard, an advocate with British insurer, Willis UK.

Goddard said the East African states are showing the lead for many governments in the revival of their national airlines through modernization of fleets. In East Africa, Tanzania, Uganda and Burundi have taken steps to revive struggling national carriers, a move which has warmed up the hearts of aviation financiers.

“We have seen positive steps in Africa with the government of Tanzania taking interest in the national carriers. We are also seeing African airlines getting interested in air safety audits, this will reduce the risk profile,” Goddard noted.

While the global insurers dismiss Africa as insignificant, African airline chiefs insist the continent's airlines cannot be written off despite the difficulties they face.

According to Girma Wake, the chief executive officer of the Ethiopian Airlines, Africa is becoming a major economic powerhouse and many more countries are finding oil, a development that has made the continent more attractive to foreign investment.

He said the dominance of the European carriers will rise to 80 percent of the traffic, leaving the continent with little or no money to pay for the purchase of new aircrafts.

Only five African airlines are among the top 50 airlines which transported 75 percent of the African passengers. Speaking during the opening of the 16th annual African Aviation Finance Conference in Nairobi, Wake warned that Africa will continue to lose a wide margin of its travelers to the European and Gulf state carriers, a development that would lead to their collapse.

“We all need our governments to support us, but it is not good for the country. If we push for our country's protection, it would eventually hurt our countries. We should start creating open skies,” Wake told delegates at the aviation finance conference in Nairobi.

Wake said African countries should strengthen civil aviation authorities in Africa to enable them to effectively police the airspace.

“We should come up with a proper policy to support air transport,” Wake said.

Ethiopian Airlines, one of the major carriers still having a strong hold on the continent's airspace, believes that it would still remain profitable in the global aviation scene despite the escalating internal crude oil prices which hit historically high levels of US$98 a barrel.

According to him, African airlines can only survive in the competitive aviation field if states reduced their control on their airspace to allow free-flow of flights.

“Every airline which comes to a country brings some benefits. If we stop the airlines from flying to our markets, we are saying we do not want trade, tourism and job opportunities,” he emphasized during an interview with the East Africa Business Week.

African airlines are under intense push to improve the quality of services and pay fat salaries for pilots and air cabin crews who are constantly on the move since the onset of the Gulf airlines onslaught on the African aviation scene.

“They cannot have enough pilots for the aircrafts they are ordering and it is clear the next thing will be to come to Africa,” Folly-Kossi noted. “What you see is sign posts at hotels showing we are recruiting yet what they are doing are to poach Africa's most experienced pilots. The foreign airlines do not offer jobs to Africans. We need to preserve these jobs and possibilities to our own.”

The African aviation executives gathered in Nairobi from the 20-22 Nov. to discuss access to financing for the African airlines. Africa has a high component of costs which increase the overall cost of air tickets in the continent.

Wake said African states should start creating open skies.

“East and Central Africa have implemented the Yamoussoukro protocol. African airlines should work together on connections and cooperation. We should be able to work together and be strong. Commercial agreements should be created between the African carriers. We should all remove non-tariff barriers,” Wake said.

The Yamoussoukro protocol, one of the biggest and boldest attempts to liberalize the continental airspace agreed in the late 1980s, still remains a still-birth aviation treaty. Airline chiefs cite the lack of an integrated air transport policy for Africa as one of the reasons why most countries have been unwilling to grant air transport agreements to other airlines.

He said the key challenge for the airlines in finance for aviation development and liberalize the airspace to African airlines to enjoy the benefits of the growth of aviation.

African airlines may fly into oblivion, experts, CEOs worry



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