The airline industry in Africa is comparatively young and the smallest among the six regions of the world as defined by ICAO.
The colonial era witnessed colonial powers such as Britain, establish locally-based airlines which served their colonies, whereas Belgium, France, Portugal, and Spain used their national airlines to serve the respective colonies under their jurisdiction. Most African governments moved to establish national carriers such as Ghana Airways and Nigeria Airways soon after they gained independence. These national airlines were owned and operated by the government which financed their operations. However, profits accrued from the airlines were not ploughed back as capital into the airlines, but reverted back to general government coffers.
Africa’s aviation industry is not the only one to have faced challenges in the past. The global airline industry, despite its relevance to economic development of other industrial sectors has been marginally profitable throughout history, in spite of its impressive growth rates.
The airline industry experienced much faster progress in the 1950s and 1960s at its infant stage; with a record of about 10% annual growth in world passenger traffic in the 1970s. The growth rate declined to an annual rate of about 6% annually in the 1980s and averaged around 5.2% throughout the 1990s. The early 2000s was very challenging for the airline industry as it recorded very low growth in traffic. However, the year 2004 recorded a 13% increase, and from the period to 2008 the annual traffic growth rate averaged a little below 4.0 %. It is just beginning to pick up again.
Although the enormous challenges within the sector overwhelms majority of sub-Saharan African airlines, companies like the state-owned Ethiopian Airlines and Kenya Airways continue to survive the turbulence and even report profits. When internal and self-inflicted challenges are elaborated in the subsequent paragraphs, one would not need a Harvard degree to understand why state-owned airlines like Ghana Airways and Nigeria Airways are now erstwhile.
The Challenges
In looking at the challenges the industry is facing, it is significant to mention that there are those challenges which the Sub-Saharan based airline has no control over. These are categorized as external factors, and airlines have little influence over them. The factors which airlines can influence directly are the internal factors.
The following present the peculiar challenges facing the airlines based in Sub-Saharan Africa:
Poor Macro-economy – The economic indicators of Sub-Saharan Africa do not encourage air travel within the region. Low GDP and GNI per capita figures leave the Sub-Saharan African with little disposable income to afford the ‘luxury’ of air travel, coercing most airlines to cope with very small market sizes. These factors often lead to high fares charged by the airline for them to break even, a feat which rarely occurs in their accounting practices.
Infrastructure – Although most airports and runways in Sub-Saharan Africa are insufficient and not of the best quality, demand is too low hence they can contain traffic for now and projections of the near future.
However, there is the need for increased terminal capacity at most International Airports such as Nairobi and Addis Ababa. Again, modern navigational systems need to be used to enhance safe air traffic control.
Lack of Privatization and Alliances – Ethiopian Airlines, although 100% government owned, is the only national carrier in Sub-Saharan Africa that has operated profitably over the last couple of years. Kenya Airways’ privatization returned it back to successful operations and profitability, whiles those airlines owned by Ghana and Nigeria collapsed after years of state-ownership. Most Sub-Saharan African national carriers suffer from the lack of expertise, capital injection and expansion which their governments lack and private investors have. In Sub-Saharan Africa, there are 19 privatized airports under different privatization models.
Ageing Fleet and Poor Safety Record- The issue of ageing fleet and safety is an age-long problem facing most airlines based in the region. Poor safety record has not favoured Sub-Saharan African carriers as the premiere choice of transportation, regionally or cross-continental. The economics of using old, fuel inefficient fleet type imply that the airlines spend a fortune on maintenance costs and fuel.
Unliberalized Skies – Most Sub-Saharan African countries are reluctant to implement fully the Yamoussoukro Declaration to completely liberalize their skies. The fear of unfair competition from foreign competitors against home based carriers is one reason for the reluctance in the full implementation of the declaration. Again, most Sub-Saharan African based carriers do not meet the safety requirements set out in the Declaration per ICAO standards, hence their inability to operate in most countries.
Government Interference/corruption/nepotism – Most Civil Aviation Authorities in Sub-Saharan African countries have not been decoupled from government and their various aviation ministries. Political cronyism in appointment of board members and executives usually lead to inefficient management.
Strong Competition from foreign carriers – Most airlines based in Sub-Saharan Africa cannot face strong competition from foreign carriers who operate under well-recognized brands, have larger markets and network access. Their fleet of modern equipment is usually unrivalled by most Sub-Saharan African based carriers.
These challenges can be categorized variously under Michael Porter’s Five Forces Analysis:Five Forces Affecting Airline Profitability in Sub-Saharan Africa.
Addressing the challenges
In addressing the challenges airlines in Sub-Saharan Africa face, it is imperative for government, the international community and aviation stakeholders as well as industry players to work together in tackling both external and internal factors the industry faces.
Addressing Macro-Economy Issues – There have been an established correlation between economic growth or income levels of a country and the propensity to travel by air. Although airlines stand to benefit if citizens have higher disposable incomes to spend on air travel, they have little to do to improve the economies of countries. Sub-Saharan African governments are responsible for growth and sustenance of their economies in general, and particularly for the benefit of airlines, increase GDP and GNI per capita levels. In so doing, prudent fiscal policies must be drawn and adhered to; countries must be open to foreign investments whiles checking fiscal mismanagement and corruption.
Towards Privatization, Partnerships and Alliances - Kenya Airways is one of the success stories of privatization in Sub-Saharan Africa. There is a growing need for privatization as SSA governments do not have the needed capital injection available to expand and sustain viable airlines and aviation infrastructure. Airports and airlines alike would benefit from partnerships.
Modernization of Fleet and Safety – Obsolete flying equipment has high maintenance costs and is not fuel efficient. Airlines based in Sub-Saharan Africa need to modernize their fleet to enjoy good aircraft economics. Newer fleet which adhere to ICAO and general aviation safety standards, when acquired by SSA airlines, will allow for penetration into new markets for profit maximization. Ensuring a safe flying environment for SSA based carriers require the full implementation of an effective and clear regulatory oversight mechanism and total adherence to the IATA Operational Safety Audit (IOSA). Safety Management Systems (SMS) and runway safety measures must also be implemented.
Towards Liberalization – The quest to see a fully liberalized Sub-Saharan African sky, although having chalked some success in the past, is not likely to happen soon in the foreseeable future. Sub-Saharan Africa needs an integrated air transport policy which will set out rules and create a level playing field for Sub-Saharan African carriers, whiles protecting them from unfair competition which might lead to their collapse. The facilitation of international trade among SSA countries will also help enhance the liberalization of skies, as the ECOWAS ideals have led to some appreciable level of liberalization in West African skies.
Government support for Airline Industry – Sub-Saharan governments need to support the airline by providing the needed autonomy for Civil Aviation Authorities to operate. Nepotism, political cronyism and misguided appointments to executive positions of CAAs and Airlines should be addressed via proper adherence to legislation which decouples government arms from the aviation or airline industry.
Overall, the future of airlines based in SSA seems poised to benefit from perceived future economic growth, increase in trade and commerce implying an increase in traffic and cargo services. With the right airline practices and favourable external factors discussed, airlines based in the region can operate near profitability in the future.
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