Leaders
from the African Airlines industry concluded their 44th Annual
General Assembly and conference in Johannesburg, South Africa today
with a call for airlines cooperation, market liberalization and
creating of a level playing field to facilitate competition and
sustainable growth. The three-day conference was held under the theme
“Business together in the era of growing opportunities” and
brought together over 392 high profile delegates from Africa and
across the world.
Opening the Assembly, the Minister for
Public Enterprises of South Africa, Hon. Malusi Gigaba, challenged
African airlines to be more aggressive and innovative in the business
and work together to better serve the continent air transport needs.
He called for the implementation of the key recommendations and
resolutions that will emerge out of the conference. He further called
upon industry stakeholders in Africa to work together and seek
partnerships to broaden their network and compete with operators from
other regions.
Welcoming delegates to the meeting, the
President of AFRAA and Chairperson of South African Airways, Vuyisile
Kona, noted that air transport liberalisation is good for the
continent although it can pose serious survival challenges to local
airlines that are ill-prepared to compete in a liberalized market. He
said South African Airways was ready and willing to support other
African airlines in areas where it has expertise. He commended the
large turnout at the AGA and reiterated the need for airlines to
commit to working together through commercial cooperation and joint
initiatives to derive economies of scale. In his words, “this is
the only way we can be competitive and profitable”.
The
Secretary General of AFRAA, Dr. Elijah Chingosho deplored the
excessive airport taxes, charges and fees being levied on airlines
and passengers and said, “... this in addition to the generally
high cost of operations, is making African airlines less competitive
compared to their foreign counterparts.” Dr. Chingosho called upon
African States to take their safety oversight responsibility
seriously and together with the African Union engage the EU on the
putting of many African states and airlines on the EU banned list.
The Secretary General bluntly stated that the EU list of banned
airlines was a ploy to switch traffic from African operators to their
European competitors. Dr. Chingosho queried how one can explain why
the EU claims some African destinations are unsafe and yet the EU
carriers continue to operate and conduct brisk business out of those
unsafe markets.
Address by the Vice President of IATA, Mr. Tom
Windmuller: There is a long history of cooperation between IATA and
AFRAA but it has never being so close thanks to AFRAA
secretary-general Elijah Chingosho. He stated that aviation’s
contribution to gross domestic product in Africa would increase by 5%
a year over the next 20 years, which would add 66,000 jobs. For this
development to be sustainable the aviation sector makes money but the
IATA forecast is that there will be no profitability for African
airlines this year. Business travel to Middle East from Africa
increased by 21%.
His address focused on safety,
security, environment, taxes and fuel and on the new distribution
capability. On the issue of safety, he referred to the challenge
African airlines face of improving its image and safety standards
after the European Commission in April banned operations of more than
100 African airlines, citing safety concerns. He stressed that
EU must work close with the affected states. As far as the
postponement of the EU ETS he said that EU decision created some
space for negotiation, the challenge is to remain united since no
solution can satisfy all airlines.
The problems facing the
continent's airlines were safety, security, infrastructure and the
regulatory and fiscal environment.
Passenger numbers are expected
to grow significantly between now and 2030.
IATA’s forecast
last month estimated that collectively African airlines will make no
profit this year.
On the role of government in the
development of air transport in Africa, the AFRAA Assembly called
upon governments to demonstrate commitment towards liberalizing the
air transport industry and creating a conducive environment for
airline operations. This will stimulate regional and domestic traffic
growth and create a bigger home-base market for our intercontinental
airlines. Governments should remove barriers to cooperation between
carriers and put in place policy and regulatory framework that
facilitate beneficial cooperation.
A former Chairman of
EgyptAir Group and AFRAA, Eng. Hussein Massoud, was recognized at the
AGA for his distinguished contribution to AFRAA and the African
aviation industry. Eng. Massoud, who is also the immediate former
Minister of Aviation of Egypt, received the plaque of recognition
from the Minister of Public Enterprises of South Africa, Hon. Malusi
Gigaba.
Growing
Opportunities
Dwelling
on the theme of the conference, “Business together in the era of
growing opportunities”, speakers lauded the enormous growth
opportunities in Africa and why African airlines should position
themselves to benefit. It emerged that airlines can do more to
support each other. The big African carriers offered to support the
smaller ones, and asked the smaller carrier to seek help whenever
they require it. Issues of liberalization, market access, elimination
of non-tariff barriers and improving safety and security as well as
investment in infrastructure dominated discussions.
African
Airlines Performance in 2011
In
a detailed annual report on the performance of African airlines
presented by the Secretary General of AFRAA, Dr. Elijah Chingosho,
during the just concluded AGA, he noted that passenger traffic in
2011 declined by 8.2% to 56 million, due to the Euro zone financial
crisis and the political instability in parts of Africa, especially
North Africa. The report noted that 42% of all passengers into and
out of Africa travelled on intercontinental routes, 26% travelled
within Africa (intra-Africa) while 32% were domestic
passengers.
Europe remains the biggest air transport market
for African airlines accounting for 156 billion RPKs in 2011. Looking
ahead, Europe is forecast to have the lowest growth potential at just
4.5% per year over the next 20 years. The market to watch according
to the 2011 AFRAA annual report is Asia Pacific. In 2011 Asia Pacific
accounted for 6.2 billion RPKs, but with a forecast growth of 8.2%
per year over the next 20 years, and little competition from the
Asian carriers (at least for now), the region may well be the market
to target for future passenger and freight growth according to
AFRAA.
On freight, the report noted that African airlines
still lack the capacity and are not properly structured to take
advantage of this business segment currently dominated by non-African
airlines. According to AFRAA, airlines continue to lose freight
business on intra-Africa and domestic routes to road, water and rail
transport systems. Of the 705,000 tonnes of freight carried in 2011,
68% was to/from intercontinental destinations, 23% to intra-Africa
routes and 9% on domestic networks.
The continent recorded
68.2% average load factor in 2011, up 1.2% from 2010, compared with
the industry average of 75.0%. AFRAA attributed the low load factor
to a miss-match of capacity and demand, lack of cooperation among
airlines and over-capacity on some routes.
On fleet, the
report noted that, Africa fleet is only 4% of the total global
commercial aircraft in operation and is made up of 64% single-aisle,
29% twin-aisle, 6% regional jets and 1% large jets. The average age
of the fleet improved significantly to 14 years in 2011 due to the
replacement of some overages aircraft and the acquisition of new ones
by some airlines. AFRAA predicts that over the next 20 years, the
continent will need to acquire 800 aircraft worth US$100 billion to
replace some existing fleet and meet traffic growth needs.
On
safety, the report noted that significant improvements have been made
over the years with 38 African airlines currently registered on the
IOSA registry. Of the total of 39 fatal accidents recorded globally
in 2011, Africa accounted for 13% or 5 accidents. AFRAA urged States
to take their safety oversight responsibility seriously and called on
countries with challenges in meeting their safety obligations to seek
assistance through the AFCAC/ICAO initiated AFI Plan for Safety
programme. In a resolution adopted on safety, African airlines
condemned the EU list of banned airlines and called upon the European
Union to adopt pragmatic and constructive approaches to dealing with
safety in the industry. The resolution further acknowledged ICAO as
the only neutral body with a mandate to oversee to the global
regulation of aviation and urged the EU to avoid unilateral
regulation of the aviation industry which will serve no good but only
ignite retaliation. The AFRAA 44th AGA called upon ICAO to speed up
work on coming up with a globally acceptable formula for dealing with
carbon emissions by airlines, now that the EU have put the Emission
Trading Scheme on a one year temporary hold.
Appointment
of Officers
The
AGA elected Dr. Pimentel, the Chairman and CEO of TAAG Angola
Airlines as Chairman of the Executive Committee while Mr. Inati
Ntshanga, CEO of South African Express and Mr. Sergio Rosa CEO of Air
Burkina were re-elected First and Second Vice Chairmen respectively
of the Executive Committee. The AFRAA Executive Committee has
oversight responsibility for the Association and crafts policy as
well as oversees implementation of projects and programmes by the
Secretariat.
The Assembly also elected new members to replace
those whose term of office on the Executive Committee expired at the
close of the 44th AGA. Mrs. Fatima Beyina-Moussa, CEO of EcAir
(West/Central Region); Eng. Enhemed Elwani, Chairman and Ag. CEO
Afriqiyah Airways (Northern Region) and Mr. John Mirenge, CEO of
RwandAir (Eastern Region) were elected for a term of 3 years
each.
CEOs
on Panel
Focus
Areas: How can African airlines work together to remain competitive?
Moderator,
Mr. Girma Wake, Advisor to the Ministry of Transport & Board,
Chairman of RwandAir, said that African airlines left a lot of
space in the african market and now there is a need to feel
these gaps. Africa is not served enough. African airlines have got to
make the effort and the best way to achieve it is to trust each
other.
Mr.
Vuyisile Kona, Chairman of the Board & Ag. and CEO of South
African Airways, said that his airline wants to operate more at night
times but infrastructure in Africa is not adequate. The political
instability in the continent makes things and more difficult and
investments highly risky and thus unlikely. There is also in Africa
lack of expert aviation skills but the cost of training is high.There
are ways that African airlines can cooperate together in an
industry that is not static but dynamic. In his words, cooperation
“is the only way we can be competitive and profitable”.
Dr.
Titus Naikuni, Managing Director & CEO, Kenya Airways, stressed
the importance of liberalisation saying « Our skies are not open. We
have capacity but we can’t access the market. We just give the
rights away to non-African airlines». He continued by saying that in
the current environment size does matter and African airlines and
governments should reconsider the prevailing attitude of supporting
the flag carrier.
Mr.
Tewolde G.Mariam, CEO Ethiopian Airlines, on his part claimed that
there is a lack of adequate integration in the continent. Given the
regional regulatory framework the airspace is more open to
non-African airlines. In his words “the regulatory framework is not
balanced, everything is done on a bilateral basis. That is why 80% of
the market is with non African airlines.” He stressed that African
airlines should cooperate in various areas, adding that African
nations should open their skies to African carriers. African Union
must be a block the same way EU is a block. He added that although
air transport is critical in Africa and for its economic growth, it
is very taxed. Infrastructure is poor and governments are not
investing.
Mrs.
Fatima Beyina-Moussa, CEO ECAir, referred to the lack of expertise in
cargo and the urgent need for African airlines to emphasize on
training and to align the schedules of the african airlines.
Mr.
Alphonse Kioko, CEO of Precision Air, said that it was the
cooperation with Kenya Airways opened the doors for Precision Air. He
went on to say that there are a lot of gains from synergies and as a
result the costs went down.
Panel
Discussion
Theme:
How to be and remain a successful airline through innovation,
efficiency and cost management
The
moderator, Dr. Kostas Iatrou, Managing Director, Air Transport News,
in his opening remarks said that the current environment operates
under the influence of an economic crisis and that since the air
transport industry is dynamic and not static airlines must adapt to
new realities. He added that LCC carriers have appeared in the
African market and the African air traffic is dominated by
non-African carriers.
Mr.
Inati Ntshanga, CEO South African Express, stated that people are the
most important asset of the business. Airlines need to innovate
around people via training etc. He added that business models need to
be reviewed so as to focus on revenue enhancement, measurement. He
pointed to the importance of joint activities and «why not an
African alliance». He continued by saying that if a business doesn’t
innovate it will die but innovation must not be complicated. He
closed by saying that yields will continue to decline for the
airlines therefore, airlines must employ the right product.
Mr.
Chris Zweigenthal, CEO AASA, stressed that airlines must identify the
market needs, to choose from the available innovations and decide
whether they can afford the cost. Airlines and governments must
create in Africa an environment that can attract business and
facilitate the «do business» process. He stressed that there
will be no success if african airlines fight against each other. He
added that iInnovation is needed on a strategic level, that is
find certain synergies in order to create regional alliance. There is
also the need to strike the balance between what the market requires
and what the states require.
Mr.
Maher Koubaa, VP Middle East and Africa, Sabre Airlines Solutions,
stressed that there is new category of airlines the innovative
airlines and that innovation strong driver for profitability since it
what make the differentiation from competition. Another key factor he
mentioned is the understanding of the specific market. He referred to
the virtual alliance based on the agreement that was signed with
AFRAA and which will enable African airlines to coordinate their
schedules and achieve in total 100 million USD of extra revenue.
Mrs.
Sandrine de Saint Sauveur, President and CEO, APG, said that while
airlines in Africa concentrate on home markets, airline profitability
can be achieved when considering the other markets, and the big
market is out of Africa. She also said that only 36 African
airlines are member of BSP. She concluded that there is a cost to be
part of an alliance despite all the benefits.
Mr.
Will Owen-Hughes, Snr. Director, Supplier Services, Travelport,
claimed that the consumer is the king and that airlines are not
selling seats anymore but airline brand.
Mr. Bruno Boucher,
Associate Partner, Lufthansa Consulting, on his part referred to the
aviation industry as a jungle of regulation and added
that everyone in this industry making money apart from the airlines.
Airlines need to have the right tools and support. The important is
how airlines want to do it and this becomes an art when managing an
airline. He also supported that innovation is the strategy for
survival and therefore airlines must provoke innovation.
Source:airtransportnews