…The turbulence impeding aviation growth on the continent
When talking about challenges and the future of African aviation, airline operating costs as well as safety and security are probably the biggest issues.
Over the years aviation stakeholders on the continent have had sleepless nights on how Africa and the national regulators can facilitate this growth responsibly and in a sustainable manner.
There are many challenges on the voyage from loss-making to profit-making for African airlines.
For a long-time the African aviation industry had been labelled for low levels of safety and security due to a record of higher accidents and incidents rates.
Official statistics presented by the African Airlines Association(AFRAA) at the just-ended 74th IATA AGM that took place in Australia indicate that Africa still surpasses global averages when it comes to fatal air crashes.
While Africa accounts for less than 3% of world traffic, from 2008 to 2017 for scheduled commercial aircrafts, the average fatalities recorded in Africa represents 27% of the worldwide average. The global average of fatal accidents was 18% over the period.
According to AFRAA’s secretary general Abderahmane Berthé, while the traffic in Africa is expected to double every 15 years: “The challenge to maintain good safety and security with the increase in the number of flights remains critical.”
Meanwhile, airlines’ operating costs in Africa remain among the highest in the world, while its share of global traffic is less than 3%.
Berthe, in a working document presented at a meeting held on the sides of the IATA AGM between IATA and AFRAA, said charges and taxes in various African airports are also among the highest.
“The high cost of doing business is indeed affecting the economic performance of African Airlines. There are monopoly service providers in ground handling and catering in many airports in the continent. This often results in monopoly high pricing. The multiplicity of Air Navigation Service Providers results in high navigation charges for operators,” bemoaned the continental aviation watchdog.
Fuel is also another challenge denting the financial prowess of airlines on the continent.
As of June 2017, jet fuel cost in Africa is on average 27% higher than the rest of the World. The price of jet fuel at some stations in Africa, Berthe noted, can be up to two and half times the world average.
Another concern expressed by AFRAA is the fact that aviation charges and taxes are levied both on operators and passengers.
“Charges paid by operators include airports infrastructure and traffic control charges while charges paid by passengers include security and passenger charges, government taxes. Taxes on sales are still levied in many states contrary to ICAO recommendations. Passenger charges and taxes typically range from $40-$130 at several stations in Africa which are well above global averages and put African airlines at a huge competitive disadvantage,” he said.
He urged African governments to liberalise ground handling services so as to encourage competition, boost efficiency in service delivery and reduce prices.
Blocked funds are also giving airlines nightmares on the continent with over N$980 billion trapped in countries such as Angola(N$660 million), Zimbabwe(N$96 million) and Sudan(N$217 million).
Blocked funds are monies generated by an airline in foreign countries that cannot be repatriated mainly due to lack of foreign currency in central banks.
Berthe however remained optimistic that such funds will eventually be unblocked.
“Our view is that the trend of jet fuel price increase will improve foreign exchange availability in countries largely reliant on oil exports for foreign exchange earnings and this will help to reduce the amount of blocked funds. In some of the affected states, the depreciation of local currency in the long run is causing significant loss of value of blocked funds and erosion of the value of sales in those countries. Devaluation of the local currency in Angola early this year resulted in a loss of value of over $70M of the blocked funds,” said Berthe.
While aviation development in Africa is growing at a high pace even though figures are still low compared to other regions of the world, AFRAA maintained that operators need adequate, safe, efficient and cost-effective infrastructure that meets the growing needs and expectations of passengers and shippers.
Many African airports are suffering from capacity limitations and need enhancement investments to expand their runway and taxiway capacities as well as terminal capacity both for aircraft, passengers and operators’ offices.
African operators are faced with demographic change with fierce international competition based on new business models. There are also constraints to source capital and sometimes a lack of market access to growing markets.