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    BusinessAFRAA urges nations to tackle bottlenecks in African airline industry

    AFRAA urges nations to tackle bottlenecks in African airline industry

    Date:

    Recognizes Ethiopian as best airline of the year

    The African Airlines Association (AFRAA) on Monday called  on African nations to tackle the bottlenecks hindering the growth of the African airline industry.

    Addressing the 48th AFRAA’s annual general assembly in Victoria Falls, the Zimbabwe an secretary general Elijah Chingosho (PhD) disclosed that market protection, prohibitive airport charges, exorbitant fuel prices and fuel tax, high-ground handling fees, restrictive visa regimes are some of the bottlenecks hindering the growth of the African airline industry. Chingosho said lack of full market liberalization, intense competition coming from mega international carriers, political instability in some African countries and hefty taxes are some of the challenges facing African airlines.

    European airlines and the giant Middle Eastern carriers have dominated African skies. African airlines market share which was 40 percent in the 1990s has dropped to only 20 percent. Eighty percent of the African passenger traffic is carried by non-African carriers.    

    Chingosho said some African countries which are hard hit by the nose-diving price of oil are reluctant to release foreign airlines’ funds. Foreign airlines are unable to remit their sales from those countries and this has seriously affected their operations.  

    Chingosho said Angola, Nigeria, Egypt and Sudan are the countries which are hard hit by the soaring price of fuel. Foreign airlines are unable to repatriate their sales revenue from these countries due to the foreign currency crunch.  “Nigeria and Egypt have repatriated some funds recently. However, it is critical that airlines should be able to fully repatriate their funds,” Chingosho said. AFRAA estimates that some 2 billion USD airlines’ funds are blocked by the four countries.  

    He cited the high cost of fuel in some African countries has also been a challenge to airlines despite the oil price decline in the global market. Some international airlines are mulling to suspend or cut down operations to Nigeria due to the high cost of fuel, fuel shortage and the problem with repatriation of funds.        

    Recently, CEO of Emirates, Tim Clark, told the international media that his airline may cut down operations to Nigeria.  Kenya Airways has stopped its flights to Abuja as part of its cost cutting measures. Ethiopian Airlines which serves four destinations in Nigeria –Abuja, Lagos, Enugu and Kano –is also facing challenges in repatriating funds from Nigeria, a strong – hold of the airline. Fuel shortage and prohibitive fuel charge is a real challenge in Nigeria. However, Ethiopian said it will continue serving its important market –Nigeria –which it began serving in the 1960s despite the challenges. “Africa is our home. We served our continent for the past 70 years at all times – good and bad times. So it will continue serving our valued customers in Nigeria. We have no plan to cut down our operations,” Ethiopian Airlines Group CEO Tewolde Gebremariam told The Reporter.

    Chingosho said exorbitant fuel tax, airport charges and air ticket tax are big challenges facing African airlines. According to the International Air Transport Association (IATA), African airlines have lost 700 million USD in 2015. Chingosho said cumbersome taxes, hefty fuel price and stiff competition with mega international carriers have contributed to the huge loss African airlines are recording.

    IATA vice president for Africa Raphael Kuuchi on his part said that safety and security remains an area of concern in Africa despite significant improvements made in recent years. “Safety and security, high operational cost, and regulation issues are some of the hurdles that need to be addressed,” Kuuchi said.

    According to him, IATA has been supporting African airlines in improving safety and security records by providing trainings and assisting them to join IATA Operational Safety Audit (IOSA) registry. IATA has increased the number of African airlines on IOSA enrollment from 18 to 32. In 2016 five new African airlines joined IOSA but four failed to keep their IOSA registry.

    “IATA will continue supporting African airlines in areas of safety and security,” Kuuchi assured African delegates. Kuuchi also mentioned declining market share of African airlines and falling oil prices as some of the existing challenges for African nations.

    At the CEOs panel discussion African airlines senior executives expressed their concern over the dominance of foreign airlines in African market. Busera Awol, Ethiopian commercial director, said that the African market is invaded by non – African airlines. “Who have the highest available seat per km (ASK) in Africa? It is Turkish and Emirates. The African market is invaded by Turkish, Emirates, Etihad, and Qatar. We (African airlines) all are in danger. We should wake up and cooperate,” Busera warned.

    He said the cooperation between Ethiopian Airlines and ASKY is exemplary. “That is true African cooperation that I have seen so far.”

    CEO of RwandAir, John Mirenge, said that African airlines are directly attacked by Gulf carriers which are systematically pushing African carriers out of the market. “African market has changed a lot. It is not like what it was 15 years ago. The yield had decreased due to the stiff competition,” Mirenge said.

    Zemedehen Nigatu, managing partner Ernest and Young East Africa, who made a presentation during the conference advised African airlines to collaborate to succeed. Zemedeneh said that the African economic growth slowed down to 1.6 percent from 5 percent annual growth. “Africa’s largest economy Nigeria is in recession. The rosy picture Africa Rising is gone now,” Zemedeneh said.

    He underscored the need for cooperation among African airlines during turbulent time. “The survival of African airlines is threatened by the Middle Eastern giants’ expansion to Africa. African three major carries Ethiopian, Kenya Airways and South African Airlines combined are one – third the size of Emirates.”

    Zemedeneh who lauded Ethiopian fast growth and increased profitability said cooperation governance is critical for the success of an airline. “Airlines are businesses and regardless of the ownership (government or private), they should be run on a business model.”

    He advised African airline CEOs to look for growth in Africa and emerging Asian markets. “Chinese would be the highest number of travelers. Ethiopian Airlines has 44 weekly flights to China. The signboards at Addis Ababa Bole International Board are written in Chinese. Ethiopian is hiring Chinese flight attendants. This is a smart thing to do,” he said.             

    More than 400 delegates-airline CEOs, civil aviation and airport authorities, aircraft and engine manufacturers, IT and other service providers gathered in the mighty Victoria Falls to attend the 48th AFRAA AGA. Representatives of IATA, ICAO, the African Union, the African Civil Aviation Commission and senior government officials of Zimbabwe attended the conference which adopted a number of resolutions when it was closed on November 22.   

    Aviation contributes 72 billion USD to the continent’s GDP and supports 6.8 million jobs.  According to IATA’s recent forecast Africa’s passenger traffic will be growing at a rate of 6.5 percent year on year.  

    Ahead of the conference, president Robert Mugabe inaugurated a 150 million USD Victoria Falls International Airport upgrading project which increased the number of passenger handling capacity to 1.5 million per year. Described by CNN as one of the Seven Natural Wonders of the World, Victoria Falls is a major tourist attraction in southern Africa.

    In related news, Ethiopian Airlines has won best airline of the year award of AFRAA. Ethiopian Airlines was selected for the award for its extensive route network in Africa, collaboration with other African airlines and its profitability. Ethiopian Airlines Group CEO, Tewolde Gebremariam, received the award at the gala dinner held on November 21 at Boma Lodge in Victoria Falls. The Togo – based pan African airline, ASKY, won best regional airline of the year award. ASKY is an affiliate of Ethiopian Airlines.

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