Wednesday, June 19, 2024
BusinessPrivate aviation operators skeptical of Authority’s commercial flight permit

Private aviation operators skeptical of Authority’s commercial flight permit

Aviators argue unaddressed restrictions should take precedence

The Ethiopian Civil Aviation Authority has announced that private aviation operators can now engage in domestic commercial and cargo flight services, marking a significant milestone in the state-dominated industry. However, the representatives of private aviation firms say the move is akin to putting the cart before the horse.

A letter signed by Getachew Mengiste, director-general of the ECAA, grants 12 businesses that hold an Air Operator Certificate (AOC) and investment and trade permits the freedom to embark on scheduled passenger and cargo flights within Ethiopian airspace.

Dated May 22, 2024, the letter obtained by The Reporter lists the concerned aviation firms, including Abyssinian Flight Services and Aviation Academy, Trans Nation Airlines, National Airways, and East African Aviation, as well as Axum Aviation, the carrier owned by an individual, and North Star, a trade share company.

These firms are currently involved in charter flight services, but the Authority has invited them to submit regular scheduled domestic passenger and cargo flight program proposals for approval, according to the letter.

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It declares that aviation officials arrived at their latest decision in an effort to increase domestic air transportation capacity. It also states that the aviation firms are expected to increase intra-regional connectivity, foster connectivity to tourism destinations, and play a role in the transport of perishable agricultural commodities and other goods.

The announcement precedes a delayed aviation policy, the ratification of which is still out of reach despite being in the pipeline for the past seven years. The Authority, which has submitted the policy to the Ministry of Planning and Development, envisions the liberalization of the aviation industry and the creation of a level playing field for private firms.

The new announcement, however, has been received less than enthusiastically by the operators. Those who spoke to The Reporter argued that the move is inconsistent with industry priorities. They observe that the expansion of seat limits and fair access to airports and maintenance centers, as well as provisions for access to finance and foreign currency should have preceded the decision.

Captain Solomon Gizaw, managing director of Abyssinian Flight Services, said the ECAA’s long awaited decision presents good opportunities, but criticizes it for prioritizing things in the wrong order.

 “The new permit is like offering a nice juicy steak to a customer and then denying them the knife,” he told The Reporter.

Solomon notes that private aviation firms would require a minimum of 10 large passenger and cargo aircraft to operate feasible domestic scheduled air transportation services. Access to finance, argues the industry insider, should have taken precedence over the announcement of the industry’s liberalization.

“Programmed commercial flights follow stringent time tables,” he said. “That can only be done with five to ten airplanes, the procurement of which would need at least USD 40 million, which brings us back to the forex question.”

A source at National Airways, who spoke on condition of anonymity, told The Reporter that the ECAA’s guarantees for scheduled flight demands must be followed up by an official policy that consents to private aviators’ procurement of commercial aircraft.

The source notes the existence of an “unofficial ban” on the types of airplanes that companies like National Airways would like to import.

“Publicly, officials allude to our freedom to bring in any kind of jetliner that we’d like. We’re asking them to issue a policy that lifts the restrictions,” said the source. “Looking at the Authority, it would seem as if they had, but as long as it is not legalized, an inspector could simply ban the planes’ entry into the country’s airspace.”

The representatives of these aviation firms underscore that the economic impact of permission to import the kinds of aircraft they require must not be ignored.

Experts and industry insiders observe the revenues and profits of the firms are dependent on the operation cost of each flight, which in turn is heavily reliant on the number of seats that can be offered to passengers. 

ECAA imposed limitations on passenger capacity and the age of aircraft used by domestic aviators have been a bone of contention since 2016. The Authority prohibits the use of passenger aircraft older than 22 years, with the cap for cargo aircraft at 25 years.

The source at National Airways sees the liberalization as an opportunity for the private sector to demand the revision of these restrictions.

It is a view shared by Captain Amare Gebrehanna, deputy managing director at Abyssinia Flight Services. He observes that owning a sufficiently-sized fleet is essential for the effectiveness of scheduled flight operations.

“The aircraft we currently own with a passenger capacity of five to ten people are not enough,”
 said Amare. “We need 40-seater airplanes at least, as we cannot launch the service and then use fuel, spare parts, or other excuses.”

He argues that commercial flight services are a huge commitment requiring significant investment and financial capacity, which he says the industry presently lacks.

Aside from regulations, experts agree financial constraints are the biggest challenges impeding growth.

“Transactions for local flight services are conducted in Birr. We can’t use that either to import new planes or for the maintenance of those we are already using. This goes further, affecting our ability to repay the loans we take to buy the aircraft,” said Solomon.

The sentiment is shared by Amare, who said that maintenance services and the procurement of spare parts have grown more difficult in light of the country’s forex squeeze.

Solomon argues the ECAA’s inability to adequately respond to long-lived requests from private aviation firms for plots of land to construct their own maintenance service provision segments is the biggest hindrance draining the foreign currency they earn through their service provision.

“We use all the dollars we have to pay for maintenance services we get abroad. This is all because the Authority refuses to provide us with the land we need,” said Solomon.

He told The Reporter he would have preferred the land over a permit for domestic scheduled flight operations.

However, the source at National Airways disagrees, arguing the new rules would help in easing the bureaucracy choking the private aviation industry, including charter flight services.

“The characteristic of charter flights is to just up and go based on the customer’s interest, but currently we have several gatekeepers holding us back from doing that,” the source said.

The ‘gatekeepers’ are airports, ECAA personnel stationed at airports, and the Authority itself, which sometimes request a 24 hour notice prior to a charter flight.

The aviators hope the commencement of scheduled flights will remedy the issues, as all operations would be programmed and approved, shielding them from what they see as unnecessary interruptions.

Officials at the ECAA say private aviation firms themselves are partly to blame for the issues surrounding maintenance. Tesemma Adamu, director of air transport development at the Authority, told The Reporter his office had previously offered solutions to the frequent complaints about access to space and aircraft maintenance services.

“The first option we gave them was for the private aviation companies to form a band and open one maintenance center inside Bole International Airport. But instead, the private operators wanted a separate maintenance center for each of them, which is impossible. The second option was to allow them to use an aircraft maintenance facility in Bishoftu, which was built by the Dergue regime. But later on, the private operators resorted to negotiate prices and use the maintenance facilities of Ethiopian Airlines,” said Tesemma.

Amare argues that unless the ECAA works to allow private aviation firms to operate scheduled flights to neighboring or proximal countries, which would enable them to earn foreign currency, the prospect of operating domestic scheduled flights would not be enticing for investors.

The Authority’s restrictions on regional flights is another area of contention. Experts argue the limitations also discourage foreign investment.

“Foreign investors are not interested in diving into joint ventures where they could own part of an aviation business that can neither fly abroad nor generate foreign currency,” said Solomon. “Again, only with forex can we conduct maintenance works and repay our debts.”

Amare concurs.

“The private aviation industry needs its own bilateral agreements. There are no provisions for that. We need that,” he said.

The source at National Airways, on the other hand, is optimistic that expansion into scheduled passenger and cargo flights will be a step closer to joint ventures with foreign investors.

“The Industry, by its nature, requires huge investment. The new permits will open some doors allowing operators to expand our financial sources,” the source said.

Amare has his reservations. He warns that anticipating success in the short-term without the fulfillment of prerequisites is a misguided expectation.

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