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UncategorizedSingle African Air Transport Market or single African airline?

Single African Air Transport Market or single African airline?

No continent so far has established a common airline collectively owned by its member states. Although some individual countries have tried to establish commonly owned airlines, such ventures were not successful, writes Aklilu Haile.

On June 18, 2018, Prime Minister Abiy Ahmed (PhD) addressed the Ethiopian House of People’s Representatives in its extraordinary session and in the course of his speech he discussed the privatization of some key government-owned companies including Ethiopian Airlines and Ethio Telecom. 

In connection with the partial privatization of Ethiopian Airlines, one paramount point the Prime Minister raised, in support of the decision to privatize the national flag carrier was the signing of an agreement by African leaders including Ethiopia to establish one common African Airline. However, the initiative that was agreed to be launched by the AU member states in January 2018 in Addis Ababa during the African Union Summit was to establish a “Single African Air Transport Market” (SAATM)  and not a single African Airline.

The purpose of this article is to shade light on the difference between one African Airline as mentioned by Prime Minister Abiy and the Single African Air Transport Market agreed by the African leaders.

The establishment of SAATM is a continuation of the Yamoussoukro Decision, which was agreed in Cote d’Ivoire in 1988 and ratified in 1999. The main objective of the Yamoussoukro Decision was to gradually liberalize scheduled and non-scheduled air transport services in Africa among the member states.

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The intent of the “Single African Air Transport Market” initiative is to liberalize and open airspaces of member states so that an airline of a signatory member state can fly to any airspace of the other countries in the block, without restriction on frequency, type of aircraft, etc. Liberalization and opening up of African skies among such block of counties is the highest level of traffic right freedom an airline of a signatory country can get, and is expected, to bring about a better economic integration among the countries and improved air transport services to consumers. In the absence of such deregulated regional airspace, countries have to enter into bilateral air service agreements between them to allow each other’s airline to operate in its country.

The reason why countries shy away from opening their airspace is to protect their airlines from competition. Although opening up of a country’s airspace can bring improvement in service quality and price reduction to consumers, countries with weaker airlines fear competitions from the more efficient and bigger airlines that could ultimately drive their national airlines out of business. The more efficient and bigger airline a country has the more interest it would have to join such a liberalized block of countries.

As of May of 2018, 26 African countries have joined the SAATM and Ethiopia is one of them. The Single African Air Transport Market is one of the flagship projects of the African Union Agenda 2063 that were expressed during the fiftieth anniversary of the OAU/AU in 2013, in order to bring about a better socio-economic development and integration on the continent. Some of the other such bold and ambitious projects are the creation of African Continent Free Trade Area (AfCFTA) and the African Passport.

No continent so far has established a common airline collectively owned by its member states. Although some individual countries have tried to establish commonly owned airlines, such ventures were not successful. As example, the fate of Air Afrique and Gulf Air could be seen here.

Air Afrique was created in 1961 as a joint venture between Air France, Union Aéromaritime de Transport (UAT), and eleven francophone countries in Africa. It used to operate in the founding countries as well as other international destinations until it ceased to exist in 2002 due to its poor financial performance.

Similarly, Gulf Air was owned by four governments namely the Emirate (now Kingdom) of Bahrain, the State of Qatar, the Emirate of Abu Dhabi and the Sultanate of Oman starting from 1974 with 25 percent share each. In 2002, Gulf Air launched a restructuring and turnaround program following a sharp fall in its profits and increasing debt. In the same year, however, the State of Qatar announced its intentions to withdraw from Gulf Air. The Emirate of Abu Dhabi subsequently decided in 2005 to withdraw from Gulf Air and established its own airline, Etihad Airways. Finally in 2007, the Government of Bahrain claimed full ownership of the airline, as the only remaining joint-owner Oman, divested its share in the airline. The performance of Gulf Air during its multinational ownership was mediocre compared to the growths of the other airlines in the Region such as Emirates Airlines and Qatar Airways.

As the above experiences of the two airlines demonstrate, multinational ownership of airlines was not successful, because each of the shareholding countries has different and sometimes conflicting interests. Hence, taking the above narration as an example, a continental airline would not be plausible.

To conclude, despite being close to the air transport business, I am not aware of the existence if any other initiative or agreement signed by African Leaders to establish a common Airline.

Ed.’s Note: Aklilu Haile, MBA in International Aviation, is an aviation consultant. The views expressed in this article do not necessarily reflect the views of The Reporter. He can be reached at [email protected].

Contributed by Aklilu Haile

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