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Aviation market liberalization faces stiff pushback

Aviation market liberalization faces stiff pushback

Government to reconsider Ethiopian Airlines, Airports merger

The proposed aviation market liberalization by the Ethiopian Civil Aviation Authority raised serious concerns among stake holders.

As part of the ongoing economic reform program by the Prime Minister Abiy Ahmed (PhD) administration, the Ethiopian Civil Aviation Authority (ECAA) in collaboration with the Ministry of Transport has drafted a new aviation proclamation and regulation that encourages local and foreign investors to venture into the domestic aviation market.

In a consultative meeting held with stakeholders held on Thursday, ECAA presented the draft aviation proclamation and regulation. The draft proclamation allows private investors to build, operate and own airports, airfields and heliports. The existing aviation law mandates only the Federal government to build airports. However, the draft proclamation would enable local and foreign investors to build and operate airports and air strips. Foreign investors can partner with local investors to build and operate airports.

According to Ali Mohammed legal department head with ECAA, foreign investors can form joint venture companies holding up to 49 percent shares while the majority stake would be owned by Ethiopian nationals. Regional states and city administrations can also build and operate small airports.

Director General of ECAA, WossenyelehHunegnaw (Col.), noted that the draft proclamation would enable private sector operate airports. Wossenyeleh said foreign investors in partnerships with local investors or the government can jointly develop and operate airports. He said the domestic aviation market was reserved only for Ethiopian nationals adding that the proposed aviation regulation allows the participation of foreign investors in the domestic air transport sector.

Wossenyeleh noted that all airport developers and operators would be obliged to meet global standards. “As aviation is a global industry all operators have to comply with international standards,”he said.

Stakeholders voiced their concern of the proposed proclamation. CEO of Ethiopian Airports,TewodrosDawit expressed his concern of the possibility thatneither the private sector nor the regional states have the experience of building airports. “What type of airports are we going to allow the private sector and regional states to build? There are so many safety and security issues that need to be addressed. We should define the type of airports that can be built by the private sector. The private sector, regional states and city administration can build air field and air strip but building an airport at this time by the private sector or cities pose safety and security risks. Is it time to fully open the sector for the private sector?” Tewodrosasked. The Constitution allows only the federal government to engage in the development of airports and the proposed proclamation may contradict with the Constitution.

Wossenyeleh said that the federal government can delegate its power to regional states. “We have consulted legal experts and this would not contravene the Constriction,” he said. Wossenyeleh noted that the categories of the airport that can be built by the private sector, regional states and city administration would be decided by the government.

“Airport development is a capital intensive business. We do not expect the private sector or regional government to build a big airport tomorrow. But we think of what could happen after 10-15 years. Airport administration could be given on a concessionalbasis to the private sector,” he said.

CEO of National Airways, AberaLemi (Capt.), pointed out that currently Ethiopian Airlines owns the airports. “Will the airports remain under Ethiopian Airlines administration or what would be the fate of the existing airports? Why do not we deliberate on the exiting challenges?” he inquired.

Wossenyeleh said that the Council of Ministers has decided to put the Ethiopian Airports Enterprise and Ethiopian Airlines under one leadership. “If there are problems with the current airport services we can discuss that in another forum. Now let us focus on the draft proclamation and regulation,” he said.  

Amir Abdulwahab, general manager of National Airways, lamented that there are so many irregularities at the existing airport administration. “Some decisions have been made on wrong premises. Ethiopian Airlines build and operate airports. And the government is in the process to partially privatise Ethiopian Airlines. Foreign companies would buy shares in Ethiopian Airlines. How will ECAA regulate all airports? Ownership and regulation are two different things. If we do not discuss and rectify the existing problems it would be like constructing a building on poor foundation,” Amir said. According to him, there are unfair treatments at the airports. “When private operators demand for plots of land for the construction of hangars, Ethiopian Airlines would object saying it needs the land for future expansion projects. While there are unfair treatments of private operators at state owned airports what would we expect when private sector builds airports?”   

Managing director of Abyssinian Flight Services and Aviation Academy, Solomon Gizaw (Capt.), asks why private operators are not allowed to develop small facilities at the existing airports. “We have been demanding to build a maintenance hangar for many years to no avail. I understand that there is space problem in Addis Ababa Airport but why don’t weget plots in Jimma and Hawassa Airports. We have aircraft maintenance mechanics but since we do not have maintenance hangars we send our aircraft to Nairobi where we send a huge sum of foreign currency. Just last week I received an invoice of 76000 USD.”

Tewodros noted that the government decided to merge Ethiopian Airports with Ethiopian Aviation Group to sustain the fast growth of the national carrier and develop the aviation sector in the country. “If you have complaints on the airport service we can discuss that,” he said. 

EndeshawYigezu, air transport director with ECAA, revealed that the Ministry of Transport would undertake a study on the fate of the merger of Ethiopian Airports and Ethiopian Aviation Group. “The ministry would conduct a study and present a recommendation for the government that will enable it to decide on the matter? Will it continue like this or will it be reversed? That will be decided by the government,” Endeshaw said.

FrehiwotTessema, CEO of Aquarius Aviation, one of the private airlines operating in Ethiopia, said that it would be commendable if regional states could develop and operate air strips. “We have been demanding to build air strips in the regions. For instance, my company requested to maintain and use an old air strip in Langano or build a new air strip but the regional authorities were not even to receive the letter written by the ECAA. So we would be very happy if regional states could develop their own air strips,” Frehiwot said. “It could help the country attract investors, tourists and create jobs,” she added.

MesfinTassew, chief operating officer of Ethiopian Airlines, denied the accusation directed at his airline. Mesfin said Ethiopian Airlines is not responsible for the alleged unfair treatment at the airport. “The Government merged the administrations of Ethiopian Airports with Ethiopian Aviation Group a year and half ago but the general aviation has been operating for the past decades. So, Ethiopian Airlines cannot be held responsible for the woes of the general aviation.”

Mesfin said the government merged Ethiopian Airports with Ethiopian Aviation Group to cope up with international airport service standards so that the national carrier continues supporting the nation’s economic growth. “The government could reconsider its decision but I do not think it will reverse it.”   

The most controversial issue was the liberalization of the air transport market. The draft air transport development regulation allows local and foreign investors to jointly establish airlines that operate scheduled and charter flight services. Foreign investors can invest in local airlines by having up to 49 percent shares. Local and foreign investors can invest in aviation school, aircraft maintenance centers, cargo operation and aviation consultancy firms.

Executives of Ethiopian Airlines furiously contested the idea of opening up the air transport sector for foreign companies.Mesfine said Ethiopian Airlines has been considered as a strategic asset of the nation contributing a significant share for the socio economic growth of the country. “The national carrier is facing an intense competition from mega carriers which are backed by their governments. Today we are competing with Emirates, Qatar, Etihad and Turkish Airlines and battling for traffic rights. If we allow foreign nationals to have a 49 percent stake on a domestic airline giant foreign airlines like that of Emirates would come and compete with national carrier. This would kill the national carrier,” Mesfin said.

Amir argued that how long the national carrier thrive under protection. “The government is liberalising the market. Should we still cry for protection or should we discuss how we can win the stiff competition that we would face?”

Solomon said it was not time to fully liberalise the air transport sector. “ECAA first should build its capacity. We also do not want the national carrier, the pride of all us to die.”

Abera, on his part, said that the issue of foreign investment has not been the demands of the private operators. “It was not our priority. Ethiopian Airlines is the pride of Africa and we do not need anything that would harm our national flag carrier. However, we have been demanding for fair treatment for private operators. We have our line of business and we have been requesting the government to lift the restrictions that have been stifling the private operators. Aircraft seat and type limitations, restrictions on scheduled and cargo flights so on.”

Mesfine said that all countries even those developed nations who are advocates of open skies protect their national carriers. “Let us not be fooled. Ethiopian Airlines will submit its written response to the proposed proclamation and regulation,” he said.

GennanawAssefa, VP legal department, asked the legal premises of the proclamation and regulation. “We are here talking about big policy issues. We are discussing ownership structure. Where is such a policy direction? I know that the Ministry of Finance is working on that. But, how are you mandated to address such a major issue? How should we invite foreign investors? We should think how best we can do it for the betterment of the aviation sector and the development our country.”

Wossenyeleh noted that the Civil Aviation proclamation clearly mandates the Ethiopian Civil Aviation Authority to deal with the aviation sector. “Ethiopian Airlines is an operator. It is ECAA which can drafts aviation proclamation. Our duty is to make proposal. The government can endorse or reject it,” he said.

Wossenyeleh told The Reporter that the draft proclamation would be submitted to the Attorney General. The draft aviation proclamation and regulation would be submitted to the Council of Ministers which will enact the regulation and pass the proclamation to the House of Peoples Representatives for endorsement.