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The dilemma of opening African skies

The dilemma of opening African skies

The Single African Air Transport Market (SAATM) – a flagship project of the African Union Agenda 2063, an initiative of the AU to create a single unified air transport market in Africa, the liberalization of civil aviation in Africa and as an impetus to the Continent's economic integration agenda – got the green light at this year’s AU Summit. Though 23 have agreed to implement SAATM, 32 AU member nations have not warmed up to the idea, reports Kaleyesus Bekele.

Africa is home to 12 percent of the world’s population but it accounts for only three percent of the global air service market. Since other transport infrastructure like road and railway network is not well developed, air transport was supposed to play a crucial role in connecting African countries and spurring economic development. By building only three kilometers of runway Africans can travel thousands of miles in Africa and the rest of the world.

However, African countries are not well interconnected by air. Neither are they economically well integrated. Intra Africa trade stands at only 15 percent. Air fares are relatively expensive due to high airlines operational cost that stem from exorbitant airport fees, taxes and fuel price among other things.

African air transport market is restricted by protectionist bilateral air service agreements commonly called BASA. On some routes few airlines dominate the skies due the restrictive BASAs and this makes air fares more expensive.

Though the Organization of African Unity (OAU) and the African Union (AU) have been tirelessly working on promoting African economic integration, the African air transport market is still fragmented. African countries deny traffic right for African airlines but allow non-African carriers to freely operate in the continent.

Due to the restrictive BASAs home grown African airlines carriers cannot freely fly from one African country to another. Those who have the traffic right still beg civil aviation authorities to increase flight frequencies. According to a World Bank Report titled “Open Skies for Africa” part of the reason for Africa’s under-served status, is that many African countries restrict their air services markets to protect the share held by state-owned air carriers.

The dilemma of opening African skies

 

Ethiopian Airlines Group CEO Tewolde Gebremariam said that the AU and its predecessor have been working very hard for the economic integration of Africa but despite all the efforts intra Africa trade is only 15 percent of the total trade volume. “Compared to other continents like the European Union, which stands at 60 percent, ours is very low. So we need to integrate among ourselves. We need to trade and invest. And the most critical economic enabler to boost trade, investment and tourism is aviation,” Tewolde said.

Recognizing these challenges African leaders who gathered in the Ivorian city of Yamoussoukro in 1988 decided that African air transport market should be open for African airlines. Many African states in principle agreed to air service liberalization. In 1999 African ministers responsible for civil aviation adopted the Yamoussoukro Decision, named for the Ivorian city in which it was agreed. The declaration commits its 44 signatory countries to deregulate air services, and promote regional air markets open to transnational competition.    

In 2000, the Decision was endorsed by head of states and governments at the OAU, and became fully binding in 2002.

But implementation has fallen short, says Charles Schlumberger, Lead Air Transport Specialist at the World Bank, and author of Open Skies for Africa. “African states have been reluctant to fully implement the Yamoussoukro Decision,” Schlumberger said.  

Various attempts by the African Airlines Association (AFRAA), the African Civil Aviation Commission (AFCAC), and the AU to persuade African states to fully implement the Yamoussoukro Declaration took decades. And this has cost the continent direly.     

Failure by African states to establish a single African air transport market enabled foreign airlines to conquer African skies. The intense competition coming from mega international carriers led to the demise of many African carriers.

According to Tewolde, 80 percent of the passenger traffic between Africa and other continents is carried by non-African airlines. “All the major African carriers including Ethiopian Airlines, South African Airways, Kenya Airways, TAAG Angola, Egypt Air, Royal Air Marroc, Tunis Air and Air Algérie combined have only a 20 percent market share. This is not fair. We are determined to change this. We should not be a bystander in our own continent,” he said.                    

The International Civil Aviation Organization (ICAO) and the International Air Transport Association (IATA) have also advised African countries to open their skies for enhancement of connectivity and efficiency of air services in the continent. An IATA survey suggests that if just 12 key African countries opened their markets and increased connectivity an extra 155,000 jobs and 1.3 billion dollars in annual GDP would be created in those countries.

Nick Fadugba, former secretary general of AFRAA and CEO of African Aviation Services, told The Reporter that African countries, who do not even have a national airline, are resistant to liberalize their air transport market. “Why do African countries sign international treaties if they are not going to implement them,” Fadugba wonders.

Former secretary-general of AFRAA, Elijah Chingosho (PhD), told The Reporter that after years of deliberations it was difficult to wait for all the 44 signatory states to fully implement the YD at once. “So we initiated a renewed impetus to implement the YD. What we decided was to launch the African Single Air Transport Market with those who were ready and willing to liberalize their air markets,” Chingosho said.

Consequently, in 2015, at the African Union Heads of State and Government Summit the Declaration on the Establishment of a Single African Air Transport Market (SAATM), as a flagship project of the AU Agenda 2063, was adopted. Immediately thereafter, 11 AU Member States declared their solemn commitment to establish a Single African Air Transport Market through full implementation of the Yamoussoukro Decision of 1999 that provides for full liberalization of market access between African States, free exercise of traffic rights, elimination of restrictions on ownership and full liberalization of frequencies, fares and capacities.

The number of signatory countries has increased to 23 since then. Ten more countries have expressed interest to join the league.

Amani Abou-Zeid (PhD), Commissioner for Infrastructure and Energy at the African Union Commission stated that SAATM was created with the aim of enhancing connectivity, facilitating trade and tourism, creating employment, and ensuring that the industry plays a more prominent role in the global economy and significantly contributing to the AU’s Agenda 2063.

According to the AU Commission, the creation of the single African air transport market will create additional 300,000 direct jobs and two million indirect jobs. Abou-Zeid, said the establishment of a single African air transport market will spur economic development by boosting trade and tourism among African nations. Aviation in Africa supports eight million jobs and 80 billion dollars in GDP.

After years of negotiation and arduous legal paperwork the African Union officially launched SAATM on the margins of the Assembly of Heads of State and Government of the African Union meeting at the 30th Ordinary Session at the AU headquarters in Addis Ababa, on January 28-29. The new chairperson of the AU, President Paul Kagame of Rwanda, declared the establishment of SAATM in a closed heads of state summit held on Monday at the headquarters of the Union in Addis Ababa. President Kagame said that the launch of SAATM is a big step forward for the development of the African air transport industry.

Kagame, chairperson of the AUC, Mossa Faki Mohamat, and President Faure Gnassingbé of Togo, champion of SAATM, cut the ribbon of the plaque put at the HQ of the AU to mark the historical launch of SAATM.

A number of international aviation bodies including ICAO and IATA congratulated the AU and member states for launching SAATM. IATA said enhanced connectivity will stimulate demand, improve the competitiveness of the African airline industry, and make air travel more accessible. According to IATA, this will enable higher volumes of trade, expanded tourism and growing commerce between African nations and with the rest of the world.

“The SAATM has the potential for remarkable transformation that will build prosperity while connecting the African continent. Every open air service arrangement has boosted traffic, lifted economies and created jobs. And we expect no less in Africa on the back of the SAATM agreement,” Raphael Kuuchi, IATA’s Vice President for Africa, said.

“We commend the 23 States that have signed agreed to SAATM.  It is an important step forward. But the benefits of a connected continent will only be realized through effective implementation of SAATM—firstly by the countries already committed and also by the remaining 32 AU member nations still to come on board,” Kuuchi said.

Tewolde said January 29, 2018 will be a historical day for the African aviation industry. “This is obviously a huge millstone for the continent.”

But not all Africans are celebrating the launch of SAATM. There is a strong resistance by countries to implement SAATM and some airlines are criticizing the initiative.

At the official meeting held on Monday morning, President Yoweri Museveni of Uganda requested to make an observation. President Kagame said that it was not in the program for any head of state to comment on SAATM but he gave the floor to Museveni.

President Museveni expressed his fear that SAATM will lead to the domination of African skies by few African airlines who are already dominating the African skies. “Few airlines are going to dominate and that is not good,” Museveni said. He said he rather prefer that African countries form regional airlines first before liberalizing their skies.

A senior African aviation expert The Reporter talked to said that President Museveni’s remark was contradictory with what his country is doing. “It seems that he is not knowledgeable about SAATM. Uganda has already liberalized its air service. Since it does not have a national airline it has allowed African and non-African airlines to operate to and out of Uganda. Many airlines fly to Entebbe. Even some carriers have fifth freedom right – the permit to operate between Entebbe and other destinations,” the expert said. “So what is the rationale behind protesting SAATM while you have already allowed all international carriers to operate to your country,” he remarked.        

Museveni was not the only one who expressed his skepticism about SAATM. Nigerian private airlines expressed their grave concern towards the establishment of SAATM.

Airline Operators of Nigeria (AON), which denounced the policy, said they were not carried along in the discussions leading to the endorsement of the implementation of the policy, and alleged that if embraced, it would shortchange the industry.

The Nigerian airlines argued that there is no level playing field where Nigeria can compete with other African carriers, which they said still enjoy some protectionism, lower interest rate on loans and waivers on import duty for aircraft and spares. These airlines requested the Government of Nigeria not to implement SAATM.

Some of African airlines, who protest the implementation of SAATM, claim that the initiative would benefit only the big airlines such as South African Airlines, Kenya Airways and Ethiopian Airlines and it would afflict the small and weak airlines.

African aviation authorities reject the assertion. Sossina Iyabo, the secretary general of the African Civil Aviation Commission, the executive agency of SAATM, told The Reporter that SAATM would benefit every African country and airline regardless of their size by improving air connectivity, boosting passenger traffic, and spurring economic development.

“When you live in fear you do not make progress. But you can overcome your fear by coming out and look what is in it for you and take your share from the market,” Iyabo said. She added: “It does not matter whether you are big or small. Even if you do not have an airline every state will benefit from SAATM. Because you benefit from increased passenger movement, your airport would benefit, air navigation services will benefit, your downstream sector, the aviation value chain will benefit, your every entity that works in the airport environment will benefit.”

Nigeria is one of the 11 champion states that first expressed their solemn commitment to African open skies agreement. “The Nigerian airlines are not yet able to see the benefits of SAATM as their government. They are not as visionary as they should be,” Iyabo said.     

Secretary-general of AFRAA Abderahmane Berthe told The Reporter that the small airlines should cooperate with the big airlines. “The train of liberalization is there. You cannot stop it,” Abderahmane said. He said that small airlines should not worry about the implementation of SAATM as it incorporates regulatory framework that protects airlines from unfair competition and it also has dispute settlement mechanism.

Tewolde on his part said that there is no such thing as big and small airlines in Africa. “We all are small airlines. It is like two bald men fighting for a comb,” Tewolde said.  

Market liberalization has always been a bone of contention. Many argue that liberalization brings in more operators, foster better service and reduced fare. While others contend that the local industry would be stifled.

“When air transport market is deregulated there will be winners and losers. If you are small and weak you should cooperate with strong African airlines like Ethiopian Airlines,” Fadugba told The Reporter. “I hear some say Ethiopian is the winner and it will take all. But instead of criticizing ET work hard like ET. Emulate them. And partner with them like what ASKY, Malawi and now Zambia are doing,” Fadugba said.

Tefera Mekonnen, air transport director AFCAC, said there is no need to be afraid of SAATM as the open skies agreements comprises consumer protection, competition regulation and dispute settlement mechanism. Tefera advised member states to engage with the executive agency, AFCAC, on the implementation of SAATM.

African states that get together twice a year to convene on continental agendas such as economic integration still seem to be divided on the implementation of African open skies, thirty years after its inception.

Berthe said the most important thing is that the 23 countries that are committed to fully implement SAATM represent 80 percent of the total African air transport market. Berthe poised that more countries would join SAATM in the coming few years when they realize the benefits. “If you are in a country which is not part of SAATM you will have to compete with airlines from SAATM area which have access to a larger market. If you are not a signatory you will be isolated and would lose market. Eventually, you will end up closing your airlines.”