Forum urges for enhanced cooperation among African airlines
The 29th African Aviation Forum held this week in Addis Ababa urged African airlines to enhance collaboration and partnership in a bid to withstand the stiff competition coming from mega international carriers.
Opening the African MRO (Maintenance Repair and Overhaul) and Aviation Training conference held from February 4-6, 2020 at Ethiopian Skylight Hotel, Nick Fadugba, CEO of the African Aviation Services Limited, said that air transport is the most efficient means of transport in Africa where rail and road transport is not well developed. Fadugba said in order to thrive African airlines must forge sincere collaboration, partnership and joint ventures. “We must look at Ethiopian Airlines as a leading example which is connecting Africa and establishing partnerships with several African airlines,” he said. “I am talking about sincere partnerships and joint ventures,” he added.
With a population of 1.2 billion people and fast economic GDP growth and burgeoning middle class the air transport industry in Africa has been growing steadily. Africa is attracting foreign direct investment and the GDP will continue to grow in the coming years. The International Air Transport Association (IATA) forecasts air transport industry in Africa will continue to grow at a rate of 4.6 percent, the second fastest growth next to the Middle East.
“We all must be ready to accommodate this fast growth,” Tewolde Gebremriam Ethiopian Airlines Group CEO told delegates. The African MRO market alone is worth 2.6 billion dollars. However, despite the presence of modern MRO centers in Ethiopia, South Africa, Egypt and Morocco, the majority of this market goes out of the continent. African aircraft and engines are repaired elsewhere with a higher transport cost.
“There is enough market for all of us. What we need is collaboration,” Tewolde said. According to Tewolde, Ethiopian Airlines has invested more than 300 million dollars on its MRO center building maintenance hangars, maintenance capability in the engine and components shops. The airline has invested more than 100 million USD to expand its aviation academy which is the largest aviation training institute in Africa. With flight simulators and 36 trainer aircraft Ethiopian Aviation Academy is training 300 pilots a year and the plan is to train 1000 pilots a year.
Tewolde Gebremariam highlighted the challenges facing the African aviation industry. “African countries are not well connected. If you want to go from Algiers to Cape Town you have to go to Europe first,” he said.
Ethiopian has been playing a significant role in connecting Africa for over seven decades. Ethiopian has been connecting African countries and with the rest of the world. “We have been serving African countries since independence. Ethiopian played a vital role in the socio economic development of the continent particularly in nation building process of many African countries. Ethiopian today operates to 60 destinations in Africa, 125 international and 22 domestic destinations. It has a modern fleet of 130 aircraft with an average age of five generating 4.5 billion dollars.
“Collaboration in today’s globalised highly connected small global village is very important. The I phone is designed in the US and manufactured in China. Collaboration- that is the area that we are lagging behind,” Tewolde said.
Tewolde recounts that when he joined Ethiopian Airlines 35 years ago the aircraft technicians supporting Zambia Airways and Angola Airlines. He said Ethiopian Airlines has been doing its share to contribute in terms of collaboration. Unfortunately after 30 years fast forward Africa still lags behind in in terms of collaboration.
“From our side we are still maintain the collaboration attitude,” he said. Today Ethiopian provides maintenance support to RwandAir, Air Tanzania, Malawi Airline, Ethiopian Mozambique, Chad Airline (a start-up airline a joint venture between Ethiopian and the government of Chad), Congo Airways, Cam Air (Cameroon) TAAG Angola, Ceiba Airline (Equatorial Guinea) Arik Air and others in Nigeria and ASKY in West Africa.
“These joint ventures though they are at initial stage we have a dream that they will be large airlines in a very short time because there is an opportunity to grow,” Tewolde said.
While there exists a vast untapped opportunity African home grown airlines are facing myriads of challenges. The market share is highly skewed. Eighty percent of the market share between Africa and the rest of the world is controlled by non-African carriers. Twenty years ago African indigenous carriers had 60 percent market share. This has been declining alarmingly and reached 20 percent.
“Who knows if we do not work together that can shrink further to zero. And then we will not be able to see indigenous truly African airlines,” Tewolde said. “We believe that the market share has to be at least it has to be 50-50. Fair share. But it is up to us to change the market share. It is a competitive world and instead of having unhealthy competition among ourselves in the continent we have to cooperate more. I call up on African governments to open up liberalise so that African airlines can revolutionise as South West Airline has revolutionised the American air transport industry 30 years ago.”
The growth of African aviation industry is thwarted by higher operation costs. Aircraft fuel is 35 percent more expensive than the world average. Airfares are expensive as governments impose exorbitant taxes. “Air tickets are equally taxed with cigarettes and alcoholic beverages,” Tewolde said.
Tewolde stressed the need to liberalise African skies for African airlines. “Indigenous African airlines should freely fly in Africa without any restriction like European carriers fly any point in Europe without restriction.”
Girma Wake, former CEO of Ethiopian Airlines and former board chairman of RwandAir, echoed the need to liberalise African sky. Girma said though African states decided to open up the air transport market in 1989 they are not able to fully implement the decision to date.
Girma said 33 countries representing 89 percent of the air traffic have ratified the new initiative Single African Air Transport Market (SAATM) launched by the African Union in January 2018. “Eighteen of them have signed memorandum of implementation with countries. This is not a bad achievement and the others will follow suit,” Girma said.
Girma went on to say that SAATM is good for African carriers. “I believe that SAATM will save many of the carriers from losing. Today 80 -90 pc of the airlines are losing. 50 percent of the total profit of Africa comes from one airline.”
Lack of understanding is blocking SAATM. “The fear that if we open up the big carriers will eat us alive is not valid. The big carriers can do without SAATM. It is the small carriers that benefit. The small and big carriers should work together,” he concluded.