Sky’s liberalization: african airlines and LAM Mozambique

6 Dec, 2005. The Nation, Nairobi: ‘Intruders’ threaten African Airlines.

[Interesting article from The Nation (Nairobi). What to do with foreign control of African sky? LAM still in the blacklist. Artigo interessante sobre os intrusos dos ares – liberalização do espaço aéreo e consequências para a sobrevivência das companhias nacionais].

The entry of foreign airlines in the African aviation industry due to liberalisation is threatening the national carriers.
A recent regional airlines conference in South Africa was told that foreign carriers controlled a disproportionately large share of the African market and use their wealth to drive the continent’s national airlines out of business.

However, it was noted that the airspace of a few African countries, including Kenya, was adequately protected by the national carriers.

Kenya Airways was cited as among the continent’s carriers which compete with the foreign airlines with few chances of losing out.

The conference, which was attended by chief executives of the major African airlines, noted that if the “invasion” by foreign carriers was not checked, their African counterparts may soon grind to a halt.

Many African carriers are increasingly facing the challenge posed by the richer and more technologically advanced foreign ones, particularly in the long-haul sector.

The unfavourable competition is further complicated by the “blacklisting” of some African airlines allegedly for not meeting some safety conditions. This has resulted in their banning from flying to some European destinations.

According to the International Air Transport Association (IATA) director-general, Mr Giovanni Bisignani, some of the airlines are Lam Mozambique, Transairways, Central Air Express, International Air Tours, Johnson Air and Silverback Cargo Freighters.

Apart from South Africa, most of western, central and southern African countries do not have long-haul carriers, and this exposes the continent to unfair competition from foreigners.

However, North African countries of Morocco, Algeria, Libya and Egypt have strong carriers which remain competitive and prosperous, while in West Africa, only Senegal has a competitive airline.

Kenya Airways and Ethiopian Airline are strong forces in eastern Africa, while Southern African Airways and Air Mauritius dominate the south.

These airlines have taken steps to equally share traffic with their European counterparts. But many of the long-haul ones in the other countries have collapsed, while some are struggling.

It is for this reason that uncontrolled liberalisation was a major item of agenda at the regional conference in Sun City, South Africa.

Under the aegis of the African Airlines Association (AFRAA), CEOs of about 40 major African member airlines sought to fight the dominance of the continent’s skies by the foreign carriers and asked for their governments’ support.

The secretary-general, Mr Christian Folly-Kossi, warned that the continent was likely to be completely invaded by the mega-carriers.

“The invasion of the continent is stimulated by the fact that Africa is the fastest growing region for air travel after Asia,” he said. “Yields remain the highest in Africa, compared to other continents, and unfortunately, African carriers are weak and pose very little threat to the mega-carriers.”

Mr Bisignani said African air traffic is expanding at a rate above the world average, with that of passengers rising at 11.2 per cent and of cargo at 7.5 per cent. However, he noted, the growth was likely to be affected by high fuel prices.

According to AFRAA, air transport in Africa generates 470,000 jobs and contributes $11.3 billion (Sh846 billion) to the continent’s gross domestic product. The foreign carriers, therefore, have a good reason to eye the market.

Mr Folly-Kossi said there was lack of bilateralism, reciprocity and balance rules in the route control on the continent. “History indeed shows that in the happy days when bilateralism, reciprocity and balance rules were prevailing, African airlines were better off,” he added.

But he said a survey conducted by the AFRAA secretariat in Nairobi had shown that in eastern and southern Africa, the local carriers are coping with the competition.

“In North Africa, the sky is well protected and the exchange of traffic rights is carried out on the basis of bilateralism, reciprocity as well as the capacity and frequency balance,” he said.

In the eastern and southern Africa, he noted, Kenya Airways, South African Airways, Ethiopian Airline and Air Mauritius were leading carriers, and most of them were fast expanding their networks to other parts of the continent.

The conference blamed African governments for the “encroachment” by foreign airlines, saying that they had accepted “progressive distortions” of the balance rules protecting the African airlines, yet governments in other regions had continued to observe them.

According to AFRAA, the effects of the foreign dominance of the African aviation industry is far-reaching.

For instance, revenue generated by the foreign carriers is not reinvested on the continent, but repatriated to the mother countries.

The foreign carriers hire only a few local people and at very low levels, while top management positions are reserved for their nationals.

The domination also leads to the collapse of the local carriers and a strain on the domestic and regional routes which are critical to the local economy. The implementation of the single-airspace concept within the European Union that allows European airlines to fly to African destinations from any airport of the region is likely to further increase the dominance.

Mr Folly-Kossi warned that further glut would come as a result of the franchising policy being promoted by various European carriers in many African countries, and also of their buying into African airlines.

In West Africa, Air Afrique, Ghana Airways and Nigerian Airways collapsed in the last few years, and their market was taken over by foreign carriers on long-haul routes.

The marketing and sales executive officer of Ethiopia Airlines, Mr Tewolde Gebre Mariam, said the predominance was a market problem for his company. He noted that the ongoing liberalisation on the continent was expected to attract new entrants in the market, thus lowering the cost of air transport, intensifying competition and bringing about a greater bargaining power to customers.

Among the challenges facing the continent’s aviation industry, he said, was ineffective competition in service and quality. The industry lacked home market to build wide networks and high-frequency operations, he noted. To fight the dominance and ensure the growth of the continent’s airlines, Mr Mariam urged the companies to form partnerships.

For example, he said, Groupo TACA in 1997 brought together five airlines – Lacsa of Costa Rica, Taca Int’l of El Salvador, Aviateca of Guatemala, TACA of Honduras and Nica of Nicaragua.

Mr Folly-Kossi said the competition was like “the fight of one David and many Goliaths.” Most African airlines fly only to their former colonial masters’ capitals, further complicating their positions, he added.

South African Airways chief executive Khaya Ngqula said lack of coordination and cooperation among African airlines was a big setback to the continent’s aviation industry. “We need to group ourselves into a formidable unit because our business is the same – carrying passengers and cargo,” he said.

“Like lions do,” he said, “we have to learn to hunt in a group. That’s what we need to do now since we are too small to hunt alone.”

South African transport minister Jeff Radebe said that for African airlines to be competitive, their governments must improve the environment and infrastructure. It is an uphill task to travel across the continent owing to lack of connectivity, he said, adding: “Africa needs a comprehensive action plan on aviation. Liberalisation of African skies remains a major challenge to all.”

Opening the conference, he warned the African airline CEOs to make good choices of suitable aircraft for specific routes.

“You should be vigilant not to acquire outdated technology,” he said. “Old, environment-unfriendly aircraft may be dumped in Africa with a high cost of maintenance.”

He told them that to remain competitive, they have to look for ways of dealing with irregular traffic and low passenger volumes.

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