Once upon a time, there used to be East African Airways. At its peak, the common carrier for Kenya, Tanzania and Uganda was described as Africa’s foremost emerging airline only second to South African Airways. The collapse of the first East African Community (EAC) in 1977 ended all that promise.
Jetting into the present, we now have Burundi Airlines, Kenya Airways, RwandAir, Air Tanzania and Uganda Airlines. With varying degrees of success, all these national carriers are trying to survive in one of the most capital intensive and competitive industries in the world. Coupled with a working environment of high taxes, fees and protectionist policies, their overheads are frightening which translates into relatively high ticket prices.
No one is more aware of these vulnerabilities than the executives who run these airlines. On the sidelines of the African Airlines Association AGM held in Kampala last March, Jenifer Bamuturaki, Uganda Airlines CEO said: “Our revenues internally meet 85% of our costs without government support. The revenues we make are three times more than what we get from the government and what we’re working towards internally is to stop coming to the government and be able to meet our own expenses.”
Apart from the taxes that are levied directly on the ticket, the average African air ticket breaks down into several US dollar payments. These include landing fees, noise, parking, Common User Terminal Equipment (CUTE), Jet Bridge, passenger bus, lighting, counter, fire fighting and prevention. There are also payments for check-in facilities, the Ground Power Unit, ground handling, Follow-me vehicle, hangar, housing, terminal, towing and push-back. To complicate matters further, and depending on the airline and country, not everyone charges the same.
Yet, with some give and take, together with a little nudging and pulling, costs can come down. Since the regional governments financially support these airlines and own the airports, it is the governments to ultimately decide whether flying remains a preserve of the few or a boon for improving regional connectivity. Changing the regulatory policy to suit present day market conditions is one of the ways of getting more people to fly.
Allan Kilavuka, CEO of Kenya Airways said, “Aviation is taxed heavily, it faces numerous challenges, and the regulatory compliance requirements among African states are not harmonised. Aviation doesn’t get enough understanding from governments and that means it doesn’t get enough investment. It is not seen as a solution to the continent’s challenges other than as a tax opportunity.”
In business, and despite the digital age, physically meeting with counterparts across the continent is necessary for building strong working relationships. It establishes the trust needed to push things along and turn opportunities into mutual benefits. Economic growth suffers when people cannot easily get around and Africa happens to be a huge place.
Being all nicely tucked up within our borders does not bode well for the Africa Continental Free Trade Area (AcFTA). We are over one billion Africans who hardly know each other. This is fertile ground for the continued misconceptions and xenophobic attitudes that often limit cross-border business growth.
Western Europe, which is roughly the same size as the Democratic Republic of Congo (DRC), has nearly 200 scheduled airlines. The seven-member EAC, including the DRC, has less than 30. The International Air Transport Association (IATA) says Africa is home to over 18% of the world’s population, but Africa’s aviation industry accounts for just two percent of global air passengers. Out of every 100 passengers, two are Africans.
During 2024, African airlines are expected to collectively make a $100 million profit. When calculated as earnings per passenger, this amounts to just 90 US cents compared to the global average of $6.14. Even though this is an industry known for low margins, IATA says Africa can do far better.
Referring to these figures, Kamil Alawadhi, IATA’s Regional Vice President for Africa and the Middle Eastsaid, “The demand to travel is there. To meet it, the African airline sector needs to overcome many challenges, not least of which are infrastructure deficiencies, high costs, onerous taxation, and the failure to broadly implement a continent-wide multilateral traffic rights regime.”
IATA thinks in a world where aviation continues to play a crucial role in connecting people and facilitating economic growth, Africa stands out as the region with the greatest potential. Realising this potential however, requires breaking down barriers to encourage a more competitive environment that does not consistently fall prey to the whims of national interests.
Fortunately, as Africa’s fastest growing economic bloc, the EAC is heading towards an ‘Open Skies’ policy of unlimited commercial aviation services, without the need for explicit government-level approvals.
In July, the EAC Secretariat in Arusha announced the completion of draft regulations for liberalisation of the Air Transport Market in the EAC Region. The document is to soon be submitted to the EAC Sectoral Council on Transport, Communication and Meteorology for adoption.
Hopes are that Partner States will subsequently negotiate their Regional Air Transport Bilateral arrangements under the Multilateral Air Services Agreement, effectively opening the way for a single market for air transport services within the Community.
Andrea Aguer Ariik, the EAC Deputy Secretary General in charge of Infrastructure, Productive, Social and Political Sectors said, “An integrated air transport market is essential for the development of our region. By removing barriers to air travel, we can enhance competitiveness and attract investment in the region. The cost of air fares in the region has caused a public outcry that needs to be addressed.”
According to the EAC Secretariat, the proposed regulatory framework is expected to lower the cost of air fares, stimulate demand for air traffic, connectivity, increase operational efficiency, reduce the flying time and support the expansion of air transport capacities. Under the spirit of the EAC Common Market Protocol, Ariik said there is a possibility of harmonizing the current regulatory fees and charges for airlines registered in the region.
For decades, African governments have been fending off accusations that running a national airline is nothing more than an expensive vanity project. The evidence is in the number of airlines that have come and gone. But the goals of the 1999 Yamoussoukro Decision still hold true. Air transport helps to generate trade, promote tourism, and creates employment opportunities.
The Single African Air Transport Market (SAATM) is a flagship project of the African Union Agenda 2063. It is intended to transform the continent’s skies into a single market by deregulating air services and opening regional air markets to transnational competition. Uganda Airlines is close to signing up and joining the current 34 members.
IATA has carried out a survey showing that if just 12 key Africa countries opened their markets and increased connectivity, an extra 155,000 jobs and $1.3 billion in annual GDP would be created in those countries. Governments allowing airlines to spread their wings in a more conducive atmosphere is the very important first step.
Perhaps then, in the not-so-distant future, another version of East African Airways will take flight. Not out of any sense of nostalgia, but because of inevitable consolidation when the competitive picture calls for economies of scale.
Qatar Airways, which is finalizing arrangements to buy a 49% stake in RwandAir, already owns a 25% stake in the International Airlines Group, the owners of British Airways.
Austrian Airlines, Brussels Airlines and Swiss International Air Lines are all subsidiaries of Lufthansa Group, the German carrier. Ethiopian Airlines Group owns 49% of Malawi Airlines and 45% of Zambia Airways.
As the saying goes, ‘the sky’s the limit’, but only if the right incentives are in place.