African airlines wait for open skies

Since relocating to the Democratic Republic of the Congo (DRC) two years ago, Firmin Agossou has had a variety of options when traveling home to Benin. Employed in the eastern city of Goma, he often returns to Cotonou to spend time with his family.

The quickest way would be by car from Goma to Kigali and from there take a five-hour direct flight by RwandAir to Benin, Mr Agossou told Africa Renewal.

Or he could fly out of Goma to Kinshasa and then fly home aboard ASKY, a West African airline with an active hub in Lomé, Togo. There is also the option of flying through Addis Ababa. But when it comes right down to it, the best choice for Mr Agossou is to fly out of Kigali or risk getting stranded in Lomé should he miss a connecting flight.

“Flying out of Kigali is the most convenient option. It’s simple and no hassle,” he says.

Thousands of air travellers like Mr Agossou face complicated choices when flying between cities across the continent. Although transiting through Europe when flying between two African cities is for the most part no longer necessary, still, as Mr Agossou has discovered, choices remain constrained by sub-optimal travel conditions including long layovers, relatively high fares, uncertain flight schedules and poor quality of services, underscoring the challenges facing air carriers trying to attract passengers and at the same time make profits.

The African Union and the International Air Transport Association (IATA) are urging countries to open their skies to market competition. African airlines executives are pushing back against what they are calling government intrusions, red tape, high taxes and political meddling.

Indebted growth

Last year Ethiopian Airways, Kenya Airways and South African Airways, three top airlines on the continent, sold two thirds of the estimated 9.2 million seats purchased for travel within sub-Saharan Africa. The remaining one third was spread among more than a dozen smaller carriers such as Nigeria-based Arik Air, Air Mauritius, and RwandAir.

Just over “10 million seats were offered in 2001”, says Heinrich Bofinger, senior transport economist at the World Bank. “That capacity more than doubled to 22.7 million in 2015.”

Experts say air traffic on the continent will grow by an annual average of 5.1% in the next 18 years, outpacing the global projected average of 4.7%, according to IATA.

Yet while more flights are linking big cities than they did are decade ago, most airlines based in sub-Saharan Africa are losing money due to stiff competition from Gulf, Turkish and European carriers on transcontinental routes.

Of Africa’s big three carriers, only Ethiopian Airlines posted a profit last year. Kenya Airways and South African Airways suffered losses. Collectively, African airlines posted losses of around US$700m in 2015 and $800m in 2016, and aviation experts at IATA and the African Airlines Association (AFRAA) say this trend may continue.

To make the air travel industry profitable, African countries need to liberalise air traffic, according to IATA and the African Union. As far back as 1999, 44 countries agreed in Yamoussoukro, Côte d’Ivoire (the Yamoussoukro Decision) to deregulate air services and promote the opening of regional air markets to transnational competition. Since then, however, implementation has been slow and inconsistent. Industry experts often criticise African countries for having more bilateral open sky agreements with partners outside the continent than with African partners.

As demand for air travel grows, countries are rushing to launch or revive national carriers. “Countries often want to have their own carrier as a matter of national pride,” Mr Bofinger observed. However, African aviation history shows that state-owned carriers are hardly commercially sustainable.

Ghana, Mali, Nigeria and Senegal are struggling to establish viable national carriers. Undaunted by past experiences, some of these countries are dusting off old plans. And now a rising middle class and new economic opportunities are reawakening national aviation dreams. Côte d’Ivoire, where the Yamoussoukro Decision was reached, has relaunched its own airline to serve destinations in West Africa. Uganda is mulling over the idea of establishing its own airline, as neighbouring Tanzania Air is trying to survive the tough times.

IATA has warned that protecting small, fragmented and closed markets could end up hampering the development of air services by limiting their potential to contribute to development and economic growth. At the same time, experts are urging African countries to create more airlines, especially low-cost carriers, to serve the continent’s internal air transport needs. Were African airspaces to be fully liberalised, there would be better services, cheaper fares to stimulate additional traffic and greater trade flows, an IATA study found in 2014.

“Opening borders, lowering barriers and implementing the open skies agreement is always favourable to the industry,” Alexandre de Juniac, IATA director general and CEO, told Aviation & Allied Business Business Journal, a magazine that focuses on African airlines news. “There will be winners and losers, but it will be favourable because it will boost their traffic.”

The renewed push to implement the Yamoussoukro Decision is expected to usher in the Single African Air Transport Market (SAATM) in January 2018, with 40 countries expected to be signatories by then. So far 20 African countries out of 54, including Ethiopia, Kenya, Nigeria and South Africa, are committed to implementing the policy.

Freedom flights

Ethiopian Airlines, Kenya Airways and others have taken advantage of the Yamoussoukro accord by aggressively promoting Fifth Freedom Flights in sub-Saharan Africa, providing a persuasive argument for liberalisation.

Fifth Freedom Flights “allow the capacity of an aircraft to be spread amongst multiple international destinations on one marketed flight”, Mr Bofinger noted in a 2017 study for the World Bank and the United Nations University.

Mr Bofinger explained to Africa Renewal that Fifth Freedom Flights “allow, for example, a flight to originate out of Addis Ababa, land in Nairobi, Kenya, drop off and pick up passengers, continue on to Kilimanjaro in Tanzania to drop off passengers destined there, and move on to Dar es Salaam”.

Mr Agossou also noted that RwandAir already uses this arrangement.

According to Mr Bofinger, success in implementation can be measured by the number of international airport connections served by multi-stop flights, adding that services in sub-Saharan Africa have thrived, with multilegged connections having increased significantly.

But even if the African skies were suddenly opened, industry experts believe it will not be enough to ensure sustainability. Other challenges will have to be addressed, such as poor infrastructure, high costs of operation and a lack of cooperation between airlines.

“How can we liberalise airlines when we are overtaxing them?” Elijah Chingosho, the secretary general and chief executive officer of the African Airlines Association (AFRAA), asked at the Aviation Africa conference in Kigali in February.

Overall, AFRAA noted, airport passenger charges in Africa are two to five times higher than the global $25 average. Reportedly, fuel is also 2.5 times more expensive in Africa than in other regions.

“If [governments] reduce charges and taxes, it brings more prosperity, jobs, GDP and trade that overcompensate for the reduction in charges,” Mr de Juniac emphasised.

And Girma Wake, the RwandAir CEO (who is the former CEO of Ethiopian Airlines) said in March that governments “should stop interfering in the airlines’ performance”.

Politically motivated appointments at management levels at the expense of proven competence, a recurrent problem for state-owned enterprises, also plagues most national airlines. However, the most decried government move, which has the effect of skewing competition, is the regular infusing of public money to keep ailing airlines afloat.

In November 2016, AFRAA declared Ethiopian Airlines the best in Africa for the fifth consecutive time, recognising, in part, its “exemplary” cooperation with other African carriers. To some, the airline’s successes appear to be showing the way forward for the industry on the continent. While wholly owned by the government, the airline has an independent management team. It has embarked on an ambitious development programme, which includes promoting travel hubs in East and West Africa with regional partners.

Other airlines such as ASKY and RwandAir are following suit, indicating that, with open skies and fair competition, African airlines can successfully find their way to profitability.

This article was originally published by Africa Renewal.