Airline absence squanders profitable opportunities

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Airline absence squanders profitable opportunities

The absence of local inter-continental airlines from designated routes is causing particular pain in the aviation industry as this has left many southern African markets under-served. 

The minimal aviation presence is in turn choking regional capacity, thereby squandering valuable commercial opportunities and slowing down the recovery of lucrative long-haul foreign tourism and trade.  

This warning was issued last week by the International Air Transport Association’s (IATA)’s regional vice president (VP) for Africa & Middle East, Kamil Alawadhi, at the annual general assembly for the Airlines Association of Southern Africa, which took place near Kleinmond, in South Africa’s Western Cape.

Alawadhi added that this aviation absence is also delaying the delivery of socio-economic benefits and attainment of many of the UN Sustainable Development Goals in the region.

“The solution is not necessarily to start or prop up unviable airlines. It is to review and overhaul the regulatory regime and replace it with one that is fit for purpose,” said Alawadhi, while calling on Africa’s governments and industry to work closely with each other to drive a harmonised agenda for air transport. Doing this, he added, would unlock even greater economic prosperity throughout the region. 

Alawadhi also emphasised proper planning, the provision of adequate staff and appropriate resources. 

The IATA regional VP also called out many African governments, who have increased aviation industry taxes as a means to make up for revenue lost due to Covid: “Aviation and tourism are not to be treated as easy targets for collecting taxes and charges without reinvesting in improved infrastructure, training or service delivery. Some of the most expensive airports in Africa are also ones with the lowest service levels and infrastructure. This disparity between cost and quality is unacceptable.”

In addition, Alawadhi discussed impediments to the recovery of the air travel and tourism sector in the region, noting that a financially viable air transport sector, in a fit-for-purpose and enabling regulatory environment supports jobs, promotes transformation and can be a driving force for Africa’s economic recovery and future growth. 


Regional outlook 

IATA’s current outlook sees the global aviation loss reduced to US$9.7 billion for 2022 and a return to industry-wide profit in 2023 with Africa on track for a full recovery by the end of 2024. This is compared to an astronomical loss of US$42 billion last year by global airlines. 

Meanwhile, demand for air cargo, which is a useful barometer of trade, has slowed worldwide, having contracted by 8.3% in August compared with the same month last year. However, Africa remains a bright spot, with demand up by 1% during August.  

Looking at the passenger market, worldwide saw a 67.7% rise in traffic during August, bringing the industry to 73.7% of 2019 pre-pandemic levels.

The latest figures in a sub-regional breakdown for Africa of airline capacity indicate the north African market is now 3.2% above 2019 traffic levels, central and west Africa is 3.8% above 2019 levels, eastern Africa is 6.4% below but southern Africa is still alarmingly 32.7% below 2019 levels.  

However, Alawadhi noted these figures are not necessarily a reflection of tepid demand as airlines in the region are actually experiencing unprecedented load factors and most are operating at maximum capacity. 

“If we zoom in on southern Africa lagging behind in the recovery, we can easily spot issues of market access and connectivity. What the numbers describe is the impact of several carriers’ exits from the market and the harmful distorting effects of an outdated regulatory framework of bilateral air service agreements between governments that restrict expansion and market access.  They do so by designating points of entry, setting capacity caps and limiting the number of flights airlines, designated by the respective countries, may operate,” Alawadhi explained. 


Single Africa
Air Transport Market 

The IATA VP added that it is time for governments to demonstrate courage and commitment by implementing the Single Africa Air Transport Market (SAATM), cautioning the industry and the continent cannot afford to spend another 30 years convening workshops about it. 

Once implemented, he said, this would result in more revenue for governments to invest in suitable education and skills development, for increased numbers of young Africans to be sustainably employable in aviation. This, he said would then be a magnet for investment, which will advance sustainable transformation and enhance the attractiveness and competitiveness of the industry in the region. 

Speaking at the same occasion, CEO of the Airlines Association of Southern Africa, Aaron Munetsi, admitted that most of the governments in the region have recognised the potential rewards and committed to implementing SAATM. But he confessed it is clear SAATM is still some way from becoming a reality and said in the meantime, airlines have to utilise the existing bilateral and regional instruments to ensure these benefits are brought to life and experienced as widely as possible.   

“But what is said and done can be quite different. Some of these very same governments, at the instigation of their national carriers, act contrary both to the spirit of SAATM and their bilateral air service agreements, by imposing prejudicial requirements on the reciprocal nation’s designated airlines,” Munetsi bemoaned. 

He continued that logic would dictate a slowdown in GDP growth which translates into lower demand for air travel, saying; “It remains to be seen if this holds true for southern Africa, given the dynamics of downsizing by some airlines whilst other airlines are upscaling their operations. Demand for domestic, regional, and international travel is stronger than ever with people accepting and paying higher prices in a trend that has been referred to as ‘revenge travel’ or ‘pent up demand’.” 

Munetsi further stated many airlines are still suffering from long-term effects of Covid, with the majority of airlines and service providers having taken on additional debt to stay afloat. 

“Most, if not all of them shed jobs temporarily or permanently in order to manage costs. This resulted in institutional knowledge, advanced skills and expertise being lost through retrenchments, retirements and relocation. At the same time, demand for skills development, job creation, transformation and environmental compliance are undiminished. These all require significant investment at a time when rising interest rates are pushing up the cost of borrowing and finance while fuels and other inflationary pressures are tightly squeezing margins,” Munetsi advised.