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Africa's aviation industry takes off, but global competition hovers

posted 10 May 2012, 07:39 by Mpelembe   [ updated 10 May 2012, 07:40 ]

Africa's aviation industry, estimated to be worth about 56 billion US dollars, has been growing at about 4 percent per annum. But this projected growth is unlikely to translate into huge profits for African airlines as the continental airspace is dominated by airlines from Europe, the US, Middle East and China.

At a growth rate of 4 percent per annum, Africa's airlines are shunning a tarnished image of poor safety records and only partial liberalisation.
Africa's aviation industry is estimated to be worth about 56 billion US dollars and as air transport demand is set to double over the next 10 years, the continent's airlines can see their worth going up.

But despite the projected growth, analysts say the numbers are unlikely to translate into huge profits for African airlines as the continental airspace is dominated by airlines from Europe, the US, Middle East and China.

The economies of scale play to the advantages of these more established airlines, much to the detriment of the newer and fledgling airlines from African countries.

"The prospects of Africa over the next 20 years are very good, we are looking at doubling the demand for the air transport in the next ten years and tripling in the next 15 to 20 years, so that can only be good news. The challenge is or the question is; are we up to it, in terms of skills, in terms of equipment, capitalization and all those other things?" said aviation analyst, Linden Birns.

The forecasts indicate that passenger numbers in Africa are expected to grow from 67.7 million in 2010 to more than 150.3 million in 2030.

Travel agents says they are already seeing increased bookings in the region.

"We have definitely seen an increase of clients travelling to Africa within the last few years. Clients who are involved in infrastructure development, IT work, mining and so forth have been travelling more frequently within Africa," said Imraan Ebrahim, a travel consultant based in South Africa.

Birns says there are also hindering factors like currency differences and poor infrastructure clouding the business environment for the continent's carriers.

Most African countries have currencies that are far weaker than those of the developed world. This means that in addition to facing pressure because of rising fuel prices and other general inflationary costs of doing business, African airlines also have to battle with unfavourable exchange rates.

"Certainly one of the big challenges facing airlines in emerging markets is the situation where they incurring a lot of costs

in dollars but generating a lot of their revenue in comparatively weaker currencies. There is no silver bullet to dealing with this," Birns said.

"Governments also need to think about investing in other elements of the air transport infrastructure that help to make airline transport and air travel more efficient, so better airports, more appropriate airports, good smooth air traffic management systems that minimize delays and stop aircrafts from being put in holding points in terminal B," he added.

Qatar Airways, the state-owned carrier of Qatar, announced on Tuesday (May 08) that more capacity will be introduced on the double daily Doha-Dar es Salaam route from next month. With seven services operating via Nairobi, Kenya, these will become non-stop flights to Dar-es-Salaam, effectively providing more seats direct to the Tanzanian capital.

Birns said Africa's bilateral air traffic agreements which were designed in the 1940s have hampered the flexibility of Africa's airlines. These agreements are signed between two nations giving each other permission to use civil aviation space in their territories. However, many countries did not enter these agreements as they wanted to protect their own national carriers.

However, liberalization of the African skies is improving.

Technical expertise on the other hand need to be upgraded and qualifications in aviation fields made uniformly standardized across the continent, Birns said.

Despite some world-class airlines on the continent, poor maintenance of fleets and technical problems have contributed to a number of accidents which have given African airlines a bad name, resulting in some being banned from entering some international airspaces.

South Africa Airways commercial manager, Theunis Potgieter African airlines need to work together to be able to compete with the global players.

"The issue is on the international side of the business and it's the ability of African carriers to compete on global bases and global scale, and in the last few months we have seen issues were markets like, Zambia, Zimbabwe and Malawi there has been difficulties for national carriers to be able to compete against these global carries," he said.

"So there is definitely a very good, I think business case or case for African carriers to work together to be able to compete against this global meaga-carriers," Potgieter added.