IATA's four big hurdles to overcome in Africa
Kaleyesus Bekele gets the IATA perspective on the state of the African airline industry.
The African aviation industry currently supports some 6.8 million jobs and contributes $76 billion to the continent’s gross domestic product (GDP).
However, a number of outstanding issues are stifling the growth. These include safety, poor connectivity, market restrictions and exorbitant taxes.
The International Air Transport Association (IATA) has been assisting African countries to resolve some of these issues.
Briefing journalists at the conclusion of the 72nd IATA annual general meeting and air transport summit in Dublin, Ireland, Raphael Kuuchi, vice president for Africa, said that safety was one of the priority areas.
“Safety has been improving steadily in recent years but the level in Africa is not yet up to the global average, where we want it to be,” he said.
“We are providing training support for many of the carriers in line with the Abuja Declaration to ensure airlines qualify for the IATA operational safety audit (IOSA) registry. We have been successful in providing training and capacity building for 20 airlines in the past and now we have increased the number on the IOSA registry from 18 in 2013 to 32 today.
“We still have a number of airlines who have finished the audit and are closing their gaps and we hope this year to have a number of them joining.
“We already have Allied Air from Nigeria, Air Burkina and Camair-Co in Cameroon, who are the newest members of IOSA registry. We believe that using IOSA, coupled with the implementation of the International Civil Aviation Organization use of audit findings, we will be able to significantly improve African aviation safety. So we are focusing on that.”
The second area of concern is connectivity. People face challenges in moving around the continent by air. “We are urging African governments to open up their markets so as to allow free movement of people and goods and enable enhanced competition among operators in the region,” said Kuuchi.
“Fortunately, we had the African Union Commission heads-of-state meeting last year in which they agreed among themselves to have a sort of understanding among states ready and willing to open up their markets. To date, we have 21 countries in Africa who signed up the declaration to open up their markets.”
The declaration will enable African airlines to fly to African countries without restrictions and avoid bilateral air services agreements (BASAs). However, the implementation steps have to be clarified. IATA is working with the African Civil Aviation Commission (AFCAC), the executive agency of the Yamoussoukro Declaration, on the implementation of the declaration.
“We are working with AFCAC to see how best we can come up with the steps through which an airline can exercise the rights to fly to another country. Those steps and clarity are yet to be agreed. We are pushing on that and we hope that, some time this year, we will have clarity, which will be communicated to states. It would mean that any African airline that wants to fly within the continent would be free to do so any number of times without restrictions. That will do away with bilateral agreements completely, at least for African airlines within Africa.”
According to Kuuchi: “We are helping AFCAC to come up with an implementation agreement that does not contradict with a globally liberalised market. We are bringing global expertise to have complete alignment with global liberalisation programmes.”
Finance is another headache. Most African airlines do not have adequate resources to invest in their fleets and infrastructure.
Kuuchi said IATA was trying to forge a new partnership with the African Development Bank (AfDB) that would enable the bank to finance African airlines. “Over the years, AfDB has devoted much of its resources in developing airport infrastructure and not in supporting African airlines. IATA is preparing to sign a memorandum of understanding (MoU) to be able to have a framework where we can advise the bank why it is important, not just to support infrastructure, but also to some extent to support airlines themselves through funding.”
African governments are also often criticised for levying hefty taxes on the airline industry. “Governments should realise that aviation is not reserved for the rich. It is mode of transport for the mass and it can spur economic development if properly supported with enabling policies,” Kuuchi said.
A study commissioned by IATA in 2014 indicated that 155,000 new jobs would be created and $1.3 billion would be added to the GDP of the 12 countries reviewed if their markets were liberalised. In addition, five million extra people would be able to travel by air and that would bring down fares by 35%.
“Governments should look at aviation in terms of job creation and its contribution to GDP rather than seeing it as a source of revenue. Governments should not see it as a cash cow and try to milk it by taxing it heavily. They need to see the bigger picture, the much more benefit it can bring to a nation by creating a conducive environment for it to grow,” Kuuchi said.
IATA uses the outcome of the study to engage with governments and advocate the benefits of aviation. “We ask African governments why they are over-taxing aviation. Why are you constraining it instead of making it more competitive? We have been holding talks with governments on tax issues.”
Today fuel prices globally average about $1.3 per US gallon. In Africa it ranges between $2 to $2.77 per gallon. In some cases the price of aviation fuel is twice more expensive than the world average. It is, on average, 21% more expensive than the world average.
“In addition to that we’ve got all those taxes,” said Kuuchi. “Africa is not a rich continent so why should we be paying more? If you look at the high taxes in fuel, the victims are oil producers. In most oil producing countries aviation fuel is more expensive. It is hard to understand why this is so.”
According to IATA, in 2015 African airlines lost $700 million and this year would lose $500 million.