September saw the African GHI Stakeholders Conference return, with over 150 delegates gathering at the Safari Park Hotel in Nairobi to discuss the huge growth opportunities of the regional market, set to be one of the fastest-growing regions in the next 20 years – at 5% growth per annum.
Liberalising markets
As proceedings got underway, it was declared that this growth should be considerably higher, however. “We need to set ourselves a target of two-digit growth,” said Gaoussou Konate, Consulting Director Technical Operations, African Airlines Association (AFRAA), noting that the Free Trade Agreement will boost growth by 52% by 2022.
To enable growth, protectionism has to stop, said Gordon Anyimu, Head of Ground Services, Kenya Airways, lamenting the visa restrictions, fines and documentation encountered when travelling between states. These are inhibiting the most direct routes, stifling connectivity between states and encouraging flyers to take alternative routes, declared Konate. How we liberalise visa requirements was queried, with the room concurring that conversation must be heard and action taken by government.
“Currently there is a perception that African carriers aren’t reliable and we need to dispel this myth,” said Anyimu, adding that national airlines need to put away their egos and align towards a common vision of a liberalised Africa. However, there is currently more incentive for regional airlines to co-operate with international carriers than with domestic – and this must be addressed.
Free trade is vital in facilitating growth of the regional industry, asserted Konate. “Air traffic always follows trade. This is why we have to lobby for trade growth.” Although some concern was expressed for the future of the Single Air Transport Market Agreement (SAATM) in the current global climate of protectionism, amidst Brexit and the US-China trade war.
Christophe de Figueiredo, CEO Morocco, Swissport Maroc, suggested the re-entry of certain legacy airlines offer hope, including BA opening routes from North Africa to the US and Europe, and Ryanair operating into Nigeria. Local airlines would do well to take note of this activity, however – while they fight each other, large international airlines are becoming better connected in Africa and usurping opportunities that could be exploited by local airlines.
Infrastructure limitations
Unanimous was the assertion that lacking or dated infrastructure is a major limitation in the progress of African aviation. Short-sightedness by each government that comes to power means that funds are not invested in airports, meanwhile airlines are investing in smaller aircraft because the infrastructure is geared towards this, when in fact there is a need to invest in bigger aircraft that can carry passengers and cargo. Charges to use said infrastructure are also too high, Konate bemoaned. Underdevelopment in some stations is encouraging people to take routes that bypass African airports, related Anyimu. “Perception is key because people believe in liabilities and that it’s safer to transit in Istanbul rather than a country in Africa.” Leadership will be crucial in strategising on how to take back market share, while an overall need for greater trust between countries is required to foster better internal connectivity. It was also suggested that airports reinvest some of their revenue into infrastructure development.
Policy and financial concerns
Elisha Omuya of ICAO commented on ICAO’s ‘No country left behind initiative’ and the uptake of ICAO standards at airports in Africa, noting an average of 52% implementation across the states. He advised a target of over 60% implementation by 2020, adding that all international gateways in Africa should be compliant by 2022.
A financial update followed, addressing SAATM. A single, liberalised African sky is good on paper but flawed in practise and gradual implementation is needed, explained James Mwendia, Consumer Industry Leader at Deloitte East Africa. Growth markets he flagged up included Uganda, following the relaunch of Uganda Airlines, Zambia, where tourism led by South African Airways drives growth, and Rwanda, which is benefitting from the dynamic growth of Rwandair. All are expected to grow by 7% each year for the next 20 years, doubling in size each decade, he said.
Opportunities in cargo
Another Big Debate brought the regional cargo market under the spotlight. High demand for African exports, from coffee beans grown in Kenya to cocoa from Ghana, has seen the African airfreight industry register 5% growth in FTKs year-to-date – but there is potential for much greater growth, highlighted Cisse Abdoulaye, Group COO – Ground Handling & Cargo Management at NAS, with Africa only commanding 2% of the world’s trade at present. Plentiful arable land is one of Africa’s strengths, he continued; however, the main export, perishables, is vulnerable to price volatility. Meshack Kipturgo of Siginon Aviation emphasised the potential of this sector, with two thirds of arable land uncultivated. “We could feed the world,” he stressed, suggesting that Africa be considered as a single trade block with duty free regimes to enable economies of scale.
Lacking infrastructure at airports presents limitations to capacity growth, however, and service charges and high taxation between countries hinder intra-African trade. The SAATM naturally represents an opportunity in this area, by opening borders to trade. The consensus from the panel was that Customs standardisation is required and governments needs to be active in addressing barriers to trade.
Kipturgo asserted that if free movement of people between states was allowed without business visas companies in Africa would invest more in the country, while Abdoulaye highlighted the regional prevalence of corruption, citing the mandatory payment to a customs agent to bring goods in, “but never a receipt…” he remarked.
What do airlines want?
On Day Two, some of Africa’s biggest carriers took to the stage to relay the needs of the sector from their perspective. Alongside high fees and visa requirements, current infrastructure is preventing airlines from operating the widebody aircraft they need to, to better serve the sector, explained Tom Ogendo of Kenya Airways, while high ticket prices, resulting from excessive taxes, is leading to a low uptake of air travel within Africa. Konate stated that AFRAA is ready to collaborate on any initiative that will drive growth, emphasising the need to work together to bring charges down. Stakeholder collaboration was given as the key to encouraging new carrier entrants, with Konate highlighting that “low cost carriers are the future of Africa” but currently only command 12% of traffic in the country. Also on the wishlist was a more comprehensive service portfolio from ground handlers, to bring end-to-end continuity, along with the usual request for investment in technology, training and safety – but are the airlines willing to pay for this, delegates wondered? Presentations on how to incentivise and retain staff from Swissport Maroc and NAS, and how to implement a mature safety culture by Dawit Lemma, CEO of Krimson Aviation, provided an example of work being done to address these requests.
The handler, meanwhile, was seeking more collaborative, less punitive SLAs and a review of the ‘termination for convenience’ clause, asserted Fabio ____, with the benefits of GSE pooling also receiving mention, and the need for airports to regulate contract prices to stop handling companies “cannibalising each other”.
African airports and GSE
Outgoing CEO of the Kenya Airports Authority, Jonny Andersen, reported a huge growth in the domestic travel market and aircraft movements, with Jomo Kenyatta alone poised to hit nine million passengers this year, up from seven million two years ago. The airport is also one of the fastest growing cargo airports, seeing 25% growth in throughput between 2017 and 2018.
All airports in Africa need to become ISAGO certified, he stated, or “our very existence is at stake,” as well as to invest in zero emission equipment, noting Jomo’s goal to become the greenest airport in Africa by 2022. Meanwhile infrastructure updates are planned, such as to cargo facilities, he explained, adding that he foresees fewer ground handling companies in the future and that recommended changes to the KAA Act 1996 will address these areas.
The room was full for the last session of the day, which evaluated the ground support equipment market in Africa, where a unit of GSE costs 25% more than the industry average. Delegates bemoaned the excessive delivery time for GSE orders to Africa and the perception that GSE is made to a lower specification for this market. David Bunting of JBT Aerotech dispelled this misconception, while Bob Gurr, VP Swissport South Africa, highlighted unmaintained equipment as a common factor here, asserting, “you ignore routine maintenance at your peril.” Electric GSE received due mention, with Gurr noting that Swissport’s fleet will be 40% electric by 2023; however, uptake is severely hindered in Africa owing to the cost and a lack of charging infrastructure.
Call to action
With representation from airlines doubling to 20 carriers this year and over 500 One-to-One Meetings taking place, networking was productive at the event, as was crucial conversation in the conference room. Discussion concluded that collaboration is needed to lower taxes, remove barriers to travel and trade, bring profitable routes into Africa, and ultimately create an environment that will foster rather than stifle industry growth in this promising region.
Join us in Cape Town, from 22-23 September 2020, when the event returns, to evaluate the progress of the coming year.
