Mitchell Schwartz Browns Jerseyin Here is your first Forum Thu Jul 14, 2016 2:05 pm
by xinxiu24 • 462 Posts
Key topic at the African Airlines Association (AFRAA) annual general assembly in November was how the continents airlines could compete against bigger foreign operators within their own airspace.
What strategies could be implemented in response to the larger and more dominant overseas carriers?
Industry figures show that intercontinental capacity to and from Africa by African airlines stands at around 20% -the remainder with airlines mainly from Europe Mitchell Schwartz Browns Jersey , the Middle East and lately North America. As a result of this intense competition on the intercontinental routes, the best opportunities for growth and expansion for African airlines lie in the under-served regional and domestic markets.
In my view there are two aspects to this, said DR Elijah Chingosho, secretary general of AFRAA.Firstly, what can the African airlines do for themselves and, secondly, what can the African governments do to facilitate the growth and development of African airlines?
Lets start with governments. In Africa the charges, taxes and levies on passengers and on fuel are very high-much higher than the world average rates.
In terms of passenger charges, particularly in Central and western Africa, he said some places were charging between $60 to $80 per passenger.So you can see that it puts African aviation at a disadvantage because, for the larger airlines to grow, we need those feeder airlines coming from domestic and regional operators that also face these high charges. We need to grow the intra-African market, said Chingosho.
He emphasized that governments need to reduce such excessive charges. Considering the high cost of fuel around the world.Chingosho indicated that worldwide fuel constitutes about 36% of operational costs for airlines globally.
In Africa, on average, its 45 to 55% because of these various charges, taxes and levies on fuel, he added.
The second point he raised was that of the Yamoussoukro Declaration, designed to accelerate the implementation and liberalization of the air transport industry in Africa; an issue that has dragged its feet over time.
Chingosho said it was critical to fully liberalize Africa for African operators, thus making it possible to get entrepreneurs from one country to invest in another.
So, basically, what we are saying is we need the full implementation of the Yamoussoukro Declaration because what you often find is that African governments give preferential treatment to some foreign carriers, say from the Gulf or Europe.
For example, they allow more frequency of services by literally giving fifth-freedom traffic to foreign carriers, yet the same is denied to African carriers. If our governments are able to create a level playing field than I believe that our airlines should be able to compete effectively, he explained.
One of the main challenges facing airlines on the continent is that they are very small.We need to consolidate, we need to form partnerships and we need to forge joint ventures. We encourage such arrangements, he stressed.
He noted the example of Kenya Airways and its partnership with Tanzanian carrier Precision Air and that between Ethiopian Airlines and ASKY in Togo-basically, larger airlines buying equity in smaller partners. This way Michael Bowie Browns Jersey , both are able to grow, he said.Its the only way we will be able to form bigger operating entities to compete against the foreign carriers.
According to a report by the Centre for Asia Pacific Aviation (CAPA) Precision CEO Alphonse Kioko said Kenya Airways involvement in the company has allowed the carrier to access financing from banks to grow the airline in away that was not previously available. It has also benefited from staff exchanges with Kenya Airways-allowing employees to gain experience in a bigger organization .Also, an association with Kenya Airways maintenance has made it easier for Precision to lease aircraft.
ASKY gives Ethiopian a hub in the huge and fast growing West African market, rich in oil and mineral exports, not easily accessed from its home base at Addis Ababa.
Establishing the hub in Togo, a small market with little traffic of its own, was challenging and restrictions on night services meant aircraft utilization was not optimal, increasing costs. Nevertheless, ASKY has performed well, establishing good traffic volumes and load factors.
The inability to benefit from scale is a major drawback: Africa is littered with several small carriers that are crippled by their size.
Chingosho continued to stress on the fact that they must attract interest of the larger carriers.
He said: Im aware that Air Malawi, which a very small airline, is in discussions with airlines to try and get them to buy equity participation in the company. I think that is the way to go, otherwise the smaller carriers, because of the lack of economies of scale, will go out of the market one after the other.
Outside of South Africa,(and possibly Namibia) ,airlines in the sub-Saharan region are relatively small operations with no significant operational credibility ,many of them featuring on the European Union list of banned airlines.
However, Chingosho warned that consolidation among these small carriers might not be the answer.If we ask why the small carriers dont consolidate, the thing is that they dont have much to gain from each other because they suffer from the same basic problems.
He listed problems such as under-capitalization, lack of management depth, and the lack of capacity to basically achieve industry best practice in quality, efficiency and in terms of economies.
Thats why, in my view, you need that investment especially from the bigger airlines. Apart from benefiting from feeder traffic, the larger carriers might also benefit from the traffic rights which may be granted more easily under such forms of par Outdated Mans Crit.