The global airline industry is set to rise from $569.5 billion in 2016 to $828.3 billion by 2021, representing a compound annual growth rate (CAGR) of 7.8%, and surpassing the peak growth rate of 7.4% seen in the period between 2012 and 2016, according to research firm MarketLine.
The company’s latest report states that the emerging dynamic of the Asia-Pacific region, which accounts for 33.9% of the global industry, combined with signs of reduced rivalry in the European airline industry, are driving accelerated growth in global terms.
The Chinese and Indian industries are expected to boost their value in 2021 by 81.8% and 164% respectively, compared with 2016, and are anticipated to account for a combined 41% of the Asia-Pacific industry. The European industry will also witness an accelerating trend, with a projected 30.6% increase over the same five-year period.
So, what about Africa?
Well, according to the International Air Transport Association, 2016 saw African airlines enjoy their best growth performance since 2012, up 7.4%.
“Growth is being underpinned by strong demand on routes to/from Asia and the Middle East,” said IATA’s 2016 end-of-year report. “Capacity exactly matched demand, with the result that the load factor remained flat at 67.7%.”
That may be the case, but that African growth is off a relatively low base and the fact remains that the continent still only accounts for 2.2% of the world’s air traffic, according to IATA. For the world’s second-largest continent, that’s not a very impressive number.
“For a continent with a population three times larger than the USA and Canada combined, there exists only a fraction of the aviation network enjoyed by the aforementioned countries,” says Darrin Thomas, Manager: Marketing & Communications, South Africa, for Virgin Atlantic.
Despite the growth reported above, African airlines continue to lose money, according to IATA’s 2017 outlook for the global industry. The report forecasts that African airlines are expected to lose $100 million, about the same as last year. Passenger demand across the continent is expected to grow by 7.5%, slightly behind airline capacity growth across the continent of 7.9%.
Further strengthening the argument that Africa’s aviation numbers don’t make for impressive reading is the fact that at face value, the continent and air travel are made for each other.
Africa’s large land mass, coupled with poor road and rail infrastructure, make Africa highly dependent on air transport to connect people and business. African economies rely heavily on air transport for growth, a fact acknowledged in a statement from the Declaration on the Sustainable Development of Air Transport in Africa, in Antananarivo, Madagascar in 2015:
“Air transport is a catalyst for economic growth. It connects African states to regional and global markets which enhance travel and tourism, and the movement of goods and other vital business activities. It represents an essential lifeline for landlocked developing countries and small island developing states. Increased connectivity provides African countries with quick and efficient access to destinations throughout the continent and worldwide markets. Air transport and tourism are deeply interconnected drivers of economic growth and sustainable development.”
That may be the case, but there’s a big difference between recognising the problem and actually making changes to solve it. As a result, there still remains huge opportunity for African airline growth, subject, of course, to what can be achieved, within the constraints of Africa’s stringent aviation regulations.
“With more than one billion people living on the African continent, it remains a priority to improve aviation connectivity. One of the prevailing opportunities in Africa is down to the scale of the continent – there are a huge number of untapped markets,” says Jimmy Eichelgruen, Delta’s Sales Director for Africa, Middle East and India.
Delta is a good example of an international airline that has long seen the potential of Africa and now offers daily flights from Lagos (Nigeria) and Johannesburg (South Africa) to Atlanta, four weekly flights from Accra (Ghana) to New York-JFK, and three flights a week between Dakar (Senegal) and New York-JFK. In fact, Delta is the only American carrier offering non-stop flights between Lagos and the United States.
Yamoussoukro Decision
One way the African continent could take a significant step towards cashing in on the growth potential that aviation offers is by finally implementing the Yamoussoukro Decision.
It’s been nearly 20 years since the Yamoussoukro Decision – following on from 1988’s Yamoussoukro Declaration – was signed by 44 African countries, but the plan has yet to be implemented in full. There is no doubt that Africa could benefit greatly from an ‘open skies’ policy, as long as it was approached in a sensible manner, taking into account the needs of all the continent’s aviation players.
However, therein lies arguably the greatest challenge – trying to get numerous African nations on the same page and pulling in the same direction.
But the potential benefits are obvious.
“Implementing the Yamoussoukro Decision will transform intra-African air connectivity,” said IATA in 2014, when launching a report it commissioned by independent economic consultants InterVISTAS. The report outlined the benefits that would accrue if 12 African nations were to implement the 1999 Yamoussoukro Decision.
“The implementation of this agreement has been slow and the benefits have not been realised,” said IATA.
It went on to state that “the additional services generated by intra-African liberalisation between just 12 key markets would provide an extra 155,000 jobs and $1.3 billion in annual GDP. A potential five million passengers a year are being denied the chance to travel between these markets because of unnecessary restrictions on establishing air routes.”
“Aviation already supports 6.9 million jobs and more than $80 billion in GDP across Africa. The InterVISTAS research demonstrates that liberalization will create opportunities for further significant employment growth and economic development.”
The problem with open skies in Africa is that a single sky concept is impossible without a single level playing field.
“We need a single set of rules and regulations – from the civil aviation, competition, licensing, ownership and control perspective – a single safety oversight authority and a single anti-trust watch dog,” says Rodger Foster, CEO of Airlink.
Currently, each of the 54 African states has its own political boundaries, aeronautical authority, civil aviation safety oversight authority, and anti-trust legislation and authority. That equates to a very large number of people, all with their own agendas and concerns, to get pulling in the same direction.
“The agreement signed in 1988 was clearly progressive but challenges remain,” says Eichelgruen. “Open skies agreements have many benefits – they make international travel more available and affordable for customers, and create jobs and positive economic impact in numerous communities, and this is why we support them when all carriers operate on a level playing field.”
Fifteen states – Benin, Botswana, Cape Verde, Egypt, Ethiopia, Gabon, Ghana, Ivory Coast, Kenya, Nigeria, Republic of Congo, Rwanda, Sierra Leone, South Africa and Zimbabwe – are now full signatories of the Yamoussoukro Decision, but full implementation has fallen short.
“We are very hopeful,” says Thembela Dladla, RwandAir’s Country Manager for South Africa, Namibia, Botswana and Mauritius. “The writing is on the wall, but the question is: ‘is there enough political will?’ The continent’s future very much depends on the integration of our economies and ensuring that we improve trade within the continent. The foundation of any economy to work optimally is sound transportation and logistics. That is when air services come into play as they able to expeditiously facilitate air routes versus other modes of transport such as road and rail, which require massive infrastructure investment and time.”
But how do we, as a continent, get to the point of full implementation?
“Firstly, subsidies will have to go,” says Foster. “Secondly, we need a single set of rules and regulations as well as a single competent and proficient central authority charged with ensuring compliance by each operator on a fair and equitable basis. We then need a single interpretation and clarification of the objects of liberalisation, for example when and under what circumstances may Fifth Freedom traffic rights be applied.”
That sounds like quite a challenge, so maybe some radical thinking is necessary?
“The challenges of liberalization are crystal clear. We need to embrace liberalization as a concept,” said Elijah Chingosho, Secretary-General and CEO of the Kenya-based African Airlines Association (AFRAA) at the Aviation Africa conference in Kigali in March.
He advocated that states willing to fully embrace the liberalization called for under the Yamoussoukro Decision should press ahead with these policies and “forget about the rest.”
In Chingosho’s view, full implementation is now a “pipe dream”, but he insisted it should remain a goal, claiming that it has delivered “significant economic benefits” to those that have stayed the course.
Not only are there economic benefits, but other obvious spin-offs.
“Open skies would create competition, which is fundamental to delivering the best value for the customer,” says Thomas.
Here’s to a remaining 2017, where Africa’s governments eventually sit up and realise this, along with the realisation that aviation growth is a safe bet as a catalyst to broader economic growth and job creation.
Aircraft titbit: A350 making waves
The Airbus A350 XWB is a family of long-range, twin-engine wide-body jet airliners developed by European aircraft manufacturer Airbus. As of 31 May there were 86 A350 aircraft in service with 13 operators. Qatar Airways currently has the largest A350 fleet with 19 aircraft, followed by Singapore Airlines and Cathay Pacific with 14 each. Ethiopian Airlines is currently the only African airline with an A350 in its fleet and actually has four in operation. In June it placed an order for an additional 10 A350-900 aircrafts, enabling further development to its expanding long-haul route network.
“The A350 is a game-changer for aviation,” says Darrin Thomas, Manager: Marketing & Communications, South Africa, for Virgin Atlantic. “It offers comparable per-seat economics to a 747-400, without the need to fill as many seats to realise those economics.”
Virgin Atlantic recently signed for 12 A350-1000s, which are earmarked to replace its Heathrow A340-600s and Gatwick 747-400s from 2019 onwards.
This deal is part of a fleet modernisation programme which will see 50% of Virgin Atlantic’s aircraft replaced in a six year period. The A350 will be fitted with the cabins synonymous with Virgin Atlantic – Upper Class, Premium Economy and Economy. There will be separate configurations for the business and leisure fleets, but all will have larger panoramic windows, calmer cabins with quieter engines and air-conditioning, as well as power to every seat on the Airbus A350-1000.
Among the most notable A350 features are the increased fuel efficiency, modern interiors, high capacity overhead bins, and LED ambient lighting. Economy class is particularly roomy and comfortable and features the most recent technology. On average, the new plane consumes only 2.9 litres of kerosene per passenger per 100 kilometres – roughly one quarter of that consumed by comparable aircraft. Optimised aerodynamics reduce its noise footprint by 30%, far below the regulation threshold, and because the passenger cabin can be assembled at the same time as the fuselage, wings and tailplane, the A350 takes one third less time to build than other Airbus models.
The aircraft can seat 293 passengers: 48 in business class, 21 in premium economy, and 224 in economy. A novel lighting concept will help adjust the circadian rhythms of the passengers while on board. As the world’s most modern and eco-friendly long-haul aircraft, the A350-900 uses 25% less fuel, has 25% lower emissions, and up to 50% in noise reduction during take-off than comparable aircraft models.
“They will be the flagship of our fleet,” says Jimmy Eichelgruen, Delta’s Sales Director for Africa, Middle East and India, with the American airline set to take delivery of its first A350s later this year. “They will feature brand new products for our customers, the most notable of which is the Delta One Suite. Delta Premium Select, our premium economy product, will also debut on the A350s.”
Lufthansa has placed orders for a total of 25 A350s and will base its first 10 aircraft in Munich. Their first destinations are Delhi and Boston.
“The A350-900 is the Lufthansa fleet’s state-of-the-art newcomer,” says Claus Becker‚ Lufthansa’s Director of Sales‚ sub-Saharan Africa. “This aircraft is considered the most advanced and most environmentally friendly long-haul aircraft in the world. The possibilities offered by the on-board entertainment system on the A350-900 are likewise leading edge.”
Route titbit: Airlink wins St Helena bid
The government of St Helena has announced that Airlink, South Africa’s largest independent airline, is their preferred bidder to fly passengers to the island. The government will now enter into a period of contractual negotiations with Airlink. It is anticipated that a formal announcement will be made in the coming months on completion of negotiations and contract signing. Only then will the St Helena government be able to confirm details such as the commencement date, frequency, aircraft type, the international hub and connecting airports. St Helena is 2,000 kilometres from Africa, the nearest landmass, and boasts a variety of landscapes for tourists to discover. Until the airport opened in mid-2016, the only scheduled way to travel to and from St Helena was aboard the Royal Mail Ship St Helena, which is likely to be decommissioned in 2018 once scheduled flights are established.
Tech titbit: Travelport launches new airline product
Travelport has launched a new mobile product for airlines. It’s called Travelport Fusion and was developed in response to the growing need for all airlines to meet the expectations of today’s mobile-first customer. Travelport Fusion is a mobile app solution for airlines of all sizes that can work across all host systems. The new product gives airlines end-to-end trip engagement via mobile, allowing them to develop more valuable and lasting relationships with their customers. Travelport Fusion can be deployed in weeks and can be configured to reflect the airline brand. The first release of Travelport Fusion will include a rich set of features such as mobile search, booking, check-in and boarding, passport scanning, day of travel assistance, itinerary management and real-time flight alerts. “Mobile continues to fundamentally change the travel industry, serving travellers who are increasingly more connected,” says Fergal Kelly, Chief Commercial Officer of Travelport Digital. “Customer engagement via mobile is now a critical success factor for airlines of all sizes and we believe that the airline industry is not yet well-served in this area. The important fusion of user-focused design, travel industry experience and mobile technology expertise is often misunderstood. Airlines who underestimate these three key elements in mobile travel risk missing out on significant revenue from channel shift, new customer acquisition opportunities as well as the resulting improved customer loyalty.”