It’s boom time for those airlines with their home bases on the African continent and those ‘international’ entities that see the continent as the last untapped resource. But, African aviation still faces a number of challenges. Richard Holmes takes a look at those challenges, along with the most pressing issues facing the continent’s airlines, as the rest of the world shines a light on Africa and attempts to grab its slice of the pie.
Supporting over $67-billion in economic activity per year, and sustaining more than six million jobs on the continent, the aviation industry continues to be an increasingly important pillar in the growth of African economies. While the dust of last decade’s recession is still being shaken off the European and American economies, steady growth and a sought-after resources base are ensuring airlines on the continent and beyond are reporting strong demand for air travel into Africa.
“Africa is home to some of the most important and growing economies in the world, attracting both tourists and investment in many of the continent’s expanding economies,” notes Fouad Caunhye, Regional Manager Southern Africa for Dubai-based airline Emirates. “Connectivity to major world markets is therefore important to further unlock the potential of Africa to become an even more important player in world economics.”
Emirates currently serves 23 destinations in Africa – including some destinations focused on import and export of cargo – and sees air travel as a key enabler for growing economies across the continent.
“We are confident that our services will play a significant role in supporting the economic growth of the continent, by connecting Africa to our network of over 100 other destinations around the world, and opening up channels for trade, investment and tourism to the Middle East, Europe, Asian sub-continent, the Far East, Australasia and the Americas,” adds Caunhye.
And with airlines looking to cement their role in growing economies, happily the corporate travel market appears to have left the doldrums of recession.
“The last months have been good for Lufthansa in Africa. All areas are back to growth,” reports Aage Dünhaupt, Lufthansa’s Director: Group Communications for South-East Europe, Middle East and Africa. “Traditionally, Lufthansa relies on a solid share of corporate bookings. We are looking to grow this business, of course, and have various initiatives in place to look for market opportunities. The new lie-flat Business Class seat is a very important element of our offering. We are also looking into additional lounges and have opened a completely new pier in Frankfurt, for easy connections from Africa to Europe and North America.”
“The business travel market has increased over the last 12 months, and the economic downturn has shown some improvement. Demand is growing as more and more companies notice the potential within Africa,” agrees Marika O’Hara, Head of Marketing for EGYPTAIR, adding that the Cairo-based carrier expects an increase in demand for North Africa, due to traffic from oil, gas and mining companies.
North Africa is a region that has been hit hard by political turmoil over the last 24 months, with the ‘Arab Spring’ taking its toll on corporate travel. However, the tide appears to have turned and demand is increasing says O’Hara: “The market is in the process of bouncing back, as we have noticed more companies opening offices within North Africa. 2013 is witnessing a strong bounce back into Egypt. The World Tourism Organisation has announced this May that Egypt is among the top 20 world destinations, based on figures. We have been working smarter and we have seen an increase already within both leisure and corporate travel to Egypt.”
In a further nod that North Africa is firmly back on the corporate travel radar, Qatar Airways recently announced it would increase capacity to the Libyan capital Tripoli, by offering non-stop services from its hub in Doha. Until recently, services to Tripoli were served via the Egyptian city of Alexandria. By offering direct flights to both cities, additional seats will immediately become available.
Similarly, Casablanca – Morocco’s largest city and an important leisure and corporate travel destination – will also be served by direct flights from Doha. Until recently, the service operated via the Tunisian capital of Tunis.
“We are delighted to resume non-stop flights to our two popular North African destinations,” says Qatar Airways chief executive Akbar Al Baker. “It is a significant step by Qatar Airways, as we show our continued confidence in North Africa. This means more capacity and improved travel times to and from Tripoli and Casablanca, to destinations across our network.”
Emirates is also keeping a close eye on North Africa, and in March this year added the Algerian capital Algiers to its African network. This followed new routes in 2012 to Lusaka (Zambia) and Harare (Zimbabwe).
“In September, Emirates will restart flights to Tripoli. The resumed service will be of particular benefit to passengers with connections within the Gulf Cooperation Council, Indian sub-continent, Far East and West Asia points,” adds Caunhye. “Africa is a hugely important continent for Emirates, and we are committed to investing in and further strengthening our products and services across the region.”
With 38 destinations on the continent, Lufthansa says it is also recording strong demand from West and North Africa.
“The upswing in western Africa is impressive and has great potential,” notes Dünhaupt. “We have increased our flights to Algiers, Tunis, Tripoli and Casablanca over the last weeks, and we are looking confidently into the future there.”
Much of the growth in demand has been driven by the demand for resources, and on this front West Africa remains one of the key economic hotspots on the continent. Arik Air, which operates out of hubs in Abuja and Lagos, says it has seen strong demand for corporate travel in the region.
“On our routes to West Africa, we have experienced a growing demand from the corporate sector over the past 12 months, and look forward to increased growth going forward,” notes Isla Moffett, Sales and Marketing Manager for Arik Air. “Our regional routes ex-Nigeria are showing good growth, and we have experienced steady growth on the Lagos-Johannesburg-Lagos route.”
“Specific to our market, we anticipate a growth in our corporate business – the bilateral trade between our home country and South Africa is growing, the political will appears to be there and our reach into Nigeria and West Africa is unrivalled in the area.”
However, “the corporate market is very cost-conscious, and even if the traveller is permitted to travel in Premier (Business) Class, the travel booker still looks for perceived value-for-money,” adds Moffet. “Late bookings are not an option due to the visa requirements on most passports, so early planning is essential for business travel into West Africa.”
With strong economic growth being seen in countries from Abidjan to Zambia, both African and international airlines are looking at expanding their routes, frequencies and product offerings available across the continent.
Air France has long had historical links with West Africa, and together with partner airline KLM it remains one of the most active carriers, connecting the continent to Europe, serving 51 destinations in Africa and the Middle East.
In West Africa, the airline has offered direct flights from Paris to Freetown and Monrovia since 2011, and last year resumed services to Abuja, Nigeria. The airline has also increased capacity to Abidjan, Brazzaville, Lomé, Malabo and N’Djamena.
Arik Air is the dominant airline within
West Africa, but also operates to 12 international destinations from its Lagos and Abuja hubs, and expects to increase capacity on its crucial link to southern Africa.
“We are constantly looking for new opportunities within our region and beyond,” says Moffett. “On the Lagos to Johannesburg route, we have plans to increase our capacity with the entry into service of wide-bodied aircraft. This will increase our Economy Class capacity by 55% and our Business Class capacity by 100%.”
The minerals boom hasn’t left out southern Africa either. Mozambique continues to show strong growth, thanks to coal mining operations in Tete and gas deposits offshore from Pemba, while Botswana is expecting a sparkling boom in business travel.
“For Botswana specifically, the relocation of the Diamond Trading Centre (DTC) from London will no doubt see diamond traders from around the world travel to Botswana to do business,” says Charmain Lemkus, Sales Manager at Air Botswana. She says the airline intends to introduce new domestic and regional routes, with a long-term goal of operating international long-haul flights.
“As a national carrier, we firstly have an obligation to develop domestic routes to facilitate national air travel,” continues Lemkus. “The already existing routes are doing well and there is currently a demand to develop a few more domestic routes, particularly to facilitate business, with a particular focus on tourism growth. Currently, the tourism industry is the second-largest contributor to the country’s GDP.”
Linking southern Africa to the economies of North and West Africa – and beyond – is crucial to facilitating economic growth on the continent, and with this in mind, EGYPTAIR – which flies to 84 international destinations, including 19 in Africa – last month increased its services to seven flights a week into Johannesburg, and expects to offer double-daily services out of southern Africa in the future.
British Airways has also increased its reach in to all corners of Africa, with three new destinations and 20 additional services. Alongside additional frequencies from London to Marrakech and Agadir, the airline recently added flights to Sierra Leone and Liberia to its existing suite of services to Ghana and Nigeria. The airline also recently announced it will add a fourth weekly flight on the Sierra Leone/Liberia route from October, timed to allow for easy connections onto USA-bound flights at Heathrow.
“It is unusual to add more flights so soon after starting a new route, but we’re responding to strong demand in these fast-growing West African economies. In scheduling the flight, we’ve taken into account feedback from our customers about onward connections and on which days they’d prefer to fly,” says Gavin Halliday, British Airways’ General Manager for Africa and Europe.
“The acquisition of bmi has enabled us to expand our flying programme in Africa to serve 18 routes in 15 countries. We now fly to more places more often than we ever have before, in the 80 years we have served the continent. These flights link growing African destinations to London and provide onward connections to the world’s business capitals.”
British Airways remains the only carrier to fly direct from Cape Town to London throughout the year, and also recently increased its schedule between London and Nairobi to offer eight flights per week.
While mineral resources may not have as large an impact on the east coast of the continent, the likes of Ethiopian Airlines and Kenya Airways are certainly making their presence felt, as world-class carriers serving a host of regional and intercontinental destinations.
Ethiopian Airlines remains the first – and only – carrier on the continent to fly the next-generation Boeing 787 ‘Dreamliner’, and recently began operating the state-of-the-art aircraft on its lucrative route from Addis Ababa to London Heathrow.
“The United Kingdom has always been a strategically important market for us,” remarked Rahel Assefa, Ethiopian Airlines’ Regional Manager for UK and Ireland, at a recent trade event in London. “As a result of this increase in airlift, we will now be in a position to offer the UK market around 20% more capacity, with our six weekly flights from London Heathrow to 43 destinations in Africa via our hub in Addis Ababa.”
Ethiopian Airlines operates the ‘Dreamliner’ as a two-class product with 246 Economy Class seats and 24 Business Class sleeper seats. The airline is one of the largest carriers on the continent, serving 71 international and 17 domestic destinations. This will soon grow to include long-haul routes to Rio de Janeiro and Sao Paulo, a key development as Africa plays an increasingly important role in the BRICS (Brazil, Russia, India, China, South Africa) grouping of emerging economies.
Despite still operating out of the decidedly elderly Jomo Kenyatta International Airport, Nairobi-based Kenya Airways is also growing its route network. The airline recently increased capacity to Maputo and will add 11 new cities to its route map this year, with routes to Livingstone (Zambia), Eldoret (Kenya) and Abu Dhabi already operational.
“There is increasing demand for air travel on the continent, which makes Africa the new growth frontier in the aviation industry. It is, therefore, important for us to continue to grow our presence across the continent to meet this demand,” says Dr Titus Naikuni, Group Managing Director and Chief Executive Office of Kenya Airways. Within southern Africa, Kenya Airways also flies to Nampula, Luanda, Harare, Lilongwe, Gaborone, Johannesburg as well as Ndola and Lusaka in Zambia.
In addition to expanding capacity on routes to Asia – through replacing the Boeing 767 with a larger B777 aircraft – Kenya Airways has also expanded its codeshare agreement with fellow Sky Team member China Southern Airlines, to offer improved access out of China and Australasia.
“In the global aviation industry, there is a general trend in recent times by airlines to come together into alliances and partnerships,” explains Naikuni. “This enables seamless travel to their passengers beyond the routes that they currently serve. Kenya Airways is not an exception – we are part of the Sky Team alliance, in addition to several codeshare agreements with partners.”
And he’s right. From British Airways joining hands with Iberia and American Airlines, to Air France and KLM merging, in today’s world of aviation there is safety in numbers. While airlines globally may have flown out of a prolonged patch of turbulence, it is by no means smooth sailing making money out of aviation.
Airlines may be expanding routes and offering new services, but the industry remains a cutthroat environment where high costs and an onerous regulatory framework often make profitability hard to come by.
Although the International Air Transport Association (IATA) expects African airlines to generate a small profit in 2013 on the back of growing demand, flying aircraft in Africa brings its own set of unique challenges.
“To begin with, currencies in countries such as South Africa, Namibia, Malawi, and Zambia are weak compared with the US dollar or the euro,” notes Mike Higgins, IATA Regional Vice-President for Africa. “So while the bulk of revenue is generated in soft home currencies, the majority of the overheads – capital, financing, lease rentals, fuel uplift at foreign airports, and infrastructure in foreign markets, for example – are incurred in the stronger currencies.”
Virgin Atlantic is the latest victim of the high cost of doing business in Africa, recently announcing it will withdraw its flights from Accra to London from September, due to soaring fuel costs in Ghana.
“The price of fuel in Ghana, coupled with a lack of attractive arrival slots into Heathrow and a continued weak global economy, has all contributed to this decision,” said a spokesperson for Virgin Atlantic. “These are still challenging times for the airline industry, and we have to deploy our aircraft to routes with the right level of demand to be financially viable.”
Safety also remains a crucial issue for airlines operating in Africa, the continent that accounts for a tiny percentage of global air traffic, and a disproportionately large number of its accidents. A sky-high accident rate is far and away the biggest challenge to growing aviation on the continent, with government commitment key to improving the continent’s parlous safety record.
In 2012, the continent’s tally worsened to 3.71 Western-built jet hull losses per million flights – up from 3.27 in 2011. Crucially though, the accidents are concentrated in a few hotspots where aviation oversight is limited, if not non-existent.
“Statistics show that most accidents on the continent take place in two countries, namely the Democratic Republic of Congo (DRC) and Sudan,” explains Dr Elijah Chingosho, Secretary General of the African Airlines Association (AFRAA). “For example, in 2011, there were three fatal airline accidents in DRC, out of a total of five on the continent. Similarly, in 2012, there were two fatal airline accidents in DRC and one in Sudan, out of six in Africa. These two countries have been involved in conflict for over a decade, making it difficult for the authorities to oversee safety adequately. In the case of Sudan, sanctions have made it difficult to obtain critical spare parts and other support services.”
African airlines also make up a considerable number of the airlines banned from flying into airports in the European Union – the so-called ‘blacklist’. While the blacklist keeps a number of unsafe airlines out of European airspace, it can have the unfair effect of tarring all airlines with the same brush.
Commenting in the International Air Transport Association (IATA) report titled ‘Unlocking Africa’s Potential’, “some African airlines, which are IATA members and on the IOSA registry, are on the banned list as a result of oversight concerns in their home states,” notes Chris Zweigenthal, Chief Executive of the Airlines Association of Southern Africa. “This not only discourages customers from flying on these airlines, but I believe it also has the consequence of some customers choosing non-African airlines over African airlines, even if they operate the same route and that airline is not on the banned list.”
It’s a tough game, flying paying customers from A to B in Africa, but judging by the departure gates at O.R. Tambo International Airport – the busiest airport in Africa –there is no shortage of willing players.
With resource-rich Africa increasingly seen as the golden frontier for economic growth, and a pool of cash-rich time-poor corporate travellers all too eager to close the deal, there’s almost no amount of turbulence that can upset the growth in African aviation. Bar a few bumps and bruises, the airlines from Africa and further afield are gearing up for a busy few years on the continent.
News from Down Under
While corporate travel is on the up, business flyers are carefully tightening their belts by a notch, if the Qantas experience is anything to go by. The Australian carrier – which offers daily direct flights from Johannesburg to Sydney – removed the First Class cabin from most of its long-haul fleet in October 2012, to increase capacity in the sought-after Business and Premium Economy cabins.
“The corporate market remains stable, with Premium Economy cabin demand increasing in the double digits,” says Lauren Egger, Sales and Marketing Executive for Qantas Airways Limited. “We expect the corporate market to remain stable for 2014, and believe that we will see growth in the small and medium-enterprise business.”
And for business travellers flying in the Business Class cabin, there are plenty of luxurious touches to make your trip fly by.
“Qantas has introduced a turndown service for our Business cabin passengers, and later this year, we will make available our ‘Eat-on-Q’ programme for passengers flying from Johannesburg to Sydney,” says Egger. “Next year, we will launch our complimentary Chauffeur Drive programme as well.”
For more information, visit www.qantas.com.au.
Corporate travellers fly solo
While Africa’s scheduled airlines continue to show strong growth, the private air charter industry is equally upbeat, as time-pressed professionals and a burgeoning resources industry continues to drive demand for bespoke air services across Africa.
While private jets have – particularly in the austere days of the recent recession –been seen as an unnecessary extravagance, corporate travel managers are increasingly finding the judicious use of air charter as an effective way to maximise time and travel budgets.
“The cost saving for corporate travellers’ time – of not having to comply with an airline schedule and being able to move around according to their own work and meeting schedule – certainly makes charter very attractive,” says Philip du Preez, Fixed Wing Charter Manager for South Africa-based operator National Airways Corporation (NAC).
“Corporate travellers are certainly looking for value for money, and many are starting to quantify some of the intangible benefits, such as air and ground time savings, travel stress, productivity and the like,” says Chris Frost, Business Development Manager – Flight Operations: South Africa for ExecuJet Aviation Group. “In other words, looking at true trip costs rather than just comparing six airline tickets with a six-seat chartered aircraft.”
In addition to time saving, many destinations are simply not served – or served with irregular inconvenient timetables – by scheduled carriers, making charter all but essential.
“Especially into territories such as central Africa, where airlines and airline schedules are restricted, corporate travellers can fly in, do business and return or fly on to their next business commitment,” notes Du Preez. “The time saving in charter versus executives’ down-time at airports waiting for a scheduled airline, is certainly one of the most important factors.”
“In today’s environment of corporate accountability, protracted airport formalities and airline route cutbacks, there are many advantages to chartering a private aircraft,” adds Jennifer Beattie, Sales and Marketing Manager – Africa at global air charter broker Chapman Freeborn. “These include choosing the most convenient airport, travelling at times that suit your schedule, streamlined passage through smaller private terminals, the safety and security of carefully vetted operators and crew, the privacy to conduct confidential business on-board, and a more flexible baggage allowance.”
Flexibility and convenience are key selling points of charter travel, but safety concerns are a further reason corporate travellers – particularly those arriving from the United States and Europe – are opting to charter their own aircraft.
“Most European or American business travellers are very safety-conscious, and will only travel on selected airlines. So, if their destinations are not served by those reputable airlines, the air charter businesses do benefit,” adds Frost.
“For companies in the resources, as well as oil and gas, industries, safety is a consideration, especially within central Africa,” adds Du Preez. “Although a scheduled airline may be servicing that territory, our clients prefer the privacy, service, safety and time saving element of travelling privately.”
Safety and convenience aside, distance can also play a role when it comes to private charter, and travellers are happy to pay a premium for the expediency of chartering an aircraft.
“Most business air travellers prefer non-stop flights between destinations and to arrive as close to a meeting site as possible. Where airline travel involves inter-lining and long waiting times at intermediate airports, then chartered flights can really make travel sense,” explains Frost. “However, longer flights – typically four hours or more – require larger business jets, which are significantly more expensive to charter than shorter range jets, and the travel budget may not accommodate this.”
Unsurprisingly, it’s the booming resources industries that are driving much of the growth in corporate air charter, as deposits are discovered and developed in far-flung corners of the continent.
“Typically, it is the resource exploration sector – oil and gas, mining etc – that drives the early demand for air travel,” says Frost from ExecuJet, adding that “all the economically developing African countries with weaker airline and road infrastructure, show a definite growth in non-scheduled air services. Some countries experiencing air charter growth would include Nigeria, Mozambique, Ghana, Tanzania, Democratic Republic of Congo, and Algeria.”
Plane-makers look to Africa
While airlines eye new routes into Africa, the continent is also a lucrative new market for the two companies that build the lion’s share of the aircraft in the skies today. Business Traveller Africa asked aviation giants Airbus and Boeing for their take on the continent’s competitive skies…
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Linden Birns |
Van Rex GallardBoeing |
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Airbus predicts that the African airline market will grow by around 4.4% annually over the next 20 years, creating a market for 957 new aircraft over this period. Of the current fleet, approximately 490 will remain in service until the early 2030s, creating a continental fleet of about 1500 jetliners in the 120-800-seat category. This compares with the current African fleet of 618 jetliners in this seat category. Africa currently represents around two percent of total global air transport, but it is set to become the location of the next industry ‘gold rush’, as it presents the perfect mix of population density and currently constrained – hence, untapped – trade and tourism, which is gradually being unlocked, as more African governments recognise the broader economic enabling benefits of air connectivity. At the same time, we are seeing increasing pressure being brought on African states to reform their air transport regulatory frameworks, to open up their markets to competition both from within Africa and from outside the continent. Like all airlines around the world, African carriers are demanding aircraft that will help them cut their operating costs – specifically their fuel costs, which represent anywhere between 30 to 40% of an African airline’s cost base. Airbus has responded with new offerings to both its short-haul single-aisle products – the A320neo Family – and in the long-haul sector with the A350XWB, and the A380 in the super-jumbo class. These will help airlines achieve fuel consumption and related cost reductions in the order of 25%. Our challenge is being able to build the aircraft fast enough to satisfy the global demand. |
The Africa market is extremely important for Boeing, as demonstrated by our presence on the continent over many years; our presence and partnerships with our customers and industry stakeholders; their aircraft orders and our good corporate citizenship programmes; and our active participation in commercial aviation events. Consistent with economic growth forecasts, air travel demand to/from/within Africa is forecast to outpace world demand, growing at an average of almost six percent annually over the next 20 years. Growth to/from other emerging markets is expected to lead the way, as airlines both in Africa and other emerging market regions are planning to increase inter-regional connectivity. Prospects for intra-African growth are also rising. In addition to strong economic growth, airlines in the region are exploring new business models and approaches to building up intra-regional hubs and networks. The Boeing 777 and 787 Dreamliner are ideal aircraft to serve the international long-range markets, and the Boeing 737 Max to expand their domestic and regional networks. We believe our products meet the customers’ requirements, as evidenced by orders from Ethiopia, Kenya, TAAG, Arik Air, RwandAir and Comair. However, we understand that more cargo capacity is required in the lower decks of our narrow-body aircraft. This demand is driven by the rapid expansion of the African middle-class, which in turn is stimulating business trade between African countries. |
IATA looks to Africa
For just the third time in its 69-year history, the International Air Transport Association (IATA) held its Annual General Meeting in Africa last month, with the AGM and World Air Transport Summit opening in Cape Town. Unsurprisingly, Africa’s untapped aviation industry was top of the agenda.
“Nowhere is the potential for aviation greater than on the African continent,” said Tony Tyler, IATA’s Director General and CEO. “Economic reforms and political stability have spurred growth and development, and the 50th anniversary of the African Union reminds us of its vision for an integrated, prosperous and peaceful Africa. Aviation is well placed to contribute to these and the other long-term goals so vital to the development of Africa.”
Hitching Africa’s 54 national economies to the global economic wagon – and how aviation can play a role – was a key theme of the three-day summit.
“With a few kilometres of tarmac, even the most remote destination becomes a part of the global community. But this will require the commitment of governments to solve some major issues,” said Tyler.
Chief among those issues is the safety of African airlines. “IATA’s 20 sub-Saharan members are performing in line with the global average on safety, as are the 24 sub-Saharan airlines that have met the 900+ standards of the IATA Operational Safety Audit (IOSA),” noted Tyler. “But if we look at the entire African industry, safety remains a challenge, with an overall accident rate many times the global average.”
In addition to safety, high operating costs were singled out by IATA as a major inhibitor to growing the aviation industry in Africa. Jet fuel costs 21% more on the continent than in the rest of the world, and the entire industry – from fuel to ticketing – is heavily taxed by governments that see aviation as a source of income, not a generator of economic growth. Senegal increased international landing fees by 13% last year, and additionally charges a $68 fee per passenger for airport development. Similarly, Benin, Cameroon, the Democratic Republic of the Congo, Gambia, Guinea-Bissau, Mali, Niger, Sierra Leone and Togo all have development charges ranging from $9 per passenger to over $50, according to IATA.
Under-investment in infrastructure and unreliable fuel supply were also highlighted as key issues, along with governments failing to liberalise their aviation policies. Qatar Airways’ chief executive Akbar al-Baker was among the most outspoken critics of African aviation, suggesting that governments unwilling to open their skies to foreign airlines, are propping up national carriers and shielding them from fair competition.
“They are worried that their inefficiencies will be exposed when they have more competition put on their doorstep,” said Baker. The executive’s comments rang particularly true as state-owned South African Airways, the host airline of the AGM, is currently embroiled in an uproar and litigation over a R5-billion loan guarantee from the South African government.
Despite the many issues facing airlines flying into Africa, an untapped market – and economies booming on the back of strong demand for mineral resources – shows Africa to be the bright new hope for global airlines.
“Home to a billion people spread across 20% of the world’s land mass… we see African aviation continuing to grow in the seven to eight percent range for at least the next five years,” said Tyler.