IATA: Africa Still Not Ready for Projected Growth

 - March 15, 2017, 11:46 AM
Adefunke Adeyemi, IATA's regional head of member and external relations for Africa and the Middle East, addresses the Aviation Africa 2017 conference in Kigali.

Despite projections that traffic will grow at a rate of 5.4 percent a year over the next two decades, airline industry stakeholders have effected little fundamental change in addressing the problems facing African aviation, according to International Air Transport Association (IATA) regional head of member and external relations for Africa and the Middle East  Adefunke Adeyemi. While international passenger numbers in Africa should triple to 300 million by 2035, excessive red tape, high costs and lack of air liberalization remain serious concerns, she told delegates at last month’s Aviation Africa 2017 conference in Kigali.

She compared the action being taken to the movie Groundhog Day. “It’s the same stuff, every day,” she said. “What is at stake? Why are we here? What are we talking about? Is there a sense of urgency?” she asked rhetorically, in wondering whether Africa could ever realize its air transport potential.

She drew attention to the fact that fragmentation has marred economies of scale, as cooperation between African carriers remains extremely limited. “Only Ethiopia and Kenya have connections to more than half the other countries in Africa,” she said.   

Airlines need to be profitable to support connectivity,” she added. Net post-tax profit margins showed gains all over the world except in Latin America in 2015and in Africa, which saw net profit margins fall around 5 percent in 2015 and 3 percent in 2016.

Net losses for African airlines totaled about $500 million in 2013, but projections for the four years up to the end of 2017 showed annual losses of more than $750 million. Industry EBIT margins hit positive territory in 2010-11, before moving decisively negative in 2012, and projections called for a fall to between 3 and 4 percent in 2015-17.

However, Adeyemi said the right policies for Africa could lead to an extra 35 million passengers compared with baseline forecasts, bringing the total toward 350 million in 2035 and more than tripling the 2015 figure of around 100 million passengers.

Competitiveness affected the ability to deliver value. She said the Seychelles, Cape Verde and South Africa ranked highest on the continent for quality of air transport infrastructure, citing recent World Economic Forum global competitiveness data.

Speaking with AIN on the sidelines of the conference, Girma Wake, chairman of Rwandair and former Ethiopian Airlines CEO, cited the cases of South African Airlines and Kenya Airways as prime examples of the failure of African governments to nurture airline growth.

It’s good for the governments to push change. But they [themselves] should also change,” he said. “They should stop interfering in [the airlines’] performance, carefully select company CEOs, and leave the airlines to manage [themselves], instead of micro-managing them. That’s one problem.

The other is for the government to say, ‘Look. I have given you the freedom. But there’s no more money.’ Because today [governments] are pumping money, the airlines do not feel responsible to cover their own costs. That is why 90 percent of African airlines are losing, because they know they have fallback government [funding].”

Wake added that sub-Saharan African countries are not ready for private airlines. “First of all, a private man will never make money, so why should he [invest]?” he said. “There is no control on traffic rights. That’s one area where they kill an upcoming carrier. They just say ‘No traffic rights unless you pay.’ And then you lose,” he said.

If it is completely made free, and there is no nationality issue, and people can move around, and operate from wherever they choose, then things will change.”