African Business Aviation

 - November 4, 2013, 12:20 AM
ExecuJet operates two FBO and maintenance facilities in South Africa: one at Johannesburg and one at Cape Town.

With business remaining relatively stagnant in Europe and North America, the business aviation industry is looking to other parts of the world for growth, and nowhere is growing faster than Africa. An economic explosion in the exploitation of oil/gas and mineral reserves is driving a need for a boom in corporate aviation, not only to support internal operations, but also to bring in the executives from overseas who represent a major increase in inward investment into the continent, especially from China.

Africa represents significant opportunities for the whole of the business aviation world, from OEMs through operators and flight-support companies to the FBOs, ground handlers and fuel suppliers. However, the continent presents a unique set of challenges arising from the relative newness of the corporate aviation world there. “Africa is the flavor of the month, and many are coming in,” said Nick Fadugba, CEO of African Aviation Services. But, he warned, “Some will do well, but some will lose their shirt if they don’t adapt to the local environment.”

The development of business aviation faces numerous obstacles, not least of which is the varying but mostly inhospitable terrain, and the great distances between most destinations. There is a general lack of infrastructure and, as noted by Scott Plumb, Beechcraft’s v-p for EMEA, of the 3,500-plus airports in Africa, more than 75 percent have runways that are too short or facilities that are otherwise insufficiently prepared to cater to jet operations.

Another major hurdle for the development of business aviation is the fragmented nature of the regulatory environment in the continent. Whereas civil aviation authorities (CAAs) in most other areas of the world have developed a cooperative relationship, no such exists in Africa. Moreover, in many cases the knowledge required to establish the right regulatory framework for business aviation does not exist in the government, but African operators can assist their civil aviation authorities and ministries. At a cultural level, too, there are many differences between the nations. The newly created African Business Aviation Association (AfBAA) has set as its goal addressing these–and other–myriad challenges.

Safety Record and the Cost of Ownership

Perhaps the biggest obstacle standing in the way of the growth of business aviation is the outside perception of Africa’s poor safety record. There are, indeed, horrific figures that state that the continent accounts for 3 percent of global air traffic, it is responsible for approximately half of the world’s accidents. Such statistics inevitably taint the outsider’s view of Africa, but they can be deceptive. Just two or three countries are responsible for the greater part of the accident rate, and business aviation itself shows a safety record that is broadly similar to that in other regions. However, the safety issue is one that has to be addressed further to reassure financiers, insurers and multinational companies that Africa is a safe place to operate business aircraft.

“We must do more to improve safety,” asserted Fadugba, but he noted, “There is a tremendous effort under way to improve the record.” In addition to working toward a tighter and more cohesive regulatory environment, the association has implemented a number of initiatives not only to improve safety but also to demonstrate that there are already a lot of operators who work to internationally accepted standards.

A number of efforts are under way to redress the safety perception problem, many of them being undertaken at a company-to-company level. Several companies prioritize work to favor other companies that have implemented safety-first cultures and standards, while safety auditors such as Wyvern can reassure charter clients that operators adhere to high standards. AfBAA itself is studying the creation of standards that are applied to its own members, and which can then be used as a benchmark for others, or for establishing national standards.

Fadugba emphasized: “There is no African reluctance to address safety issues,” he asserted, but noted that safety-motivated, skilled personnel is the key. “Trained manpower is critical for any industry, but especially for aviation,” he noted.

The availability of financing presents a significant impediment to aircraft ownership. Financial institutions still exercise considerable caution when financing aircraft purchases in Africa. Graeme Shanks from CIT remarked, “We need to see consistent application of rules and regulations over a good period of time,” while Guggenheim’s Chris Miller noted that it is “important to have reputable aircraft management to maintain the aircraft’s value.”

Both also underscored the difficulty of financing smaller and older aircraft. The problem lies mainly with the advance, which on a low-value aircraft does not give the financial institutions the “comfort factor” they demand. For every aircraft sale there are fixed costs, regardless of the size of aircraft. On a low-value sale those fixed costs account for too great a portion of the initial deposit, leaving little real deposit for the companies. Also, first-time buyers find it difficult to satisfy a long-term audit trail. These problems are not unique to Africa but are exacerbated in the region.

Insurance is another area where African operators suffer, as premiums are higher in the continent than elsewhere. Daniel Hawes from Willis suggested a “need to get more underwriters to Africa to see that things are being done right.” The company is looking at schemes such as discounts for AfBAA member companies. “Picking the right local partner is vital,” added Hawes.

One aspect that has resulted from the safety and ownership cost issues is that many aircraft operating in Africa do so under overseas registry. Nigeria, for example, has approximately 120 business aircraft flying in the country. Of those, only 20 or so are locally registered. Operators’ decisions to register their aircraft overseas denies jobs to locals and deprives the government of tax revenue. Despite the considerable effort by the Nigerian civil aviation authority to significantly improve the environment in the country, Miller warned that the financiers are “not yet comfortable with the Nigerian registry.”

There is, however, a general air of optimism that finance will become more freely available, and that African operators will see lower insurance premiums. “It’s the evolution of financing,” explained Oliver Tibbet from Clyde & Co. “The UAE started as a difficult place to finance: the lenders did not like UAE-registered aircraft. Now there is lots of finance available. The Cape Town Agreement helped, but so did having strong, consistent clarity from the civil aviation authority.”

Flight Support Issues

“Africa is a place where everyone needs assistance,” said Issa Zuriqi from flight support company Hadid, “but it is not a jungle anymore.” The company has offices in many African countries, and is committed to using local staff to ensure the best possible local knowledge and service.

Mohammed Al Husary from UAS agreed: “African employees are the key to success. We have real UAS personnel rather than subcontractors. Customers expect similar service in Africa as they do elsewhere. But it can be difficult to differentiate between good and bad agents in Africa. A professional trip support company knows who the good agents are.”

One of the challenges for Africa is procuring overflight permits, and it can be time-consuming dealing with various CAAs. Speeding up that process is an aim of organizations such as AfBAA. However, “Open skies won’t happen,” warns Nuno Pereira. “We will still need permits. It’s a question of national sovereignty.”

Opportunity in Africa

Despite the growing pains of a young market, Africa nevertheless represents a great opportunity for the OEMs. According to a Bombardier forecast, there are currently 350 large business jets operating in the continent, and that figure is projected to grow to 960 by 2020. Operations in Africa are focused primarily on the main centers of commerce and industry, with South Africa, Morocco and Nigeria being the leading centers. North Africa is experiencing significant growth (see box), while the market is also expanding in the sub-Saharan region, with considerable growth in countries such as Angola, Democratic Republic of Congo, Mozambique and Tanzania.

“We’re seeing more demand for the Challenger/Global size of aircraft,” reported Robert Habjanic, Bombardier’s sales director for Africa. “That’s to do with the size of Africa and the kind of cabin that customers are looking for.” Pete Buresh, Gulfstream regional v-p for Africa, agreed, noting that the G450 and G550 have been successful across the continent. One G650 has already been delivered, with two more due “before year-end.” Dassault, too, has been successful, noting that the third engine of its Falcon 50, 900 and 7X has sometimes been a deciding factor in a region where distances between suitable airfields can be vast.

Other OEMs are also sanguine about sales and opportunities for smaller aircraft. “We see the midsize category as a growth area for Africa,” reported Roch Hennessey, regional sales rep, from Embraer. “And 65 percent of the aircraft are more than 10 years old and in need of replacement.”

Beechcraft has a significant foothold in Africa through its King Air series of turboprops. “We see a significant role in Africa supplementing the larger jets,” said Plumb. Cessna is also seeing a big market for its Caravan turboprop aircraft, with nearly 300 currently operational, alongside 110 Citation jets. “The African market is very exciting, there is a lot of activity there, especially focused on the Caravan,” said Jodi Noah, senior v-p. “The Caravan is well-suited to the region due to its low operating cost and reliability.”

While obtaining financing is perhaps the most pressing problem OEMs face in Africa, spreading product awareness remains a challenge as well. Gulfstream reports that very few of its aircraft are available for charter in Africa, making it difficult to advertise the type to potential new customers.

OEM Support

As manufacturers make inroads on the continent, they encounter the question of support, an issue that has created something of a divide between the OEMs and some operators as the industry grows. Operators report difficulties in getting the level of support that they are looking for, but OEMs suggest that the numbers of aircraft in some regions of the continent are not sufficient to warrant the investment in local support centers. Importing spares can also be a time-consuming process thanks to local customs laws.

Despite these factors, the level of local support is growing slowly. Gulfstream and Dassault continue to support their aircraft from Europe, while Airbus Corporate Jets tap into the continent-wide Airbus airliner support network. Embraer, too, also uses its airliner servicing network, which includes three service support centers in Egypt, Morocco and South Africa. The company has one business aviation center and is set to open another soon.

Beechcraft supports its fleet through ExecuJet’s facilities at Lanseria and Cape Town, and has plans to begin offering support from ExecuJet’s new facility in Lagos, Nigeria. Bombardier has a regional support center in South Africa and a servicing facility in Nigeria. It is opening a new facility in Morocco, where the company is also to build parts for the Learjet 70.