AT3 AFRAA

INPUT 2005INVESTMENT CONFERENCE: 

INPUT 2005 INVESTMENT CONFERENCE OUTLINE STATE OF THE AIR TRANSPORT INDUSTRY THE NEED TO GIVE AIR TRANSPORT PRIORITY AIR TRANSPORT DEVELOPMENT PRIORITIES SUPPORT NEEDED CONCLUSION

STATE OF THE AIR TRANSPORT INDUSTRY IN AFRICA: 

STATE OF THE AIR TRANSPORT INDUSTRY IN AFRICA Fastest growing market after Asia Total passenger traffic in 2004 exceeded 36 million Yields are amongst the highest in the world Some African carriers made profit in 2004 Dominance of the African sky by foreign carriers Airlines have high operating cost due to use of old aircraft and high fuel cost

STATE OF THE AIR TRANSPORT INDUSTRY IN AFRICA (Cont’d): 

STATE OF THE AIR TRANSPORT INDUSTRY IN AFRICA (Cont’d) Many carriers are small and have limited network It is difficult to raise financing from external sources Restricted regulatory environment

THE NEED TO GIVE AIR TRANSPORT PRIORITY: 

THE NEED TO GIVE AIR TRANSPORT PRIORITY It is the fastest and efficient means to integrate the continent in view of the inadequacy of other modes of transport Air transport is fast becoming a means of mass transportation and no longer the preserve of the rich and affluent. It could be made cheaper and accessible to majority of the people Basic infrastructure (airports, runways, ATNS, etc) already exist in most parts of Africa to support air transport

AIR TRANSPORT DEVELOPMENT PRIORITIES: 

AIR TRANSPORT DEVELOPMENT PRIORITIES IMPLEMENTATION OF THE YAMOUSSOUKRO DECISION SIMPLIFYING THE BUSINESS CROSS-INVESTMENT SAFETY AND SECURITY TRAINING AND CAPACITY BUILDING

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) 1. IMPLEMENTATION OF THE YAMOUSSOUKRO DECISION A number of bottlenecks hamper the full implementation of the Yamoussoukro Decision These include; Lack of political commitment (no conflict resolution mechanism, safety & security oversight, measures to internalise Decision) Lack of institutional implementation framework (no continental, central executing agency) Inadequate regulatory framework Infrastructure development Lack of financial resources Lack of Information and data relating to the Decision Dispute resolution mechanism Harmonisation of competition regulations Safety and security Lack of participation by other stakeholders (travellers, tour operators, airports, handling companies, etc)

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) 1. IMPLEMENTATION OF THE YAMOUSSOUKRO DECISION What can be done? Establishment of Executing Agency as envisaged by the Yamoussoukro Decision Develop uniform competition regulations Involve other stakeholders in the implementation process Establish dispute resolution mechanism and procedures Set up a Yamoussoukro Decision database to collect and distribute information to states and other organisations All the above require donor support by way of financing and capacity development

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) 2. SIMPLIFYING THE BUSINESS Cost of operating an airline in Africa is very high To bring this cost down, we need to employ technology in simplifying the business processes and reduce costs AFRAA endorses the IATA resolution in this regard and has; Initiated a number of measures to support airlines in implementing e-ticketing before the deadline of December 2007

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) SIMPLIFYING THE BUSINESS The AFRAA facilitation role include; Organising sensitisation workshops Bringing airlines together based on type of GDS/CRS used for purposes of negotiating competitive e-ticketing implementation fees In conjunction with IATA designed airlines assistance policy using KQ and SA that have implemented e-ticketing (buddy system) Compiling and availing to airlines a template of e-ticketing implementation processes Requested vendors to submit group business proposals for AFRAA member airlines

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) 3. CROSS-INVESTMENT Big carriers on the continent to invest in the smaller one to help them extend their network, develop capacity and stay competitive This trend could serve as one way of speeding up the full implementation of the Yamoussoukro Decision So far some cross investments have proved very successful including; Royal Air Maroc investing in Air Senegal Int’l

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) 3. CROSS-INVESTMENT Kenya Airways investing in Precision Air South African Airways investing in Air Tanzania We are encouraged by the news that Ethiopian Airlines is in discussion with Ghana International Airlines for purposes of investing in the later In the air transport industry, “small has never been beautiful” and that is why AFRAA encourages African airlines to form alliances, code-share and fully implement the Yamoussoukro Decision

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) 4. SAFETY AND SECURITY Safety is the number one priority of the air transport industry Africa safety record remains unimpressive In the last decade, airlines in Africa carried about 4% of global passenger traffic but sadly accounted for 25% of all fatal accidents In 2005, before the Bellview accident, all the 8 accidents recorded in Africa involved 5 Antonov and 3 Ilushion aircraft This bad image is putting all carriers on the continent into disrepute and is being exploited by foreign carriers for competition purposes

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) SAFETY AND SECURITY What should be done? Safety oversight must be intensified Over-aged aircraft (particularly former USSR built ones) with incomplete maintenance history records should not be allowed to operate on the continent Airlines should embrace the IATA Safety Operations Audit (IOSA) in addition to other safety initiatives being undertaken AFRAA is in discussion with IATA for a possible joint IOSA at reasonable costs for interested African airlines. We plan to train African IOSA auditors to reduce costs IOSA will reassure the travelling public that African carriers observe high safety standards

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) 5. TRAINING AND CAPACITY BUILDING There is lack of adequate skilled manpower in the air transport industry in Africa This inadequacy is compounded by the recent poaching of African aviation professionals by foreign carriers, particularly those from the Middle East Experienced employees trained at very high costs are lost overnight because of the inability of airlines to pay competitive wages

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d): 

AIR TRANSPORT DEVELOPMENT PRIORITIES (Cont’d) 5. TRAINING AND CAPACITY BUILDING Carriers in Africa should realise they are in a global business and therefore pay competitive wages to retain staff Training institutions in Africa need to increase their capacity to train more people AFRAA has the facilities and resource people to undertake both skills and managerial training for airlines and service providers Airlines with technical training facilities (ET, SA, RAM, etc) should be encouraged to extend training to other airlines in Africa Airlines should make use of the technical and training facilities on the continent instead of seeking training overseas at exorbitant cost

SUPPORT NEEDED: 

SUPPORT NEEDED Resources are needed from investors and donors for capacity building, to speed up liberalisation and strengthen existing institutional frameworks. Specific areas assistance is needed include; Formulation of competition regulations and dispute resolution mechanisms to speed up implementation of the Yamoussoukro Decision Sensitisation of other stakeholders (passengers, travel trade, tour operators, etc) on the benefits of full implementation of the Yamoussoukro Establishment of information and statistical database Improvement of safety oversight and search and rescue Support small airlines in their e-ticketing implementation drive and to undertake IOSA Strengthen existing training institutions to train needed skilled manpower

CONCLUSION: 

CONCLUSION Air transport in Africa has a huge potential as a business and as a means of integrating the continent Most airlines however are too small to benefit from economies of scale. To address the size issue, airlines must merge, enter into alliances/partnerships and cross-invest in each other National and regional regulations need to be reviewed in line with changing trends to enable carriers expand, grow and operate freely across boarders Constraints to the full implementation of the Yamoussoukro Decision should be addressed with speed to facilitate the process Safety and search and rescue operations need special attention and investment Resources are needed to upgrade existing training and technical development institutions in Africa to provide the requisite training

Slide18: 

Thank You for your attention