Travel and tourism is heavily dependent on air connectivity – by as much as 50% in some African countries according to expert analysis shared at the third AviaDev Africa Conference in Cape Town over the last two days.
IATA reports that aviation in Africa currently supports $72.5 billion (R973.38 billion @R13.43/$) in economic activity and 6.8 million jobs. Over the next 20-years, aviation is forecast to grow at nearly 6% per year, creating significant opportunities. It expects the top 10 fastest growing aviation economies will all be in Africa, boosting not only tourism but also adding benefits to cargo services.
It’s clear that air travel is an economic enabler, with about 250 delegates from across the globe, including specialists in the aviation sector and key stakeholders from airport authorities, airlines, tourism authorities, governments and industry suppliers – discussing the expected growth of the industry across the continent.
What the challenges and opportunities are within the industry, where the margins to improve on costs could best be harnessed as well as what technological innovations could do for the industry – these were just a few of the issues unpacked.
Regulation continues to stem investment, as a result travellers are footing the bill of expensive air travel due to the protectionist approach of many African countries when it comes to their airspace. Earlier in the year, positive steps were undertaken for Africa to fully realise its air-travel economic growth potential, with 23 out of 55 countries signing the Single African Air Transport Market (SAATM).
Industry analysis shows that if only 12 countries institute the liberalised policy, which is being led by the African Union (AU), more than 155 million new jobs will be created in Africa – with GDP growth estimated at $1.3 billion across the continent.
Considering that about two decades ago, 44 African countries signed the so-called Yamoussoukro Decision, it seems as though collaboration – while well understood to be the key to moving closer to the economic benefits at hand – does not come easy to Africa.
However, AviaDev has positioned itself as a key networking event to ensure otherwise, as the outcome from panel discussions and one-on-one interviews have reinforced that achieving this expected growth curve weighs heavily on strong partnerships across the industry.
With the conference hosted in Cape Town for the first time, the success of the Direct Routes Access Partnership – which has seen 13 new routes established and as a result, added 1.5m two-way seat capacity to the Mother City – was largely celebrated as industry best practice that could be replicated across the rest of the continent. Wesgro estimates in the last year alone Cape Town has seen a 20% growth in international passengers with an estimated R4bn in direct tourism spend.
A panel of experts from Zambia Airports Corporation Limited, Abidjan Airport, Airports Company South Africa, and the World Bank Group also discussed the development and funding of African airport infrastructure.
IATA recently highlighted what it deems an “infrastructure crisis” within the industry at its AGM in Sydney Australia, citing how cash-strapped governments are “selling airport assets in order to make short term cash injections”.
It urged governments instead to “take a long-term view focusing on solutions that will deliver the best economic and social benefits”. Currently about 14% of airports globally have some level of privatisation, says the industry regulator. Added to that private airports are seen to be more expensive.
Speaking at the event Agness Chaila, Director Airport Services for Zambia Airports Corporation says airports are business just like airlines and that Zambia has looked at various models to modernise and improve its operations.
The future of the low-cost carrier in Africa
Central to the liberation of Africa’s skies, was the discussion around the future of low-cost operators. The debate became granular at the level of calling it low-fare rather than low-cost as these businesses face the same operating costs in terms of staff salaries and airport taxes as that of full-service operators.
Overcoming the regulatory challenges through continuous lobbying was seen as the most effective way to overcome this – with Fastjet being the key example in this regard.
For the future of the low-cost phenomenon to take off in Africa, the environment for private sector must be conducive to investment, governments need to create a level playing field, with authorities allowing airlines the same chance to compete, according to Sylvain Bosc, CCO for fastjet.
This together with a stable regulatory environment when it comes to taxes and airport operating costs are essential, says Bosc.
Secondary airports are few and far between in Africa, which means main airports can align across the sector to re-look and reduce operating cost to allow an opening for low-cost carriers, advises Gwenvael Ronsin-Hardy EGIS. Incentives and regulation are important, he says, acknowledging that “costs remain a big challenge”.
However, while realistic about the challenges of Open Skies not fully being put into effect Ahmed Aly, CEO Nile Air, cautioned that it was not a “one size fits all”, when dealing with the issue of low-cost operator growth.
Having developed considerable wins for the north African carrier, he says airlines should “take smart risks by fully understanding their market and growth of routes looking to profitability.
Speaking to the importance of code-shares and partnerships, Aly says, “In this highly competitive industry being a small carrier is going to be difficult to survive on your own. It might be sexy but it’s capital intensive.”
How to drive profitability through new technologies
With the ongoing presence of disruptive technologies, a panel of experts including Manish Shrivastava, Co-founder and commercial executive, Travel Commerce Solutions, affirmed travellers and customers are willing to pay for something or services that add value, with innovation being an enabler of ancillary services and retail operations that are so much more than booking a seat and checking in baggage.
Added to that profitability and technology effectiveness will be encapsulated in the concept of the connected aircraft. It is able to monitor everything from ATNS, ground-staff, cleaning and thereby reduce consumption across all cost spheres, according to Rudolph Louw, Aerospace leader- Africa, Honeywell.
The conference also saw presentations from the likes of Uber and Embraer on disrupting the future of transport. Overall, profitability and value for the traveller continue to depend on efficiency and convenience – these being the essential drivers towards the huge, growth forecast.