Small Weak Airlines

The issue of fragmented and weak airlines pervading the African aviation industry has long been a major barrier to airline industry development in Africa which does not favour the airlines themselves or the African economy. The smallness and hence weakness of many African airlines deny them of the strength to venture into new markets or sustain adequate operations on various routes, thus making interconnectivity a continuous nightmare for travellers. This state of many African airlines, as often repeated by industry sage and former CEO of Ethiopian, Ato Girma Wake, makes them not competitive against predominantly large and strong foreign airlines on intercontinental routes.

The repeated question has been whether African carriers can opt out of their disadvantaged position. And positive answers show that options like consolidation and other forms of partnerships are available for these airlines to form mega-carriers or airline alliances in the continent. What is confounding is the reason behind (many African) airlines' supposed decision to remain small and not competitive when they have opportunities to become stronger and more profitable. Proponents of mega-carriers and airline alliances in Africa see robust economy and presence of (though limited number of) aviation professionals and management experts on the continent, among others, as factors conducive to the formation of large profitable African carriers or groupings. Mega-Carriers And Airline Alliances

Although small airlines can be profitable, as seen in a number of cases in Africa (Precision Air and South African Express Airways), the need of the African continent is more about interconnecting its underserved markets to ginger up socio-economic prosperity. Even though so-called large carriers exist in Africa (relative to their numerous small neighbours), the operation of such big carriers yet do not meet the needs of several markets on the continent. To that extent, big and small airlines in Africa today can only impact on their limited networks, unless there is an extensive linkage of networks within the continent in such a multiplicity that can become an airlines alliance covering many more parts of Africa. The challenge with such an alliance may be the need for a seamless settlement plan since some especially domestic and regional airlines are not linked to settlement platforms such as International Air Transport Association's (IATA) Billing and Settlement Plan (BSP). However, airlines can integrate their systems where one partner is already on BSP, to key their entire operations into the global settlement system. For example, a domestic or regional carrier not on the BSP or other settlement systems can work with South African Airways to sell destinations on the strength of SAA's presence on the BSP. Mr. Chris Ndulue, Managing Director of Arik Air, says Arik's recent joining of the IATA BSP is a door opener to partnerships with international carriers. This, potentially adds to the number of airlines that can support the formation of a workable African airline alliance, if the airline so decides.

African airlines on global settlement platforms can set up alliance/partnership primarily to create connectivity in all parts of Africa, making it easy, for instance, for a traveller to go from Addis Ababa to Cairo and onward to Marrakech, Lagos and back to Addis, with the participation of Ethiopian, EgyptAir, Royal Air Maroc and Arik Air, etc. in the alliance. Through mergers/consolidation as well, two or more airlines can come together to create strong carriers that would serve the needs of the continent and stand up to massive competition from the likes of Turkish Airlines, Emirates, Air France, Delta Airlines, among others.

Inadequate Partnerships

Different forms of partnerships have been existing among African airlines; but the challenge has been that the outcomes of such ventures have not achieved the required results in Africa. It is indeed pointless for a weak airline to partner with another wobbling airline, for instance, or for a crumbling airline to be unable to fulfill the needs of its partner in extending connectivity and regularity of flights in their network as has been evident in some alliances in Southern and Eastern Africa. Given these scenarios, the aim of consolidation in Africa should be to form strong big carriers in which all airlines involved must, as a pre-condition, reposition themselves to contribute to the success of the emergent carriers. The needed partnerships in Africa must be effective within Africa, like those in other regions, even if not as large as successful examples of global airline partnerships including Delta Airlines, Air France-KLM, United Continental Airlines and China Southern Airlines. The concept of larger and stronger airline models is important for Africa considering the trend of global competition and the tendency of small weak airlines to remain perpetually loss-prone and non-competitive. The large size of airlines allows them to enjoy economies of scale and raises their chances of increased profitability, as borne out by success stories from global airlines which recently merged, including Air France-KLM, United and Continental Airlines, among others. Global alliances, to which some African airlines belong, have as well paid off for their members. Former AFRAA President and LAM Mozambique Airlines Chairman, Jose Viegas, says the commercial aviation is "under pressure" and "shaky", which creates an urgent need for partnerships. According to Mr. Sanjeev Ghadia, CEO of Astra Aviation, who quoted Mr. Viegas recently, the former AFRAA President backs stronger regional relationships, "energising" of some hubs, flight schedule co-ordination and other commercial co-operation to lift up operations of African carriers.

Mega-carriers in Africa are essential to check the spate of capital flight arising from the dominance of long-haul intercontinental operations by foreign carriers. Strong large carriers are equally necessary to drive Africa's economy.

Airlines In The Emerging Africa

Africa is slowly gravitating towards harmonized air transport policies and frameworks in addition to economic integration across State and regional boundaries. This can be called the new Africa, characterized by a growing market, efficient intra-Africa air transport system devoid of market restrictions, and having the passion to grow. Mega-carriers or airline alliances would be a key part of the emerging Africa.

Therefore, the campaign for sustainable large carriers and networks in Africa can only be stepped-up now, while existing carriers and potential investors are encouraged to work out modalities for establishing these. In parts of Africa such as Ghana, Tanzania and Zimbabwe, for example, there are efforts to encourage start-up airlines or revive collapsed national carriers. Ghana Deputy Minister of Transportation, Mrs. Dzifa Attivor, recently announced the go-ahead for about four new private-sector airlines in Ghana. The Asky Airlines in West Africa, as promoted by its Chairman, Mr. Gervais Djondo, is a regional carrier to bolster interconnectivity within Africa. Such emerging airlines can key into the initiative of mega-carriers or alliances in the continent. Beyond this, emerging airlines in Africa must be cognizant of the present and future needs of the continent as an aviation region that needs internal cohesion through interconnectivity, and as well needs to raise its contributions to global air transport system, up from a paltry less-than-3-percent.

Assurances For The Future

The future of African airlines lies on the creation of a solid foundation and realizable vision. Preparing airlines for the future, and possible membership of alliances or mega-carriers in Africa, requires airlines to improve their operation and management to become attractive to potential partners. According to Mr. Blair Pomeroy, Senior Partner at Oliver  Wymann Group, airlines need to identify and plug leakages in their revenue pipelines, while equally developing clear commercial strategy and strong governance to bolster their operations.

Besides, building of trust is essential to create future opportunities and encourage partnerships among airlines in Africa. Though funding has been a challenge for African carriers, strong business plans that embrace the large carrier models are not expected to be spurned by financiers. It is noteworthy that major well-managed airlines in Africa find it easier to access funding than small weak airlines.

Therefore, African airlines should begin to see large airline groupings and networks in the new Africa as close to reality, and start to work towards actualizing them.

Similarly, States should work together to open their markets to African airlines with emphasis on multi-State or multi-regional air services agreements, as opposed to bilateral agreements. States should also cut taxes for airlines. "To stimulate demand and realise full potential of the market, it is necessary to reduce taxes on passengers and fuel," says Dr. Elijah Chingosho, Secretary General of AFRAA. Specifically, Mr. Tony Tyler, IATA DG/CEO, says South Africa's plans to include aviation in its economy-wide carbon tax "will be a competitive disadvantage for South African carriers and add to double counting of emissions under conflicting measures including the EU ETS proposals as well as the environment-related departure taxes that we see in the UK, Germany, Austria and elsewhere."

In addition, groupings such as Airlines Association of Southern Africa (AASA) and AFRAA can help airlines improve their regional reach or address common challenges. President of AASA, Mr. Chris Zweingenthal, says the Association encourages regional expansion opportunities, and airline members can request AASA to take up specific business activities on their behalf, while associations "must be proactive in taking on burning issues on behalf of Member Airlines." The future of African airline industry cannot be assured by weak, fragmented and uncooperative airlines given the huge needs of Africa's emerging travelling public, in addition to strong competition from foreign airlines. One can only enthuse over the sort of connectivity and utility that would emerge in Africa with the advent of groupings involving airlines from all parts of Africa under strong regional and economic integration framework. And this is the key part of assured future for African airlines.