Air transportation is in growth mode in Africa. More than 150 million passengers transited through African airports in 2010, up 9.5% from the previous year. There is an intense competition between African and international airlines, especially on long-haul flights.

African companies often complain of strong competition from major airlines that have access to significant resources that enable them to exert control over the intercontinental routes, and accuse them of unfair competition.

However, there are differences from one region to another in Africa. If we map out traffic distribution, we note a structural concentration in Northern and Southern Africa, with significant growth in Nigeria and some of Eastern countries, including Kenya, Ethiopia and Tanzania. In other parts of the continent, particularly in West and Central Africa, traffic remains relatively low, with few intercontinental connections (often dominated by the major European and Middle Eastern airlines) and low domestic and regional connections. The continent's top 10 airports are generally the hub of the African majors that have been able to survive in a competitive environment, due to their strong regional networks that feed their long-haul routes with capacity matching demand, and relatively low operating costs, thus allowing them to offer competitive rates.

With this in mind, how can we create a sustainable aviation activity in Africa?

But before going into details of how this could be done, let's summarize the overall context of aviation in Africa as follows:

In terms of strength, there is no foreign competition on domestic and regional networks in Africa. Competition is on intercontinental routes, especially on Africa-Europe and Africa-Middle East axes. Opportunities, therefore, exist for African carriers to develop their regional markets that can be used to feed long-haul flights

However, in terms of weakness, overall these routes generate lower frequencies and tend to be operated with older generation aircraft not suited to match required capacity, and with operating costs that do not permit competitive rates.

The Importance Of Building The Right Network To Strengthen Leadership

To strengthen their leadership, African airlines can continue to develop their domestic and regional network, which in turn helps them to fuel growth on their long-haul routes and creates an effective way of competing on these routes.

Take the example of a passenger wishing to travel from a secondary airport in Africa to Europe. There could be two options: The first option for the passenger would be to first travel to an African hub by air or by other means of transport. Several choices will be available for connecting to Europe and the selection of a European airline will be highly probable. The second option could be an African airline offering a complete package, with a flight from the city of origin to the European airport, via the African hub. The passenger would naturally continue the flight to Europe on same airline having purchased the ticket in the city of origin, despite the strong competition on the long-haul route. The passenger will have a preference for using a single airline if offered a routing from the city of origin to the final destination at a competitive or even cheaper rate and with much better connection and convenience.

The second option could, of course, be in the form of a win-win partnership between a regional airline feeding the network of an African airline partner focused on intra-African and intercontinental routes.

Building the right network is important, but to make a business profitable, choosing the right size is primordial

Take the case of routes that are less than 300 nautical miles in Africa. There are 730 of these routes, 55% of which are operated by jet aircraft and 80% of these jets have a seating capacity of over 100 seats. The utilization of single-aisle jet aircraft on some routes is indeed justified where there is a need to meet demand. But for routes operated by jets of over 100 seats with frequencies below one daily flight (120 routes in total), the operators can optimize profitability by using smaller aircraft with higher frequencies. This would increase the offer which would stimulate demand, increase passenger load factors, decrease cost per seat and would allow operators to become more competitive, and thus create a positive dynamic generating volume and value. More importantly, the increased frequencies will allow for better onward connectively with the international flights.

Let's take the following two examples, one in Eastern Africa and one in Northern Africa.

In Eastern Africa, Tanzania's Precision Air, as a first step, started by developing a  domestic network using 50 to 70 seat regional turboprops suitable to the local market. After having consolidated the network, the company launched operations with medium-haul jets of about 150 seats, and is now planning to launch new routes to West and Central Africa and to Asia. Precision Air was able to achieve this through the consolidation of short-haul network which helped feed its medium-haul flights. Precision Air was, moreover, able to propose this business model to Kenya Airways in the context of a partnership under which it serves as a feeder for long-haul flights operated by Kenya Airways via its hub in Nairobi.

The second example is in North Africa. Royal Air Maroc created RAM Express in 2009, as a 100% subsidiary operating turboprops dedicated to domestic and regional flights and complementary to its network. RAM Express carries passengers at lower cost to Casablanca, Morocco's hub for Royal Air Maroc, where 50% of its passengers continue their journey internationally. Matching capacity with demand allowed Royal Air Maroc to offer a quality service to its passengers at lower cost and in a highly competitive environment.

The Right Type Of Aircraft

The current aviation global trend is strongly influenced by a structurally high fuel price, and fuel now represents a significant part of the airline's operating costs.

In a highly competitive environment, airlines seek to cut costs in all areas, accelerate the phase-out of older and less efficient fuel aircraft, including Regional Jets and to replace them with new aircraft with lower consumption. Operators have, in recent years, confirmed their preference for Turboprop Aircraft up to 70 seats on short-haul routes. Indeed, over the last five years, sales of Turboprop represented 70% of the total orders in the 50-70 seat segments.

As an example, an ATR 72-600 with a capacity of 70 seats burns up to 70% less fuel than a similar sized regional jet or turboprop on a typical regional route of 300 Nm (just under 600 km). This is a decisive factor when taking into account that fuel today represents the largest part of the operating cost.

There is therefore no doubt today that airlines prefer to operate turboprops on short routes and single aisle jets on longer routes or where traffic is dense.

ATR has been able to benefit from this trend. More than half of total sales since launch of its program in 1981 occurred over the last 5 years. 2011 is a special year for ATR: its 30th birthday marked by record sales of more than 145 aircraft and 72 options (as of September 2011), including orders from major lessors for the aircraft and the first delivery of its latest model, the ATR 72-600, to an African company: Royal Air Maroc.