Achieving profitability appears to be the preoccupation of African airlines as they resolved in Addis to hang together against all odds

Improved Gains, New Preoccupation Of African Airlines

When Chief Executive Officers of African airlines met recently in Addis Ababa under the umbrella of the African Airlines Association (AFRAA) and patronage of the Ethiopian government for the 42nd Annual General Assembly (AGA) of the association, their utmost concern was adapting to survive and prosper especially given the numerous challenges facing the airline industry in Africa from within and outside.

In declaring the General Assembly open, His Excellency Ato Deriba Kuma, Minister of Transport of the Federal Democratic Republic of Ethiopia, called on African governments to play their part in supporting the airline industry.

"Firstly, the continent's air transport infrastructure, which, with a few exceptions, is in dire state, needs to be upgraded with a view to carter for the existing traffic and the expected growth in the coming years. Without the necessary infrastructure, no industry, let alone the airline industry, can grow and prosper. Therefore, given our resource limitations, African governments should jointly push the development funding institutions to avail funding and facilitate investment in air transport infrastructure," he noted. The Minister mentioned that the second area where concerted government action is highly critical is safety and security, stressing that safety in the aviation sector is not an area where compromise is permissible.

"We have to be stringent and continuously improve our safety requirements, in line with international standards. To this end, African governments can better play their indispensable oversight role through enhanced resource and expertise sharing," he called. Of equal importance, he said, is the enhancement of the regulatory role of governments. "Here, I will be quite blunt in stating that we have for many years paid lip service to the opening up of African carries. Our words have not even begun to match our deeds. If we are serious about the growth of the aviation sector in our continent, the Yamoussoukro Decision, which was adopted by our leaders over ten years ago, must be implemented immediately and without preconditions," the Minister submitted.

African airlines are challenged by problems which were once again highlighted at this event with the view to finding lasting solutions to them and to ensuring that airlines in Africa are able to capture their market share of the global airline industry. Safety is a global problem but needs increased attention in Africa as safety levels in Africa are still below the world average. Continued liberalization of the industry is also a challenge that has refused to go away and is key to attracting the necessary capital and expertise for the industry. The former Acting Secretary General of AFRAA, Mr. Tewodross Tamrat, highlighted these challenges and stated that the AFRAA Secretariat is working with member airlines to overcome them.

Deliberations at the Annual General Assembly focused on proffering solutions to these problems with the hope that African governments will do a little more to provide the enabling environment and infrastructure for the airline industry to thrive.

Airlines' CEO's Perspective

The CEO's Forum provided opportunity for airline executives to discuss their own role in looking for the survival strategy focused on transforming the African airline industry to create opportunities. Chief Executives of African airlines present x-rayed the various challenges faced in their local environments. The interaction also provided opportunity for exchange of ideas with their counterparts. Some of the CEOs identified the restrictive environment and backward legislation in their countries as a major challenge. One CEO noted that the airport his airline uses is a hub, but the government has been very reluctant to build a new one. This challenge has hindered the airline from any aggressive expansion exercise. Some of the CEOs also noted infrastructure deficiencies as a challenge; some airports the say do not have the requisite navigational aids, while others cannot accept flights after 6 p.m.

The CEOs, therefore, advocate that in the face of these challenges; the first step is to build confidence in one another. The willingness to corporate with one another is critical to the overall success of African airlines. Airlines are also encouraged to build internal capacity since the future and growth of any airline is dependent on the competence of its internal capacity. The immediate-past CEO of Ethiopian Airlines, Ato Girma Wake explained that in overcoming domestic difficulties in Ethiopia, the Airports Authority, the CAA and the airline report to the same ministry and have been able to manage a good working relationship and providing an enabling environment for Ethiopian Airlines. He further explained that the stakeholders meet regularly to discuss expansion plans as well as the infrastructure needs of Ethiopian Airlines.

Other executives also noted that the implementation of the Yamoussoukro Decision is critical to the transformation of air transport in Africa. The CEOs, on that score, generally acquiesced on the need to face the reality of competition and allow for full liberalization. The CEO of Air Nigeria, Mr. Kinfe Kahssaye, wants smaller airlines to follow the established airline models in transportation in Africa such as EgyptAir, Kenya Airways, Ethiopian Airlines and South African Airways as these models can help other African carries attain their desired objectives. The CEO of Precision Air, Mr. Alphonse Kioko, agreed with this standpoint, noting further that leveraging on the 'big brother', as he referred to the bigger African airlines, has paid off. He added that when his airline was looking for financing for its aircraft, the mention of Precision Air's partnership with Kenya Airways got the financiers to pay them more attention.

Expansion Strategies

Daunting as the challenges may seem, they do not actually dampen the African spirit for survival as some of the executives look to the future as they discussed their expansion strategy with their counterparts. Air Nigeria explained that it has adopted a stretched strategy covering the next three years. The airline has doubled its fleet in the last couple of months while its loss has been significantly reduced. The airline also plans to increase its aircraft size to 15 by the end of 2011. EgyptAir has plans to expand to three destinations every year. The airline will start flights to Toronto from 2011 and operate daily flights to Khartoum, and it noted that its daily flights to London and Rome have been doubled.

Air Mali has recently acquired a CRJ 900 for its Bamako route and a CRJ 200 to expand to other markets. It has also entered into various agreements with Air Burkina, Air Ivoire, ASKY, SN Brussels, Iberia and Emirates that will enhance its growth.

Ethiopian Airlines plans to expand its international destinations by 50% in the next 5 years and has a strategy which sees that for every one new station Ethiopian Airline opens outside Africa, the airline opens two in Africa. This gives the airline the opportunity to deploy small planes that feed the big long-haul flights outside Africa.

Leveraging On Technology

While strategy is important to grow the business, African airlines also agree that there is a need to leverage on technology to enhance whatever choice of business model individual airlines choose to operate. The AGA's panel discussants pointed to the fact that service enabled by technology can help African airlines reduce cost, and at the same time giving passengers better service and increasing revenue generation. Technology can also help to provide market intelligence for airlines. Airlines were also encouraged to deploy the use of mobile devices and online booking systems. South African Airways, one of the airlines in Africa in the forefront of technology utilization, is deploying only about 20% online booking at the moment, it was observed. Airlines would also need to increasingly look at developing capacity for ancillary revenue as one of the resource persons on the panel noted that Emirates makes up to ten Euros per passenger from ancillary revenues.

Customer Experience Is Critical

Retaining the customer is hinged upon a pleasurable flying experience. Discussions identified that the negative perception of African airlines contributes to customer dissatisfaction. Customer experience starts from when a customer is trying to access an airline's website, and the site is not functional. Therefore, airlines need to continue to develop their product strategy towards customer satisfaction. The customer also needs to feel good from the point of ticket purchase to the point of arrival. The management of airlines must enlighten their staff on the vision of the company to make the customer feel satisfied. Facilitation of the customer at various airports also impacts on the customer experience. Airlines were advised to work closely with airports in order to enhance the customer facilitation experience.

The East African Facilitation Meeting of all relevant stakeholders at the airports which discusses a lot of issues of facilitation was identified as a good example for other regions to emulate. Many customers in Africa do not know their rights. Putting an industry code of conducts in place so that the customer knows his rights and how to seek redress should be put in place. There are efforts by the Economic Community of West African States (ECOWAS) and UEMOA to develop customer protection legislation. The African Union and AFRAA have the responsibility of working with these regional organizations to streamline such regulations. When there are strong airlines and airport relationships, it conduces to a beautiful flying experience for the customer.

Elections And Resolutions

The highpoint of the 42nd AFRAA AGA was the confirmation of Dr. Elijah Chingosho as the new Secretary General of the association to take over the affairs of AFRAA from Mr. Tewodross Tamrat, who has been acting in that capacity since June 2010. Dr Elijah Chingosho has extensive and diverse professional expertise in aviation and was the Director of Safety, Technical and Training of AFRAA for over 9 years. His familiarity with the functioning of AFRAA and its diverse membership's interests will be extremely valuable in formulating strategies to reposition the organization and achieve its goals. With over 24 years aviation experience in technical and general management, 17 of which have been at senior management level, Dr Chingosho is well-equipped with the knowledge, skills and expertise to deliver on his new mandate. The newly appointed Secretary General of AFRAA started his aviation career in the Air Force of Zimbabwe where he rose to the position of Director of Engineering with the rank of Group Captain before leaving to pursue other interests. He had a stint with a private marketing company in Harare before joining Air Zimbabwe as the General Manager, Engineering and Ag. General Manager Human Resources. He subsequently joined AFRAA in November 2001.

Similarly, Mr. Driss Benhima, the Chief Executive Officer of Royal Air Maroc, was elected President of the Association, while Engr. Hussein Massoud, Chief Executive Officer of EgyptAir, was elected the Chairman of the Executive Committee. Mr. Abdderahmane Berthe, the Chief Executive Officer of Air Mali, and Mr. Inati Ntshanga, Chief Executive Officer of South African Express Airways, were elected the 1st and 2nd Vice Chairpersons of the Executive Committee, respectively.

Before Next AGA In Marrakech

If African airlines must adapt to survive in the midst of the increasing competition from Europe, Middle East, Asia and America they must transform the air transport landscape in Africa.

AFRAA members resolved to support the International Civil Aviation Organization's (ICAO) Global Scheme to reduce emissions, as well as International Air Transport Association's (IATA) goal of carbon neutrality by the year 2020, while calling upon African governments to continue to oppose any unilateral imposition of environmental charges by States in international air transport. They also urged the African Union, African Civil Aviation Commission (AFCAC) and Regional Economic Communities (RECs) to work together to establish a common African response to the European Union Emissions Trading Scheme (EU-ETS). The members also called upon African States whose airlines are in the blacklist to take all necessary measures to enhance safety and remove their country from the list. AU and AFCAC should also engage the EU with the view to finding a mutually acceptable and agreed approach to jointly address safety concerns.

While the Acting Secretary General gave a score card of its members, he noted that 19 AFRAA members provided their financial results for 2009. The net profits from these 19 members was USD137 million. There are great expectations that when the 43rd annual General Assembly of AFRAA holds in Marrakech, Morocco, in November 2011, these results would have improved especially against the backdrop of IATA's forecast of an annual passenger growth rate of 6.5%. for the continent.

When Chief Executive Officers of African airlines met recently in Addis Ababa under the umbrella of the African Airlines Association (AFRAA) and patronage of the Ethiopian government for the 42nd Annual General Assembly (AGA) of the association, their utmost concern was adapting to survive and prosper especially given the numerous challenges facing the airline industry in Africa from within and outside.

In declaring the General Assembly open, His Excellency Ato Deriba Kuma, Minister of Transport of the Federal Democratic Republic of Ethiopia, called on African governments to play their part in supporting the airline industry.

"Firstly, the continent's air transport infrastructure, which, with a few exceptions, is in dire state, needs to be upgraded with a view to carter for the existing traffic and the expected growth in the coming years. Without the necessary infrastructure, no industry, let alone the airline industry, can grow and prosper. Therefore, given our resource limitations, African governments should jointly push the development funding institutions to avail funding and facilitate investment in air transport infrastructure," he noted. The Minister mentioned that the second area where concerted government action is highly critical is safety and security, stressing that safety in the aviation sector is not an area where compromise is permissible.

"We have to be stringent and continuously improve our safety requirements, in line with international standards. To this end, African governments can better play their indispensable oversight role through enhanced resource and expertise sharing," he called. Of equal importance, he said, is the enhancement of the regulatory role of governments. "Here, I will be quite blunt in stating that we have for many years paid lip service to the opening up of African carries. Our words have not even begun to match our deeds. If we are serious about the growth of the aviation sector in our continent, the Yamoussoukro Decision, which was adopted by our leaders over ten years ago, must be implemented immediately and without preconditions," the Minister submitted.

African airlines are challenged by problems which were once again highlighted at this event with the view to finding lasting solutions to them and to ensuring that airlines in Africa are able to capture their market share of the global airline industry. Safety is a global problem but needs increased attention in Africa as safety levels in Africa are still below the world average. Continued liberalization of the industry is also a challenge that has refused to go away and is key to attracting the necessary capital and expertise for the industry. The former Acting Secretary General of AFRAA, Mr. Tewodross Tamrat, highlighted these challenges and stated that the AFRAA Secretariat is working with member airlines to overcome them.

Deliberations at the Annual General Assembly focused on proffering solutions to these problems with the hope that African governments will do a little more to provide the enabling environment and infrastructure for the airline industry to thrive.