New challenges facing African airlines - including the European Emissions Trading Scheme (EU ETS) which kicked off January 1, and recurrent high fuel costs - cause increasing apprehension in the industry. The quest for improved funding for these airlines and the need for them to hang together to enhance their productivity and chances of profitability still occupy the front-burner as ever. And the Secretary General of African Airlines Association, Dr. Elijah Chingosho, here outlines current efforts to unstop the growth trend of African airlines, working from the perspective of the afore-mentioned challenges.

Q: The joint fuel purchase project was recently launched by AFRAA and nine member airlines. Would you say this would do much to alleviate the hardship caused by high cost of fuel for the airlines involved?

A: Fuel constitutes around 40%-50% of the operational costs of African airlines. Generally, fuel prices are going up worldwide and IATA forecasts prices to average around $100 per barrel in 2012. Any project to reduce the cost of fuel would alleviate the cost of burden to airlines and help ensure their continued viability.

The nine airlines participating in the AFRAA Joint Fuel Purchase Project are going to register significant savings in their operational costs. This is achieved through developing a win-win arrangement between fuel companies and participating airlines. In return to the fuel companies agreeing to reduce their margins, they would, however, benefit from increased pooled volumes of fuel they would be delivering to participating airlines.

Q: The joint fuel project was mooted a long time ago, what delayed the launch until this time?

A: Indeed, the Joint Fuel Purchase Project was mooted by AFRAA more than a decade ago but did not see the light of day. However, the Arab Air Carriers Organization (AACO) was successful in putting together a Joint Fuel Purchase Project for Arab carriers. If airlines from the oil rich Arab States find it necessary to cooperate to reduce fuel costs through joint fuel purchase, naturally, the need is even greater for the resource-starved African carriers.

African carriers are realizing that unless they cooperate in a number of areas, they will always endure relatively higher costs and put themselves at a competitive disadvantage compared to their counterparts in other parts of the world. African airlines are generally smaller in size than their counterparts elsewhere such as airlines from Europe, Far East and Middle East and, therefore, they do not benefit from economies of scale. Hence AFRAA, in addition to encouraging consolidation, is keen to explore ways in which costs can be reduced and revenue increased to ensure viability of African carriers.

Q: With nine airlines out of the entire AFRAA membership joining in the scheme, are you expecting more airlines to join?

A: Due to failure of successfully launching the Joint Fuel Purchase Project in the past, naturally some airlines were skeptical as to whether this time the project will be a success. AFRAA and the CEOs of the nine airlines involved were determined that the project is a success. The determination and leadership of the CEOs of Kenya Airways and Ethiopian Airlines, two airlines with the most extensive network in Africa, ensured that we have been able to successfully launch the project. Already a number of other AFRAA member airlines are expressing desire to join the project soon.

The AFRAA Arab member airlines in North Africa are not part of the project because they are already participating in AACO Joint Fuel Purchase Project.

Q: What other measures is AFRAA looking at to assist airlines in Africa to deliver more improved and profitable operation?

A: AFRAA is already working at other areas where costs to the African aviation industry are much higher than elsewhere in the world. Among these areas are excessive taxes and charges on fuel, passenger handling and on the provision of certain services such as landing and air navigation services. Also, one finds several monopoly service providers in areas such as ground handling, catering services and fuel supply. AFRAA is quantifying these high charges and lobbying governments, airports and air navigation service providers to charge competitive prices in consultation with users to ensure that the African air transport industry is viable and that the reduced costs can be passed on to passengers to enable more people to enjoy convenient and cost-effective air transport services. AFRAA is also lobbying for the removal of monopoly service providers to allow more competition, enable users to have a choice and avoid monopoly pricing.

Q: How would you describe the relationship between African airlines and airports, as well as between the airlines and tourism sector presently on the continent?

A: AFRAA has a close relationship with Airports Council International (ACI) particularly the African Chapter, the purpose being to facilitate close cooperation and collaboration between airlines and airports.

Quite often some airports have very high charges, such as for passenger services. Examples I can cite are Ambouli-Djibouti ($85.89), Accra ($75.00), Malabo ($68.02), Abidjan ($64.73), Ouagadougou ($58.24), among others. At some airports, there are some ground handlers that are licensed to operate and yet do not deliver services they are contracted to provide and sometimes airlines have to second their people to provide services for which they are already paying service providers. With more and more airlines obtaining IOSA certification, it is hoped that airports will only allow ground handlers with ISAGO certification to ensure that safety, security and quality standards are maintained at world-class standards. Hence, AFRAA will continue to work closely with ACI Africa to ensure that the above issues are satisfactorily addressed.

There is urgent need for greater cooperation and collaboration between African carriers and the tourism sector. This should enhance intra-Africa travel. There is scope for jointly communicating and popularizing the images of African carriers and the unique tourist attractions on the continent.

Q: How does AFRAA hope to work with governments of African countries to create a more viable economic atmosphere for airlines in Africa to operate?

A: AFRAA signed a historic Memorandum of Understanding with the African Union (AU) Infrastructure and Energy Commissioner in January 2011 so as to provide a framework through which AFRAA can work with AU to facilitate the development of aviation in the continent. Governments recognize AFRAA as a professional body that represents the interests of carriers on the continent and hence AFRAA is invited at the meetings of the Ministers responsible for air transport to put across our views on the industry.

AFRAA is also invited by Regional Economic Communities (RECs) at their forums, at which AFRAA lobbies for issues ranging from urging States to take their safety oversight responsibilities seriously, reduce taxes and charges and urging governments that have not done so to accede to the Cape Town Convention and Protocol to reduce the cost of financing African airlines as well as full implementation of the Yamoussoukro Decision thereby facilitating growth of African airlines.

Q. To what extent has continental financial institutions such as the African Development Bank responded to the needs of African airlines?

A: Africa is one of the regions in the world where economies as well as air traffic are growing at well above world average rates. Financial institutions are starting to recognize the need to support the development of African airlines and one now sees institutions like the African Development Bank providing financing to African carriers. We, however, think they can do more particularly in providing information on how airlines can access the financing. With adequate financing and good leadership and management, African airlines will be able to grow at even faster rates than currently the case.

Q: The EU Emissions Trading Scheme has been condemned by US, China, IATA and even ICAO. What is AFRAA's position on this scheme, and what has been AFRAA's response on behalf of African airlines?

A: AFRAA's position on EU ETS is that, whilst agreeing on the need to reduce emissions, this is the wrong way to deal with issues affecting international aviation. AFRAA is of the view that ICAO is the only recognized impartial and neutral professional body that should regulate issues such as environment, safety, security among others to ensure orderly development of international aviation as stipulated in the Chicago Convention of 1944. In any case, according to Kyoto Protocol of 1997, 3rd world countries are exempted from binding emissions reductions. AFRAA believes that the extra territorial and market distorting application of EU ETS may invite retaliation or trade wars from other countries which would create chaos in the international aviation field which is unnecessary particularly at a time when EU States are facing economic crisis.

AFRAA's response on behalf of African airlines has been to condemn the scheme but we have advised eligible airlines to comply with EU ETS stipulations under protest while AFRAA continues to work in conjunction with other organizations ranging from IATA, AACO, AFCAC, and ICAO to press for a global solution under the auspices of ICAO.

Q: More African airlines are joining global alliances. What is your response to this, and do you think Africa requires a strong mega-carrier or airlines alliance to boost connectivity and competitiveness on intercontinental operations?

A: So far four African airlines have joined the major global alliances. These are EgyptAir, Ethiopian Airlines, and South African Airways that are members of Star Alliance while Kenya Airways is a member of SkyTeam. I think this is a positive development as joining an alliance provides many advantages to an airline such as global reach, seamless travel for passengers, creating a global image for the airline and cost-efficiencies, among others. African airlines that have joined alliances learn from industry best practices from their partners worldwide and are able to adhere to global standards in areas such as safety and customer service.

The majority of African airlines are very small with fleet sizes ranging from 1-10 aircraft or so. Such small airlines suffer huge cost disadvantages due to lack of economies of scale, resulting in high costs of purchasing aircraft, spares and other services and have small markets and hence less customer appeal. Some of the small airlines or medium sized airlines (with up to 20 aircraft) may not be attractive as partners to major alliances and consolidation can be with other African carriers.

Governments ought to put in place legislation which facilitates cross-border ownership which would facilitate consolidation among African carriers. An example of successful cooperation is the partnership between Kenya Airways and Precision Air of Tanzania which has benefited both carriers immensely. Similar synergies are realized in the partnership between Ethiopian Airlines and ASKY Airlines based in Togo which has facilitated connectivity, competitiveness and viability of both airlines. Airlines worldwide are consolidating with some mega carriers such as Air France and KLM and British Airways and Iberia merging, to cite just two examples. Surely the need to consolidate should even be greater for much smaller African carriers to remain viable.

Q: What is AFRAA's game-plan for increased opening of African Skies and fostering greater partnership amongst African airlines in 2012?

A: In 2012, AFRAA will continue to lobby governments, AU, Regional Economic Communities and AFCAC to redouble efforts for full implementation of the Yamoussoukro Decision. AFRAA will also urge African airlines not to be obstacles to the process of opening up the continent since lack of consolidation will only result in more carriers going out of business.

Q: Are you satisfied with the performance of African airlines in 2011 in terms of safety, security and profitability and market share?

A: In 2011, African carriers achieved the best safety rates ever compared with the previous 20 years. There were 5 fatal accidents out of world tally of 39. In other words, Africa accounted for about 13% of the accidents down from averages of around 25%-30% in the previous years. I am very happy with the general positive trend in most countries, the exception being the DRC where accident rates have gone up over the past five years compared with the previous five years. In 2011, three of the five fatal accidents in Africa took place in the DRC. The focus now needs to be addressing issues of accidents in the DRC and some few States with serious safety deficiencies revealed through ICAO Audits. The improvement in safety standards is due to concerted and coordinated efforts by various stakeholders ranging from States, AFCAC, ICAO, IATA, AFRAA, airlines, airports and Civil Aviation Authorities. These efforts need to continue until Africa reaches world safety standards and all African States are out of the EU Blacklist.

In terms of profitability, African airlines are expected to break-even in 2012. This is one area where the high cost structure on the continent is adversely impacting the profitability of airlines. However, there are some exceptions, where airlines such as Ethiopian Airlines, Kenya airways and South African Airways continue to register impressive results.

The market share of African airlines on intercontinental routes is small. Over 80% of intercontinental traffic to and from Africa is carried by non-African airlines. Among the reasons for this are the obstacles put on African airlines such as slot limitations at some airports in Europe, the preferential treatment of foreign carriers by some African governments, capacity dumping by some mega carriers and the EU blacklist which portrays all African carriers as unsafe, among others.

However, the growing of economies, growing African middle-class, improved safety and security standards and the various opportunities for air transport growth should be exploited by African carriers to regain market share.

Q:  What is your main area of focus in bringing improvements to AFRAA members' operations in 2012?

A: In 2012, the priority of AFRAA would be safety and security to ensure that customers can patronise African carriers knowing that they are safe and secure; reducing industry costs through projects such as the Joint Fuel Purchase Project; lobbying governments, airports and air navigating service providers for more competitive charges and taxes; removal of monopoly service providers; human capital development to ensure that African carriers adhere to industry best practices in safety, security, leadership and customer service and liberalization i.e. full implementation of Yamoussoukro Decision.