BD0804 Air Travel in Africa

BRENTHURST DISCUSSION PAPER 4/2008
♦www.thebrenthurstfoundation.org♦
Wings over Africa? 1
Trends and Models for African Air Travel
Wings over Africa?

Greg Mills and Larry Swantner1
AIR TRAVEL WORLD-WIDE is a fast-changing business. A number of events in March

and April 2008 illustrate the scale of the changes in and challenges faced by this
hyper cost-sensitive and technology-dependent industry.
Heathrow’s Terminal Five was opened on 27 March, an edifice taking 19 years to

design, 20,000 workers to build and costing £4.3 billion. It has been said that with
this new terminal, travel will never be the same.2 But when London Airport was
opened in 1955, it was believed that what has become today’s Terminal Two at
Heathrow would meet all air transport needs until the end of the 20th century. For
when the first 747 flights occurred in 1970, the 400 passengers of the giant Boeing
turned such arithmetic of air travel on its head. With a projected usage of 30 million
passengers annually, thus raising Heathrow’s total to 90 million, Terminal Five is a
far cry, initial baggage handling problems apart, from the village of tents that was
Heathrow in 1947 or, slightly further afield, Gatwick’s 1933 flying club. Even the
planners of airports seem not to know the trends in their business that well. As we
shall see, the manufacturers of aircraft, too, are making bets on the future that may,
or may not, prove correct.
EOS Airlines filed for a Chapter 11 bankruptcy at the end of April 2008, leaving
hundreds of executive stranded in New York. Coming just four months after its main
rival, Maxjet, went bust, EOS’ problems called into question the strategy of business-
class-only airlines, or for those such as Singapore Airlines and British Airways
considering business-class-only routes. EOS was reported to have lost US$37 million
in the first nine months of 2007 on sales of just US$35 million.3
On 15 April 2008, a Hewa Bora Airways DC-9 crashed after aborting its takeoff from
Goma, in the far east of the Democratic Republic of Congo (DRC). At least 40 people
were killed with more than 50 others seriously injured.
The mooted merger between loss-making US giants Continental and United appeared
to have collapsed by the end of April 2008, with the talk moving to the prospect of a
United deal with US Airways and a Continental three-way alliance with American
Airlines and British Airways. The Continental-United merger discussions were
dropped after United’s parent, UAL, announced worse-than-expected earnings, which
sent its shares falling. The mooted deal indicated further the musical chairs game
being played in the US airline industry shortly after the merger announcement by
Delta Air Lines and Northwest Airlines. The point was – the US airline business was in
ill-health and in need of rapid overhaul.
1
DR MILLS heads the Johannesburg-based Brenthurst Foundation, and during 2008 is on secondment to the
Government of Rwanda as ‘strategic adviser to the President’; COLONEL (rtd.) SWANTNER is a US-based
consultant with 40 years of experience of flying and administrating military and commercial long-haul aircraft.
This paper has partly been compiled from a range of interviews of senior aviation sector personnel in the United
States, Europe and Africa.
© The Brenthurst Foundation, May 2008
2
‘Plane genius’, 5: British Airways, 2008.
3
The Daily Telegraph Business, 28 April 2008.
The South African-based low-fare carrier Nationwide ceased operations on 29 April

2008, having failed to recover from the loss in revenue flowing from the temporary
revoking of its licence to operate in 2007 as a result of safety concerns.4
African Airline Safety,5 2005
Finally, the price of oil went through the US$130 per barrel mark, with the upper
limit price still uncertain. With jet fuel at US$145 per barrel, fuel as a percentage of
operating expenses jumped in non-African operations from 15% budgeted to over
55% and in some cases over 65% in day-to-day operations. This has raised
questions about fuel saving methods – from changes in flight profiles to single-
engine taxiing, the removal of non-essential equipment from aircraft, the grafting of
efficiency-generating winglets on older aircraft, and more efficient models.
The five airlines (Aloha, ATA, Business Jet, Midwest Express and Spirit) that have
ceased operations in the US in late 2007 and early 2008 have all ostensibly been
low-cost, point-to-point operators rather than the more expensive hub-and-spoke
operations. Fuel costs for the industry world-wide are estimated at US$136 billion in
2007, a 22.5% increase over 2006.
4
A note on the Nationwide website read: ‘On the 7th November 2007, Nationwide Airlines experienced an
engine separation from a Boeing 737-200 on departure from Cape Town. Subsequent to this a protracted
grounding of our fleet was mandated by the South African Civil Aviation Authority. In the months of December
and January we resumed operations and attained a gradual recovery of the business however in the months of
March and April we faced a 30% increase in fuel costs coupled with a decrease in passenger load factors.
Throughout this period we continued to work towards securing investment by a black empowerment consortium
which unfortunately has not come to fruition. Our cash-flow has become critical and as a result have decided to
voluntarily cease all flight operations until further notice. The company was placed under Provisional Winding-
Up Order on the 29th April 2008 and in the hands of the Master of the High Court, Johannesburg. A provisional
liquidator, Tshwane Trust Company has since been appointed, who will take charge of Nationwide Airlines… .’ At
http://www.flynationwide.co.za/
5
From: Charles Schlumberger, Case Study Exercise: Insight for Transport Task Managers, The World Bank, 11
March 2005.
African air travel may, in the eyes of many, be at the other end of the scale. There is
no continent with the same number of crashes per frequency of flights6 – six times
worse than the world average – or with the extent of unregulated airspace. Even
though Africa accounts for just five% of the world’s aviation traffic, 2007’s ‘hull loss
rate’ for the continent, which measures the frequency of accidents, stood at four,
compared to 0.7 globally. The skies remain unregulated and dangerous, with the
relative absence of essential services, especially competent radar-guided air traffic
control, and given aircraft safety standards. For example, the Geneva-based Aircraft
Crashes Record Office reported eight air accidents in the DRC alone in 2007.7
Yet the frequency of more than

fifty flights a day into Goma in
the eastern DRC, the city where
the DRC’s most recent air
disaster occurred on 15 April
2008, is an indication of at least
two things. Firstly, since most of
these flights are carrying
unrefined ore (rocks), this is
evidence of the absence of road
infrastructure in that cavernous
territory. There is a need for air
links to transport cargo and
people alike. Secondly, there is
the need for air travel as a sine
qua non for international exchanges of trade, finance, technology and skills – in
essence, for development and prosperity.
The last two decades have nonetheless been a time of great upheaval for Africa’s
national air carriers. Many have gone bust, including a few notables such as Ghana,
Nigeria and Zambia Airways. There are very few even partially state-owned airlines
operating in Africa today: South African Airways (SAA), Air Namibia, Angola, LAM
(Mozambique), Air Zimbabwe, Air Senegal and Royal Air Maroc among them. And a
few loss-making ones, seemingly focused on staff welfare and government
patronage rather than service considerations, should probably also be allowed to go
6
A recent chronology of African air disasters includes: January 8, 1996 - At least 350 people died when a
Russian-built Antonov-32 cargo plane crashed into a crowded market in central Kinshasa, capital of Zaire (now
DRC). November 23 - One hundred and twenty-five of 175 passengers and crew are killed when a hijacked
Ethiopian Airlines Boeing 767 crashed into the sea off the Comoros Islands; January 30, 2000 - A Kenya
Airways Airbus A-310 crashed into the sea shortly after takeoff from Abidjan in Ivory Coast, killing 169 of the
179 passengers and crew; May 4, 2002 - A Nigerian EAS Airlines BAC1-11-500 crashed in the north Nigerian
city of Kano, with at least 148 fatalities, 75 on the plane and 73 on the ground; March 6, 2003 - An Algerian
Boeing 737-200 crashed shortly after takeoff from Tamanrasset airport, killing 103 passengers and crew; May 8
- Cargo door opens in mid-flight on an Ilyushin 76 transport plane in the DRC, sending at least 70 passengers
plummeting to their deaths; July 8 - A Sudan Airways Boeing 737 crashed shortly after takeoff near Port
Sudan, killing 104 passengers and the crew of 11. One child survives; December 25 - A Boeing 727 bound for
Beirut clips a building after takeoff in Benin and plunges into the Atlantic Ocean, killing 111 passengers and
crew. Twenty-two survive; October 22, 2005 - A Nigerian Bellview Airlines Boeing 737-200 airliner with 111
passengers and six crew crashed north of Lagos, shortly after takeoff. All aboard are killed; December 10 - A
Nigerian Sosoliso Airlines DC-9 flight from Abuja carrying 110 passengers and crew crashed on landing. Four
people survive; May 5, 2007 - All 114 people on board a Kenya Airways Boeing 737 are killed when the plane
crashed in torrential rain after takeoff from Douala in Cameroon en route to Nairobi; April 15, 2008 - A Hewa
Bora Airways McDonnell Douglas DC-9 crashed after aborting its takeoff from Goma in the DRC. Sourced from
http://www.alertnet.org/thenews/newsdesk/L16864928.htm.
7
IATA Director-General Giovanni Bisignani said about Africa’s air safety record during a visit to Nigeria in 2008,
‘This cannot go on ... When you have a continent that is six times worse than the world average,
embarrassment is the only word to explain it.’ Reuters, 10 April 2008 at http://www.globalgoodnews.com.
bust. African airlines lost approximately US$400 million in 2006-7, and profits are
not expected to accelerate until Africa’s safety record improves, though losses are
expected to ease slightly to US$300 million in 2008. This is partly a result of the
international traffic increase of 8% in 2007, in turn reflecting market liberalisation
and robust economic growth in parts of the continent.8
In their place have sprung up an increasing number of private regional carriers. A

view of the ramp of Nairobi airports gives some idea of this proliferation in East
Africa alone, this in a venue where the national carrier is dominant: Fly 504, East
Africa Airways, Air Uganda, Jetlink, Aero Kenya, Imatogo Airlines, Lakevik Aviation
and Executive Turbine are all private airlines. There are 50 licensed airlines in Kenya
today, of which around 30 are operational. As a result of this growth, the
humanitarian aid delivery business and private charters, Nairobi’s Wilson Airport is
said to be the busiest in Africa when measured by air movements. (If the United
Nations were to leave the region, it is calculated that there would be a 50% drop in
traffic.) Such growth has stressed airport functioning to breaking point and is despite
the tough current times for African carriers, with
increasing fuel costs and, in Kenya’s case, the
impact of recent bad politics on its tourism
industry.9
But as the saying goes, the best way to make a

small fortune from airlines is to start with a large
one. In the nearly one hundred years of
commercial air travel, few have made money. It
is a difficult business by nature of the intensity
of its competitiveness, uncontrollable costs
(especially fuel) and heavy capital expenditure.
It has been said that managing an airline is a bit like trying to solve a Rubic’s Cube
with uncontrollable inputs. Just when you think you have the puzzle solved, an input
beyond your control (fuel price, extreme weather, unexpected government
interference, labour unrest and terrorist activity) makes two or three quick spins of
your cube, and your planned ‘solution’ is again in complete disarray. Save Singapore
Airlines and Emirates, there are no state-owned national airlines that are today
making money. And few countries with successful services and tourist economies
require national carriers to grow that side of their economies. Is there a model that
African airlines should best follow to maintain profits and offer a competitive service?
What is the current best practice thinking in this regard? And are there special
considerations that must be borne in mind in Africa?
This Discussion Paper examines these questions against a backdrop of current

thinking in international airline strategic thinking and management.
8
Ana McAhron-Schulz, IFALPA Industrial Advisor, Airline Industry Overview, April 2008.
9
The Kenyan tourism industry recorded a 61 percent drop in the first quarter of 2008 when compared to the
same period in 2007, posting KSh8 billion in income compared to the projected figure of KSh21 billion. Some
274,000 tourists arrived in Kenya compared to 500,000 in the period in 2007. See ‘Tourism earnings fall by 61
per cent’, Saturday Nation (Nairobi), 3 May 2008. For example, the number of airlines plying the Nairobi-
Kisumu route in Kenya has increased to eight from just two three years ago. The annual number of passengers
has increased from 70,000 in 2005 to 240,000 in 2007. The Kisumu facilities, from the terminal to the runway,
is now deemed unsuitable for this increase in traffic. See ‘Kisumu airport in need of expansion’, Saturday Nation
(Nairobi), 3 May 2008.
The Global and African Air Picture
Air traffic globally has increased at around 5% annually on average since the 1970s.
Globally, the air transport industry enjoyed an estimated turnover of more than
US$1,800 billion and created more than 28 million direct or indirect jobs in 2005.
However, Africa’s share in the global air transport industry remains insignificant. Out
of more than two billion passengers carried in 2006 by the 190 member states of the
International Civil Aviation Organization (ICAO), Africa accounts for just five percent
of all traffic. And two-thirds of that five percent was handled by airlines that are not
members of the African Airlines Association (AFRAA).
World Bank Aviation Data for Low- and Middle-Income Countries (‘000 passengers)
Asia Pacific
800,000
700,000 Eastern Europe &
600,000 Central Asia
500,000 Latin America &
400,000 Caribbean
300,000 Middle East & North
Africa
200,000
South Asia
100,000
0 Sub-Saharan Africa
1996 2001 2002 2003 2004 2005 2006
United States
Africa has, however, rapidly increased passenger loads since the end of the Cold
War, albeit from a very low base. According to the International Air Travel
Association(IATA), in 2005 Africa air traffic had a growth rate higher than the world
average: 11% as against 8.3% for passengers; 8% as against 3% for freight. This is
corroborated by Boeing forecasts, which predict an African air transport growth of
4.8% for passengers and 6.4% for freight in the 2000-19 period. Similarly, Airbus
predicts a 6.3% increase in the passenger traffic for the period 2004-2013 and 3.9%
for the period 2014-33, as well as a 7% increase in freight traffic for the period
2005-23 (see above and
left).
In 2004, 42 members of
AFRAA carried 36 million
passengers, representing
a 12% increase compared
to 2003, while European
airlines (Air France, KLM,
British Airways, Alitalia,
Iberia, Lufthansa, SN
Brussels and Swiss Air)
transported from and to
Africa 72 million
passengers, i.e two-thirds of the total air traffic (108 million passengers).10 AFRAA
members moved 656,000 tons of freight in 2004, a 12% increase over 2003.11
10
The top ten South African inter-continental country-routes alone accounted for 5.75 million passengers in
2007.
Growth in Seats Offered in Africa,20010712
This has a number of important implications. Firstly, with a projected traffic growth
of 8% world-wide, modeling on city population growth and projected infrastructure
needs, by 2015 Africa will need about US$20 billion in additional airport
infrastructure investment13(since African passenger numbers could approach 195
million). 8.3 million square feet in extra terminal space at a cost of US$8.2 billion,
630 additional runways of 1,500–3,000 meters and 13 additional runways of above
3,000 meters, with total runway investments approaching US$12 billion.
Projected Air Traffic Increase by Region14 (RPK: revenue passenger kilometre)
11
Heinrich C. Bofinger, Preliminary Air Transport Infrastructure Findings in Africa, The World Bank, 27 February
2008.
12
Ibid.
13
Ibid.
14
From Schlumberger, op cit, 11 March 2005.
Air cargo is sometimes overlooked in its importance to African development

especially via dense-value fish, horticulture and floriculture exports. Around 15% of
world cargo flows are perishables, a figure growing at around 7% annually. In Africa
this perishable cargo share is around 80%.
15
World Perishable Flows, 2002 (tons)
In its Global Market Forecast 2006-2025, Airbus predicts the following by 2025:16
4 3,580 new freighters will be needed, of which 22 percent will be factory built (not
conversions).
4 A total of 2,777 aircraft will be converted to freight use, notably in the regional
freighter (A300s and A310s; Boeing 757s and 767s) and large freighter (A330s
and Boeing 747s) categories.
4 1,228 large freighters will be in use, the total fleet of which will be 4,115 aircraft.
4 African customers will need 86 new freighters over the period.
4 Air freight (in freight-tonne kilometres) will grow at an average annual global rate
of 6 percent over 20 years, compared to passenger traffic at 4.8 percent. But the
value of cargo shipments will increase even more because of the growing
proportion of high-value, time-sensitive goods.
4 Most of the main components of Africa’s air-freight trade today, such as the
shipment of fresh produce to northern markets and the importation of high-tech
goods from Asia, are expected to grow faster than the world average at six
percent per annum through to 2025.
4 Africa’s developing intra-Africa market is expected to continue to progress,
though the biggest challenge remains the absence of regular east-west traffic.
All this means that Africa is a relatively unregulated and undertraded environment
for air traffic, especially passenger traffic, with great potential for growth, but a
growth that can only match its economic trajectory.
15
From: Charles Schlumberger, Case Study Exercise: Insight for Transport Task Managers, The World Bank, 11
March 2005.
16
See African Review of Business and Technology, September 2007.
Two Models
There are two conventional models17 for international air travel. One is the hub-and-
spoke system used by larger airlines, enabling airlines to collect passengers and take
through airport hubs to smaller destinations.
However, the hub-and-spoke model is considered by some to no longer be

competitive. The model is made complex (and expensive) by the need to synchronise
air flights, with consequent long aircraft turnaround times and flexibility built into
schedules to increase connectivity, ensuring there is time for passengers and
baggage to make connections. It makes airlines dependent on partnerships or code-
sharing for distribution and networking. It also relies on highly sophisticated
information systems and infrastructure to optimise such complex operations, while
demanding a slower pace of business and more complex routing services for
passengers. The model’s use of ‘frills’ including lounges, entertainment, upgrade
privileges and meals have exacerbated the expenses involved.
High volumes bring undoubted economies of scale. But the reality is, in essence, that
the market demands greater frequency, especially from business travellers.
These considerations along with the effects of 9/11 (with passengers preferring to
avoid major airports) and the related rise of low-cost point-to-point airlines have
forced a change in strategy. The alternative, concomitant with the rise of low-cost
airlines, is the point-to-point model: the use of smaller aircraft travelling directly
between the passengers’ destinations, usually from high-density markets.
The point-to-point model has three major cost advantages:
Firstly, low-cost carriers pay lower salaries, use cheaper airports and leverage
resources much more effectively than hub-and-spoke carriers. The accepted cost
disparity between the hub-and-spoke carriers and low-cost carriers is 2:1 for the
same route and aircraft, even after adjustments for differences in pay scales, fuel
prices and seat density are made.
Secondly, the cost with hub-and-spoke carriers relates to the relative simplicity of
their operational model rather than the frills they offer. Consumers are proving less
willing to absorb the cost of the hub-and-spoke model’s weaknesses.
Indeed, the improvements in productivity of the point-to-point model accounts for 65

percent of the disparity in costs compared to hub-and-spoke operations. Only five
percent of the difference is due to frills. Another 15% applies to compensation and
related labour issues, and 12% to financial structure.
Thus today, many major airlines – in Africa and elsewhere – are attempting to
reproduce the low-cost model through establishing subsidiaries: SAA’s Mango
subsidiary is one example, British Airways’/Comair’s Kalula another. Those carriers
attempting to maintain operations based on the hub-and-spoke model are struggling
to stay afloat in an environment especially of high oil prices and increased concerns
(and costs) associated with international terrorism.
Thirdly, with the point-to-point model, time and expense are greatly reduced if no
transfers are required. The hubs are no longer a bottleneck and thus a source of
17
See http://www.boozallen.com/media/file/137976.pdf.
delay and cost. And because the route network is no longer interconnected, delays
tend not to spread around the system. Not only does this improve customer
satisfaction, it also allows for more efficient utilisation of expensive aircraft.
But this debate is not over. Indeed, the two major offerings by the two major aircraft
manufacturers, the Airbus A380 and Boeing 787 ‘Dreamliner’, are precisely aimed at
each of these models: the 600-seater Airbus at the hub-and-spoke distribution
system, the smaller Boeing the latter.
An African Example: One – The Kenyan Model
Kenya Airways has captured a large slice of the African market, opening up routes
across East, Central and West Africa. It has done so largely because no-one else did
or could, and because it is respected as having a good business model. This is built
on the SkyTeam alliance (around KLM and Air France), ensuring that this aspect of
international connectivity provides it with a passenger advantage none of its
(private) competitors currently enjoys.
Kenya Airways traces its history back to 1946, with the formation of the East African
Airways Corporation (EAA). Initially, EAA had a good reputation for service and
reliability. With the formation of the East African Community, EAA passed into the
joint ownership of the governments of Kenya, Tanzania and Uganda. Shortly after
the collapse of the East African Community in 1976, EAA was placed in liquidation.
Kenya Airways was incorporated in January 1977 as a company wholly owned by the
Kenyan government until April 1996.
In 1992, Kenya Airways was given priority among national companies in Kenya to be
privatised. In 1993/4, the airline produced its first profit since the start of
commercialisation. With assistance from the World Bank’s International Finance
Corporation (IFC), in 1995, Kenya Airways restructured its debts, while KLM
purchased 26% of its shares, thereby becoming the largest shareholder. In the same
year the airline started trading on the Nairobi Stock Exchange; and in October 2004
on the Dar es Salaam bourse. In April 2004, the company reintroduced Kenya
Airways Cargo as a brand and in July 2004, the company’s domestic subsidiary
Flamingo Airlines was reabsorbed.
The airline is today owned by individual Kenyan shareholders (32.5%), KLM (now Air
France-KLM) (26%), the Kenyan government (22%), Kenyan institutional investors
(15.7%), foreign institutional investors (4.36%) and individual foreign investors
(0.07%). Today it has 2,862 employees. Kenya Airways also owns 49% of Precision
Air in Tanzania.
Precision Air was established in 1993 as a private air charter company operating a
five-seater Piper Aztec aircraft flying to tourist destinations. A growing demand for
air transport services led to Precision operating scheduled flights and maintaining
Arusha town as its base. The first flights were scheduled using a small Cessnas until
the mid-1990s when the bigger ATR-42 fleet was introduced. Total passengers
carried increased from 268,580 in the 2004/5 financial year to 340,000 in 2005/6. In
2003, Kenya Airways acquired a 49% shareholding, with the majority retained in the
hands of the founder (coffee-farmer Michael Ngaleku Shirima). This has enabled the
airline to increase frequencies and to build its fleet, now comprising eight aircraft,
with connections to major towns in Tanzania, as well as regional destinations to
Malawi and Kenya. Precision operates as a Tanzanian and regional connector for KQ
into Nairobi.
From 2004, much of Kenya Airways’ success has been attributed to the KTAP (Kenya
Airways Turn Around Project) overhauling the airline’s revenue management, cost
structures, and route and fleet planning. In the 2005/6 financial year, after-tax
profits nearly tripled over 2003/4 to US$50 million, with over two million passengers
carried. Again, in
2005/6, after-tax profits
increased to around
US$65 million.
Passenger numbers in
2006/7 were 2.6
million.
Kenya Airways’ inter-

African routes reputedly
comprise up to 40
percent of its profits.
KQ’s break-even load
factors are apparently
in the 65-70 percent
margin, where they are
currently operating at
the 75 percent level.
Kenya’s use of the hub-
and-spoke model has been enabled through the correct scheduling and acquisition of
the proper aircraft type for these routes, and the connectivity and code-sharing
offered by its KLM-AF alliance. Its success has spurred greater domestic
competitiveness domestically, with the emergence of private airlines.
Overall, the experience of Kenya Airways and the concomitant rise of its domestic
competitors suggest that:
4 Cheaper fares are not the critical competitiveness factor. Consistency, reliability,
frequency and location of the airport are at least equally as important.
4 The introduction of new airlines has led to a price war on internal routes, which
may lead to a shake-out of domestic players. Four Kenya-based airlines today fly
the Juba (South Sudan) route, with fares reducing from US$700 to under
US$200, a level at which operations are unsustainable.
4 There is a growing domestic and regional commuter market feeding the Nairobi
hub. While greater loads follow greater frequency – the airline equivalent of the
‘build and they will come’ logic – it, however, takes time to build up a route.
Currently there are large gaps between capacity and usage, suggesting that
supply has been growing faster than demand, and creating problems within the
industry around profitability and potentially safety. This may lead to a new round
of mergers between competitors.
4 If there is to be a single East African regional hub, Nairobi is best positioned to fill
this role.
An African Example: Two – Southern Africa’s Comair/Kalula.Com/BA
Comair was established and started operations on 14 July 1946 as Commercial Air
Services. Founded by former servicemen, it started operations with scheduled
services between Rand Airport, Johannesburg and Durban in 1948. The airline’s
growth over the next decades was as a charter service on secondary routes.
Three major developments altered the airline. Firstly domestic South African
deregulation in 1992, permitting it to compete on major domestic routes using
Boeing 737-200 aircraft. The second change came with the 1996 franchise
agreement with British Airways. BA acquired a minority holding four years later. The
airline is today owned by the management (15%), institutions and the public (46%),
British Airways (14%) and black empowerment shareholders (35%), and has around
1,900 employees.
The third development was the establishment of the low-cost airline, Kulula.com, as
a wholly owned division of Comair.
Today, Comair operates 25
aircraft (with another three on
order in 2008), with an average
age of 12 years. In 2006/7,18
Comair turned an operating
profit of R170 million on a
turnover of R2.2 billion. This
has been achieved despite an
increase in operating costs of
over 10% mainly due to
increased fuel costs, through
improving load factors to 87%t
(from 85%) on Kulula flights,
through the increased use of
on-line (as opposed to travel
agency) bookings, and through the use of more fuel-efficient aircraft (the use of
Boeing 737-400s over MD-82s enables a 26% fuel saving, for example). The group
carried 3.1 million passengers in 2006/7. For the short-haul flights, Kulula today
operates at the 6 US cents per available seat kilometre margin, around the low-cost
airline benchmarks in Europe and the United States.
The lessons from Comair/Kulula’s operations are:
4 The importance of controlling costs as carefully as possible.

4 The need for the right aircraft, especially in an environment of increasing fuel
costs. The newer you can afford to purchase, the better; and if you can afford to
keep them on your balance sheet, do so, rather than wet- or dry-lease.19
4 The importance of route selection, and the need to integrate with international
carriers in Africa as a domestic/regional feeder operator from hubs.
4 The need for volume, which brings economies of scale.
4 Markets demand frequency.
4 The importance of generating income from the skills set of management and
personnel rather than investing more in equipment.
18
Year ending 30 June.
19
Fleet standardisation also allows further economies in spare-parts inventory and technical expertise of
maintenance personnel, and reducing training requirements of flight personnel.
4 Making safety a priority.

4 Building strong brands that customers trust.
4 Recruiting and retaining high-quality management and staff.
An International Example: easyJet20
Based at Luton Airport just north of London, easyJet is one of the largest low-fare
airlines in Europe. It operates domestic and international scheduled services on 387
routes between 104 European and North African destinations. Established on 18
October 1995, easyJet was launched by (now Sir) Stelios Haji-Ioannou with two wet-
leased Boeing 737-200s, initially operating two routes: London-Luton to Glasgow and
Edinburgh.
Similar to its largest rival, Ryanair, easyJet has seen rapid expansion through
acquisitions and base openings, both of which have been fuelled by consumer
demand for low-cost air travel.
Ray Webster, the former easyJet CEO, and its founder, Haji-Ioannou, were drawn to
such an architecture by a number of insights. The first was that the European Union
had agreed to deregulate travel within Europe, thus breaking the stranglehold of the
national carriers. The second was that the smaller, efficient, jets, originally designed
for feeder flights would make excellent point-to-point platforms. Finally, they
realised that demand for air travel was extremely sensitive to price and that a lower-
priced product could attract a whole new range of customers rather than just
competing with existing offerings.
In so doing, easyJet, like Ryanair, borrows its business model from the American air
carrier Southwest. Both airlines have adapted this model for the European market
through further cost-cutting measures, including not selling connecting flights or
providing complimentary snacks on board. The key points of this business model are
high aircraft utilisation, quick turnaround times, charging for extras (such as priority
boarding, hold baggage and food) and keeping operating costs low.
easyJet’s early marketing strategy was based on ‘making flying as affordable as a

pair of jeans’ and urged travellers to ‘cut out the travel agent’. Its early advertising
consisted of little more than the airline’s telephone booking number painted in bright
orange on the side of its aircraft. Styling itself as ‘the web’s favourite airline’, easyJet
played on the British Airways’ slogan ‘the world’s favourite airline’.
Though it was not the first no-frills carrier or the first large one in Europe, easyJet’s
success arguably paved the way for the boom in cheap air travel in the late 1990s
and early 2000s. Along with other low-cost providers such as Jet Blue and Ryanair,
easyJet was among the first in Europe to move away from a hub-and-spoke towards
a point-to-point architecture.
Onboard sales are an important part of the airline’s ancillary revenue. easyJet also
sells gifts such as fragrances, cosmetics and easyJet-branded items onboard, as well
as tickets for airport transfer services. It offers only limited in-flight entertainment,
and a charge is made for movies on longer flights.
20
This is drawn partly from http://radar.oreilly.com/archives/2006/12/a-startup-airline.html.
In March 1998, easyJet purchased a 40% stake in Swiss charter airline TEA Basle.
On 16 May 2002, easyJet purchased rival airline, London Stansted-based Go for
£374 million, in so doing inheriting three new bases from Go at Bristol International
Airport, East Midlands and London Stansted. In 2001, easyJet opened its base at
London Gatwick Airport; and between 2003-2007, new bases were created in
Germany, France, Italy and Spain. On 25 October 2007, easyJet purchased GB
Airways Ltd for £103.5 million, using this to expand easyJet operations at London
Gatwick Airport and establish a base at Manchester Airport. The deal expanded
easyJet’s operations to existing destinations in Spain, Portugal, Austria and the
Canary Islands, and to new destinations in the north of Africa, Malta, France, the
Greek islands and Gibraltar.
The airline now operates 137 aircraft from 17 bases across Europe. Listed on the
London Stock Exchange, it has 4,859 employees. From 6 million passengers in 2000
and £22m profit, in 2005/6 it flew 33 million passengers with £130m profit, and 37.2
million and £200m profit in 2006/7.
Apart from the initial pair of 737-200s leased from GB Airways and some 737-300s
inherited from Go, the airline has only ever operated new aircraft, either 737-300s,
737-700s or Airbus A319s. The newer aircraft are advertised to produce lower
emissions and be more environmentally friendly. The easyJet fleet consists of 173
aircraft (at April 2008), including 128 Airbus A319-100s, the average age of the
aircraft being 3.1 years.
Like others, easyJet has voiced concerns recently over the impact of rising fuel costs,
which it sees as ‘going to put enormous pressure on all airlines.’ It sees airlines
‘having to ‘restructure, merge, shrink or disappear’. The airline views profit growth
coming from new capacity and higher margins, with an aim to increase capacity by
about 15% in 2008.21
Africa’s Aviation Picture
In 2003, Africa had a fleet of 1,165 commercial aircraft, 605 jets and 400 turbo-
props.22 Then the average age was 20 years, compared to 12 years in North America,
nine in Europe, and seven years in Southeast Asia. Put differently, Africa has
proportionately more aircraft that are noisy, expensive to run in terms of fuel and
maintenance, and most dangerous for air safety.
South Africa is the epicentre of aircraft registrations in Africa, reflecting the health of
its general aviation sector, with over 10,000 aircraft of all types, though Kenya has
today around 750 aircraft on the national registry. More important than numbers in
the commercial world are, however, types and age profiles of aircraft. The figures
below indicate how this is changing in Africa, illustrating the following patterns over
the 2001-2007 period:23
21
Aviation News, May 2008, p.15.
22
The world total of commercial aircraft operated in 2003 was 13,612 in 2003, made up of 5,535 in America,
3,368 in Europe, 2,418 in Asia, 539 in the Middle-East, 272 in the Pacific. Strategy for Air Transport
Development in Africa, African Development Bank, May 2006.
23
Western Very Old Vintage: DC 3, etc.; Western Very Old: 1960s-1970s, include 727s, 737-100’s, etc.;
Western Old: 1970s to 1980s; Western Somewhat Recent: 1980s to the 1990s, such as the Boeing 757;
Western Recent: Group of the newest aircraft, generally from the mid 1990s onwards; Eastern Built: Not
broken down by age, though they do not play a large role in scheduled passenger travel in Africa. From
Bofinger, op cit, 27 February 2008.
4 The age of aircraft predominantly in passenger service in Africa has moved from
Western ‘somewhat recent’ (1980s-90s) category to Western ‘recent’ (1990s).
The latter category has dramatically increased its share of seat miles flown.
4 The type24 of aircraft has shifted, too, from ‘wide-body’ (Boeing 747, DC10) to
‘city jet’ (Boeing 737 type). As one illustration, the 737-200 model accounted, in
2007, for 91 percent of the old Western aircraft types in operation in Africa.
The increasing use of modern aircraft has an impact, as is highlighted below, on

increasing fuel efficiency, especially important in an environment of rising fuel costs.
Increased fuel efficiency saved the industry an estimated US$2.1 billion in 2007,
Since 2001, fuel efficiency has increased about 16.5 percent, with every one percent
in industry fuel efficiency reducing annual fuel costs by about US$700 million. The
Boeing 787 and Airbus A320 target a fuel efficiency of three litres per 100 passenger
km, which is better than a compact car.25
24
GA: Up to around a Beechcraft King Air, Twin Otter not included; Commuter Propeller: ATR, Dash-8’s,
Fokker, etc., Twin Otter included; Commuter Jet: Embraer type, Fokker 100, Canadair, etc; CityJet: Boeing
737-type category; Big Jet: Larger, but not wide body. Boeing 757, 707s and DC-8s; Widebody: 747, A310,
DC10 (MD11), etc.; Super Widebody: A380 (none in Africa yet); Eastern Built: Not further broken down by
size. From Bofinger, op cit, 27 February 2008.
25
Ana McAhron-Schulz, op cit, April 2008.
Airline Competitiveness
Airline competitiveness depends both on strategic (which model) and operational

(which aircraft, which routes, what frequency) considerations.
In simple terms, the choice of aircraft has to be matched to routes and passenger
loads. This is based both on historical data and marketing projections. These can be
influenced by political developments, notably open skies, and economic growth (or,
conversely, contraction).
A typical low-cost (and profit-making) carrier would have the following cost
breakdown (in percentages):
4 Fuel: 40 (possibly more at 2008 oil prices)

4 Aircraft capital costs: 10
4 Labour: 15
4 Maintenance: 15
4 Handling: 10
4 Overheads, including marketing and catering: 10
The above breakdown can be altered by using very old planes (bringing down the
capital figure to around 5%, but at the cost of rising fuel and maintenance costs). In
the 1920s, the cost of transporting a
passenger by aircraft 1.600km was
approximately US$1 per kilometre; in the
21st century this has fallen thirty-fold.
Today’s 747 fuel per available seat
kilometre (ASK) costs show an 85%
improvement over a four-engined DC4,
for example. Outside of Africa, low-cost
carriers work on a cost ratio of around 6
US cents per ASK on short-haul (under
three hours) routes. Africa’s low-cost
carriers operate at around that margin;
the unprofitable carriers about twice as
much. Profitability is also a factor of load:
during 2007, international load factors reached an industry record of 77%, up from
76% t in 2006.
IATA Industry Profits, 1998-200826 (forecast)
There is also a balance between getting away with paying lower staff costs
(especially for pilots, who can make up over 50% of the salary bill in airlines) and
staff retention of maintenance personnel and pilots. This is especially a problem in
Africa, given that such skills are highly mobile, easily affected by political whims and
economic troubles, and slow to be replaced.
A further complicating factor is code-share agreements. Essentially this refers to the

practice where a flight operated by an airline is jointly marketed as a flight for one or
more other airlines. This enables passengers to book through one airline on routes
not necessarily serviced by them, and offers airlines both exposure and the ability to
gain market share on routes through others through payment schemes.
What does this mean?
26
Ana McAhron-Schulz, op cit, April 2008.
Cost controls are especially important, as is the right infrastructure and right
equipment in finding a balance between older aircraft with higher fuel and
maintenance costs and newer, more expensive, cheaper-to-run versions. As a
general rule, the newer aircraft that the airline can afford to fly, the better it is. A
second general rule is, if you can afford to hold it on the balance sheet, buy rather
than lease it. But few African airlines bar a few (SAA and Kenya, for example) are
able to afford to buy aircraft en masse in the sort of numbers that enable large
discounts from the manufacturer – a practice that Ryanair has reputedly perfected.
Aircraft Operating Costs27
Regional Jets and Turbo-Props
The example of regional jets (RJs) in the United States is a case in point of how
different solutions are preferred to solve perceived air needs and how, too, these
change rapidly over time.
Currently, moves are afoot to US regional jet capacity, there being over 1,600 RJs in
operation. It is anticipated that there will be around half of this number in US skies
in future. Thus there are likely to be a glut of 50-seat RJs (such as Bombardier
CRJ200s, Embraer ERJ-145s and Avro 146s) on the leasing and sale market in the
near future as the major airlines, including Continental and Delta, begin culling such
fleets.28
RJs became popular as part of the hub-and-spoke concept as replacement for turbo-
prop aircraft. High fuel costs have forced this change of direction, placing pressure
on this already mature US market and highlighting the need for replacing the less-
economical and relatively under-utilised RJs with larger capacity aircraft – in the
27
From Schlumberger, op cit, 11 March 2005.
28
See Flight International, 29 April-5 May 2008.
100-seat range – especially at feeder carriers. This also reflects the preference
change from hub-and-spoke to point-to-point operations. The bottom line is that in
the US market there are just too many 50-seaters currently. And although they are
less expensive to operate per hour, their low passenger and very low cargo capacity
results in a higher cost per seat. Additionally, as skies and runways in the US have
become more congested, the proliferation of RJs has contributed significantly to in-
flight and airport delays.
It is suggested that the use of RJs might be a way for smaller African airlines to go.
However, one must remember that this depends on loads: as stated, an RJ’s costs
have to be divided by the seat loading. If a 50-seat capacity is what the market will
support, then the RJ might be the best aircraft for the route. RJs still have among
the highest seat-per-kilometre costs. A larger aircraft of the same generation, at the
same load factor (proportion of seats filled relative to capacity), with far greater
cargo capacity, could prove to be cheaper to operate.
Turbo-props are slower and noisier, but considerably cheaper to run and to
purchase. With the high fuel price, their 30% saving on fuel per seat kilometre is an
attractive option. Such aircraft generally also perform better on short and rough
fields.
Liberalisation and Open Skies
One key factor within the control of politicians that can significantly influence air
traffic flows, costs and competitiveness is the decision on open skies.
Open Skies: Impact on Prices

Market Entry Johannesburg-Lusaka
The world has also moved from the state being the sole air service provider with
international travel based on bilateral agreements, to one of increased liberalisation
of open skies with the state not as owner but regulator. In Africa, the Yamoussoukro
decision on open skies essentially offers so-called ‘fifth-freedom rights’ (the ability to
pick up passengers for onward connections in other countries) and in future ‘sixth’
freedoms (the right to carry passengers or cargo from a second country to a third
country by stopping in one’s own country).29
29
The first freedom is considered to be the right to overfly a country without landing. The second freedom is
the right to stop in a country for refueling or maintenance on the way to another, without transferring
passengers or cargo. With the advent of long-haul aircraft, this right is seldom used today, except by cargo
carriers. The third freedom is the right to carry passengers or cargo from one’s own country to another; while
the fourth freedom is the right to carry passengers or cargo from another country to one’s own. Both these are
usually the outcome of bilateral agreements. The seventh freedom is the right to carry passengers or cargo
The Price of Protection

Key Mozambique Routes Compared to Similar
Open skies means, in effect, removing constraints on a given route in terms of the
number of air carriers, frequency of flights and seats per flight. As such, it offers
major advantages and not just for the cost of tickets and frequency of flights, as
detailed by the figures above and below.30 However, open skies has been slow to be
adopted, given protectionist instincts. An absence of liberalisation has implications
beyond just the price of tickets to include the expenditure available for the upgrading
of services, including air traffic control and airports. There have been just ten
privatisation/concession processes with African airports since 1996: Cameroon, Côte
d’Ivoire, Kenya, Madagascar (a 15-year concession ended in 2006), Mauritius, South
Africa (Airports Company, Rand, Mpumalanga and Kruger Park) and Tanzania.
Open Skies: Impact on Volumes

Johannesburg-Nairobi
between two foreign countries without continuing service to one’s own country. The United Kingdom and
Singapore have agreed, from 30 March 2008, to allow unlimited seventh freedom rights. The eighth freedom is
the right to carry passengers or cargo within a foreign country with continuing service to or from one’s own
country. The ninth freedom is the right to carry passengers or cargo within a foreign country without continuing
service to or from one’s own country.
30
These tables were prepared by Genesis Analytics for The Brenthurst Foundation in preparation for the
Presidential International Advisory Board of the Government of Mozambique in November 2007.
Open Skies: Impact of Discount Airlines

London-Barcelona
While the benefits of the opening of the skies are beyond doubt, the when, how and
immediate impacts are a more difficult calculation, since it may lead to a
proliferation of smaller carriers and, initially, considerable market volatility.
None of the above should understate the importance of airport infrastructure in

building African airlines. This is not only essential in terms of safety and passenger
comforts, but for the growth envisaged by African countries in terms of their use as
‘clearing houses’ for high-value agriculture exports. Storage and distribution facilities
are crucial for perishables. This helps to explain why those countries in need of
financing, management and technology to modernise their airports have looked to
privatise them. This applies equally to the operational (air traffic, policing,
maintenance, meteorology, services), handling (cleaning, customs, baggage, fuel,
etc.) and commercial (duty-free shops, banks, bars, restaurants, parking, etc.)
aspects.
Airport Public-Private-Investment Models31
31
Schlumberger, op cit, 11 March 2005.
African Airports: Everyone Wannabe a Hub
Most African routes are low volume, hence the importance of creating collection point
at which traffic can congregate. Of course, this is difficult and expensive to achieve,
as intercontinental flights usually arrive at
the same time (early morning) for the
feeder flights.
With the success of Dubai and Singapore,

everyone wants to create a hub in Africa.
But clearly not all countries can. Some are
disadvantaged by geography (they are a
long way from any market of
consequence), others by competition
(another nearby state is already a hub),
and some by policy. Hubs enable
economies of scale and ease of operations
by centralising maintenance, and crew and
aircraft scheduling and rotation. Also, no hub is possible without liberalisation,
allowing anyone who can to fly in. It demands a business model for the hub facility
itself, employing restaurants and duty-free complexes. And it requires having an
economy to entice visitors and transport.
African Passenger Hubs: The Intra-African Status Quo32
The diagrams immediately above and below highlight the existence already of three
major sub-Saharan hubs. The question is moot: is it better to feed these hubs to
establish better air service or would it be more efficient and commercially viable to
establish point-to-point service between new city pairs? New point-to-point services
would have to have a unique set of economic drivers to compete successfully against
an established hub-and-spoke system.
32
For non-domestic traffic as of November 2007. Sourced from Bofinger, op cit.
Passenger Hubs: The Intercontinental African Status Quo33
With all of the above in mind, what might an African model look like?
An African Model: A ‘Third Way’?
Tourism is touted as an African niche in globalisation. After all, it is difficult to see

how most African countries can compete in low-end manufacturing against China and
other Asian work forces. Here airlines have a crucial role to play in accessing African
markets.
Global and African Tourism Flows34
1990 1995 2000 2006
Africa 15,200 20,311 28,184 40,900 (3.4%)
World 455,900 539,565 686,738 842,000
Overall, if Africa is to be more prosperous, it is generally accepted it must be a place

that is:
4 more accessible;
4 cost-competitive;
4 open for business; and
4 offers a decent standard of living, health, and education for all of its citizens.
How might this be achieved with respect to air traffic?
Comparing point-to-point with a hub-and-spoke model is difficult because by their

very nature they do not compete directly on the same city pairs. It would always be
more desirable to fly directly from Beira to Lusaka, but the traffic would have to
support it. Point-to-point has enjoyed a great success in Europe because of a fairly
well developed infrastructure and enough city pairs with high numbers of origin and
33
As of November 2007. Sourced from Bofinger, ibid.
34
Source: World Tourism Organisation.
destination (so-called O&D) traffic that were able and inclined to pay the low fares
offered. (When Southwest first got started it claimed it was not competing with other
airlines. It said it was competing with the bus lines.) One study35 of the African
Development Bank shows, for example, that of the 276 city pairs in West Africa less
than 5% generates more than 150 passengers per day. But 85% of the city pairs
generate less than 70 passengers per day. Thus getting the proper fleet mix and
route structure in any regional airline is the key component of any airline strategy.
For some African markets there may be a ‘third way’ in the hub-and-spoke versus
point-to-point model debate, and that would be taking a bit of both (perhaps a ‘hub-
to-point’ service). For point-to-point to work there must be sufficient O&D in the city
pairs, and the aircraft should be matched to the route. However point-to-point
service breaks down after connecting the more recognised city pairs. Chicago-Paris
work but Nashville-Budapest or Beira-Lusaka does not. So there must be a gathering
of like-minded people for the long-haul portion of the flight.
Longer turnaround times for hub-and-spoke aircraft are acceptable if they have
completed long-haul flights; so even though it may take longer to turn it out again,
they has been utilized for a considerable amount of productive time (known as the
daily ‘ute’ rate) The turnaround time for smaller aircraft that have been out collecting
like-minded people can be acceptable if managed properly and some separate
facilities at the airport are available. The pros and cons of this debate are manifest in
the strategic difference between the Airbus A380 and the Boeing 787.
While this is interesting, its application for a regional African airline is doubtful –
other than defining the outside aviation world with which it has to connect.
For Africa, the imperative for a major code-share partner is essential: i.e, a long haul
from Europe, United States, Asia and other places to the international arrival airport
with regional distribution of passengers from there. But with recent ICOA, IATA, FAA
and other restrictions of code-shares and liability exposure, the local carrier would
have to pass an international audit. Fortunately there are many programmes
developed by the above mentioned organizations as well as the World Bank and
other trade associations.36
Thus the factors that influence the African airline model are:
4 Liberalisation and competition: The extent of open skies will have a significant
bearing on flight frequencies and costs. The deregulation imperative – getting
government out of the business of airlines and airports – will not only assist
competitiveness and reduce government burdens, but will enable government
agencies to concentrate on the aspects which they do best: regulation, oversight
and policy setting.
35
ADB, op cit.
36
The World Bank Group through its various components (International Development Association, International
Finance Corporation, International Bank for Reconstruction and Development, and Multilateral Investment
Guarantee Agency) has made available more than US$1 billion to support aviation development throughout the
world. Additionally The International Civil Aviation Organization (ICAO) has set up several programs specifically
to promote safety and help train aviation specialist in Africa. The International Air Transport Association, IATA,
has developed a program of Operation Safety Audits to assist airlines in achieving compliance with ICOA rules
and regulations. IATA also has set up a working group ASET, Aviation Safety Enhancement Team, for the
express purpose of reducing Africa’s unacceptable accident rate. The FAA in the US conducts its annual
International Aviation Training Symposium which many African countries participate. The Air Transport Action
Group is also very active in not only promoting aviation safety but it also to promote best practices in aviation
management.
4 Drivers: Passengers need reasons (tourism, business, visiting friends and

relatives, etc.) to travel. The more reasons, the greater the passenger loads.
4 Location: Proximity to a regional hub will assist improve connectivity with
international traffic.
4 Attraction of strategic airlines: This is especially essential for those countries
without absent frequently serviced intercontinental routes by their domestic
airline, and dependent on tourism income. Being serviced by a reliable and
‘branded’ airline is a critical component in building a tourism market. The reverse
is also true: having a bad nationally branded one can do a lot of damage.
4 Routes, Planes, and Fuel: The viability of airlines is a calculation based on fuel,
routes and load factors. If governments, where there is partial state ownership,
demand the servicing of politically important routes, this may not be
commercially viable.
4 Access to experienced management: Airlines and airports are complex
businesses best left to professionals. Even if government does not wish to
relinquish entirely, for strategic or business reasons, its stakes in this sector, it
should contract the management of entities to specialists.
And the competitiveness (or not) of African airlines relates to: 37
4 the use of modern technology from aircraft to e-tickets, billing and collection;
4 membership of world air alliance enabling connectivity and feeder routes;
4 political interference from governments that fail to put profitability first;
4 under-capitalisation and a shortage of financing and skilled personnel;
4 low incomes of populations, leading to small markets in which it is difficult to
generate sufficient returns on investment;38
4 poor management and ignorance by the private sector; and
4 the proliferation of smaller, often short-lived carriers, which increases market
volatility even though it might lead, temporarily, to a consumer boom.
These are some of the basics to fix if African countries are to compete in one sector
where there is great promise for growth and economic reward beyond the sector.
Conclusion: Towards a Virtuous Cycle
Air routes and traffic are essential components of development, especially for land-
locked nations. But what are the factors that go into devising an air-traffic growth
strategy?
Although it might be the catalyst for reform, this is not fundamentally about
reforming loss-making national airlines. Indeed, the national airline should be a
secondary consideration in this process. A number of much more important and
central factors have to be considered in developing a strategy:
The first is the overall economic environment that the air sector will service and into
which it will integrate.
37
ADB, op cit, p.40.
38
According to the ADB report, it has been proven, however, that during stable periods the average growth
rate of air traffic is double that of GDP; for example, the growth in world traffic is double that of world GDP
increases over the past three decades.
The second factor is that making countries a good place for people and things to fly
in and out of is far more important than having a healthy national airline or airport.
In this there are many things than can be done more easily than others, which
demands setting priorities. This includes everything from developing adventure
tourism experiences to easing the visa restrictions on visitors and opening the skies
to competition. Indeed, the critical first consideration in reforming (and growing) air
traffic is liberalisation: nothing much can be achieved without opening the skies, and
not just rhetorically.
The Virtuous Air Traffic-Economic Growth Circle
Economic Air Traffic

Drivers:
Tourists
Business-
Visitors
Shoppers
Safety &
Security
Efficiency
Ease of
Transit
Hotels
So a lot of this is about policy, setting priorities and making things happen. The
future of the national airline may be one answer to another, more important
question: What is required to get more people to fly to a destination? And this is only
one dimension to the imperative of getting more people and goods to and from
Africa cheaper, easier and with a much greater degree of safety.
With the above in mind, there are a number of things that countries can do to
encourage air traffic:
Open Skies and Commercialisation - There is no option but to liberalise to

increase the flow and volume of air traffic arrivals to and from a destination. This
demands liberalisation and openness, and attention to the details on the drivers from
tourism to shopping that will bring people. A national airline should not be protected
at the expense of openness.
Get CAAs out of Business and into Regulation – The commercialisation

imperative extends to airports: every effort must be made to get Civil Aviation
Authorities out of business and into regulatory roles, and also to find ways to
increase investment in airport facilities and management. The easiest way
internationally to achieve this has been through concessioning or privatisation,
notably via Build-Operate-Transfer or other similar public-private-investment

schemes. CAAs need to be assured of sufficient revenue to carry out their regulatory
tasks.
Commercialise State-Run Airlines – Here there are, in turn, two general options:
Sale or concession via a management contract. Privatisation should not come at the
considerable long-term cost of not liberalising regional routes. A number of questions
have to be considered when considering how to put an airline onto a sound
commercial footing, as is outlined below:
QUESTIONS
INFORMING THE
COMMERCIALISATION
STRATEGY
Which routes are What is needed Link with tourism Timing of

profitable? for profitability & & other drivers openness
expansion?
Partners & branding

Aircraft suitability
Frequency,
connectivity
& synchronicity
Control costs
A link-up with best airline management practice would be a necessary component to

commercialisation of any airline. For smaller African airlines battling to survive and
positioning to prosper in a world of high oil prices and with thin management
capacity, the priority is to acquire management that can position the company in this
dynamic market. Thus, initially it is less about planes than people and skills – in
understanding what choices are available to airlines, and the need to instil
technology – from ticketing to loading, rostering to on-line bookings – to run the
airline, along with the skills that go with it. Only with this management base can an
airline operate efficiently and look to make necessary choices on regional positioning,
routes and aircraft.
Importantly, however, apart from Singapore Airlines – and perhaps Emirates – no

nationally owned and run airlines are profitable. Many of the main developing
country international tourist destinations do not have national airlines. For example,
in Latin America, neither Costa Rica nor Peru nor the Dominican Republic (arguably
the three fastes-growing tourism markets) possesses a national airline. Getting out
of the airline business also means that governments then focus not on protecting
and managing this asset, but on making sure that traffic flows as smoothly as
possible: fixing the airports, sorting out visas, opening the skies, developing local
products and services, and ensuring that the country is a safe, interesting and
hospitable place to visit – and not a protected, over-regulated and inaccessible
market.
Finally, while the airline industry is probably like no other in terms of technology and
uncontrollable risks and costs, it has regardless, to be run on the same principles as
other businesses – on empiricism, not emotion, and evidence, not instinct.
© The Brenthurst Foundation, May 2008

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BRENTHURST DISCUSSION PAPER 4/2008

Wings over Africa?

Greg Mills and Larry Swantner1

AIR TRAVEL WORLD-WIDE is a fast-changing business. A number of events in March

Heathrow’s Terminal Five was opened on 27 March, an edifice taking 19 years to

The South African-based low-fare carrier Nationwide ceased operations on 29 April

African Airline Safety,5 2005

Yet the frequency of more than

In their place have sprung up an increasing number of private regional carriers. A

But as the saying goes, the best way to make a

This Discussion Paper examines these questions against a backdrop of current

The Global and African Air Picture

Growth in Seats Offered in Africa,20010712

Projected Air Traffic Increase by Region14 (RPK: revenue passenger kilometre)

Air cargo is sometimes overlooked in its importance to African development

However, the hub-and-spoke model is considered by some to no longer be

The point-to-point model has three major cost advantages:

Indeed, the improvements in productivity of the point-to-point model accounts for 65

An African Example: One – The Kenyan Model

Kenya Airways’ inter-

An African Example: Two – Southern Africa’s Comair/Kalula.Com/BA

The lessons from Comair/Kulula’s operations are:

4 The importance of controlling costs as carefully as possible.

4 Making safety a priority.

An International Example: easyJet20

easyJet’s early marketing strategy was based on ‘making flying as affordable as a

Africa’s Aviation Picture

The increasing use of modern aircraft has an impact, as is highlighted below, on

Airline competitiveness depends both on strategic (which model) and operational

4 Fuel: 40 (possibly more at 2008 oil prices)

IATA Industry Profits, 1998-200826 (forecast)

A further complicating factor is code-share agreements. Essentially this refers to the

What does this mean?

Aircraft Operating Costs27

Regional Jets and Turbo-Props

Liberalisation and Open Skies

Open Skies: Impact on Prices

The Price of Protection

Open Skies: Impact on Volumes

Open Skies: Impact of Discount Airlines

None of the above should understate the importance of airport infrastructure in

African Airports: Everyone Wannabe a Hub

With the success of Dubai and Singapore,

African Passenger Hubs: The Intra-African Status Quo32

Passenger Hubs: The Intercontinental African Status Quo33

An African Model: A ‘Third Way’?

Tourism is touted as an African niche in globalisation. After all, it is difficult to see

Overall, if Africa is to be more prosperous, it is generally accepted it must be a place

How might this be achieved with respect to air traffic?

Comparing point-to-point with a hub-and-spoke model is difficult because by their

4 Drivers: Passengers need reasons (tourism, business, visiting friends and

And the competitiveness (or not) of African airlines relates to: 37

Conclusion: Towards a Virtuous Cycle

The Virtuous Air Traffic-Economic Growth Circle

Economic Air Traffic

Open Skies and Commercialisation - There is no option but to liberalise to

Get CAAs out of Business and into Regulation – The commercialisation

notably via Build-Operate-Transfer or other similar public-private-investment

Which routes are What is needed Link with tourism Timing of

Partners & branding

A link-up with best airline management practice would be a necessary component to

Importantly, however, apart from Singapore Airlines – and perhaps Emirates – no

© The Brenthurst Foundation, May 2008