BRENTHURST DISCUSSION PAPER 4/2008

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Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008

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Wings over Africa?
Trends and Models for African Air Travel 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 businessclass-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
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‘Plane genius’, 5: British Airways, 2008. The Daily Telegraph Business, 28 April 2008.

and more efficient models. 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. Midwest Express and Spirit) that have ceased operations in the US in late 2007 and early 2008 have all ostensibly been low-cost. The company was placed under Provisional WindingUp Order on the 29th April 2008 and in the hands of the Master of the High Court. 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.5% increase over 2006.5 2005 Finally.za/ 5 From: Charles Schlumberger. Fuel costs for the industry world-wide are estimated at US$136 billion in 2007. A provisional liquidator. The five airlines (Aloha. the removal of non-essential equipment from aircraft.co. Case Study Exercise: Insight for Transport Task Managers. Throughout this period we continued to work towards securing investment by a black empowerment consortium which unfortunately has not come to fruition. the price of oil went through the US$130 per barrel mark. With jet fuel at US$145 per barrel.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 2 The South African-based low-fare carrier Nationwide ceased operations on 29 April 2008. This has raised questions about fuel saving methods – from changes in flight profiles to singleengine taxiing. with the upper limit price still uncertain. point-to-point operators rather than the more expensive hub-and-spoke operations. Our cash-flow has become critical and as a result have decided to voluntarily cease all flight operations until further notice. a 22. Business Jet.’ At http://www. Nationwide Airlines experienced an engine separation from a Boeing 737-200 on departure from Cape Town. Tshwane Trust Company has since been appointed.flynationwide.4 African Airline Safety. * 4 A note on the Nationwide website read: ‘On the 7th November 2007. . Johannesburg. 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. The World Bank. ATA. the grafting of efficiency-generating winglets on older aircraft. who will take charge of Nationwide Airlines… . Subsequent to this a protracted grounding of our fleet was mandated by the South African Civil Aviation Authority. 11 March 2005.

technology and skills – in essence.globalgoodnews. 1996 .org/thenews/newsdesk/L16864928. . One child survives. For example. October 22. 7 IATA Director-General Giovanni Bisignani said about Africa’s air safety record during a visit to Nigeria in 2008. there is the need for air travel as a sine qua non for international exchanges of trade. Twenty-two survive. And a few loss-making ones. 2007 . especially competent radar-guided air traffic control.A Kenya Airways Airbus A-310 crashed into the sea shortly after takeoff from Abidjan in Ivory Coast. When you have a continent that is six times worse than the world average. July 8 .A Nigerian Bellview Airlines Boeing 737-200 airliner with 111 passengers and six crew crashed north of Lagos. There is a need for air links to transport cargo and people alike. killing 104 passengers and the crew of 11. All aboard are killed. Air Zimbabwe.An Algerian Boeing 737-200 crashed shortly after takeoff from Tamanrasset airport. Even though Africa accounts for just five% of the world’s aviation traffic. shortly after takeoff. January 30.. this is evidence of the absence of road infrastructure in that cavernous territory. Many have gone bust. May 4. Nigeria and Zambia Airways. December 25 . The last two decades have nonetheless been a time of great upheaval for Africa’s national air carriers.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. November 23 .At least 350 people died when a Russian-built Antonov-32 cargo plane crashed into a crowded market in central Kinshasa. killing 103 passengers and crew. Sourced from http://www. seemingly focused on staff welfare and government patronage rather than service considerations. the city where the DRC’s most recent air disaster occurred on 15 April 2008.A Nigerian Sosoliso Airlines DC-9 flight from Abuja carrying 110 passengers and crew crashed on landing. April 15. capital of Zaire (now DRC)..alertnet. including a few notables such as Ghana. 75 on the plane and 73 on the ground. 2002 .Cargo door opens in mid-flight on an Ilyushin 76 transport plane in the DRC. should probably also be allowed to go 6 A recent chronology of African air disasters includes: January 8. for development and prosperity. killing 169 of the 179 passengers and crew. May 5. Angola.com. with at least 148 fatalities. Air Namibia. 2007’s ‘hull loss rate’ for the continent. the Geneva-based Aircraft Crashes Record Office reported eight air accidents in the DRC alone in 2007. Air Senegal and Royal Air Maroc among them. There are very few even partially state-owned airlines operating in Africa today: South African Airways (SAA).htm. The skies remain unregulated and dangerous. 10 April 2008 at http://www.A Boeing 727 bound for Beirut clips a building after takeoff in Benin and plunges into the Atlantic Ocean. Firstly. with the relative absence of essential services.’ Reuters. ‘This cannot go on . 2005 . sending at least 70 passengers plummeting to their deaths. in the eyes of many.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 3 African air travel may. which measures the frequency of accidents. Four people survive. and given aircraft safety standards.7 Yet the frequency of more than fifty flights a day into Goma in the eastern DRC. embarrassment is the only word to explain it. 2008 . 2003 .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. December 10 . March 6. compared to 0. 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. since most of these flights are carrying unrefined ore (rocks).7 globally. May 8 .A Nigerian EAS Airlines BAC1-11-500 crashed in the north Nigerian city of Kano. 2000 . killing 111 passengers and crew. LAM (Mozambique).A Sudan Airways Boeing 737 crashed shortly after takeoff near Port Sudan. stood at four. finance. is an indication of at least two things.A Hewa Bora Airways McDonnell Douglas DC-9 crashed after aborting its takeoff from Goma in the DRC. be at the other end of the scale. Secondly.

This is partly a result of the international traffic increase of 8% in 2007.000 tourists arrived in Kenya compared to 500. of which around 30 are operational. It is a difficult business by nature of the intensity of its competitiveness. with increasing fuel costs and. Saturday Nation (Nairobi). from the terminal to the runway. And few countries with successful services and tourist economies require national carriers to grow that side of their economies. in turn reflecting market liberalisation and robust economic growth in parts of the continent. See ‘Kisumu airport in need of expansion’. in Kenya’s case. and your planned ‘solution’ is again in complete disarray. See ‘Tourism earnings fall by 61 per cent’.000 in 2005 to 240. Saturday Nation (Nairobi). it is calculated that there would be a 50% drop in traffic. Air Uganda. 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. Airline Industry Overview. labour unrest and terrorist activity) makes two or three quick spins of your cube. 3 May 2008. posting KSh8 billion in income compared to the projected figure of KSh21 billion.8 In their place have sprung up an increasing number of private regional carriers. Aero Kenya. uncontrollable costs (especially fuel) and heavy capital expenditure. though losses are expected to ease slightly to US$300 million in 2008. Some 274. The annual number of passengers has increased from 70. and profits are not expected to accelerate until Africa’s safety record improves. Imatogo Airlines. the best way to make a small fortune from airlines is to start with a large one. The Kenyan tourism industry recorded a 61 percent drop in the first quarter of 2008 when compared to the same period in 2007.9 But as the saying goes. few have made money. Nairobi’s Wilson Airport is said to be the busiest in Africa when measured by air movements. an input beyond your control (fuel price.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 4 bust. . * 8 9 Ana McAhron-Schulz. It has been said that managing an airline is a bit like trying to solve a Rubic’s Cube with uncontrollable inputs. In the nearly one hundred years of commercial air travel. the number of airlines plying the NairobiKisumu route in Kenya has increased to eight from just two three years ago. African airlines lost approximately US$400 million in 2006-7. 3 May 2008. is now deemed unsuitable for this increase in traffic. As a result of this growth. A view of the ramp of Nairobi airports gives some idea of this proliferation in East Africa alone. Jetlink. IFALPA Industrial Advisor.000 in the period in 2007. the impact of recent bad politics on its tourism industry. unexpected government interference. extreme weather. For example. (If the United Nations were to leave the region. The Kisumu facilities.000 in 2007. East Africa Airways.) Such growth has stressed airport functioning to breaking point and is despite the tough current times for African carriers. Just when you think you have the puzzle solved. Lakevik Aviation and Executive Turbine are all private airlines. this in a venue where the national carrier is dominant: Fly 504. April 2008. Save Singapore Airlines and Emirates. There are 50 licensed airlines in Kenya today. the humanitarian aid delivery business and private charters. there are no state-owned national airlines that are today making money.

Africa’s share in the global air transport industry remains insignificant. Globally. which predict an African air transport growth of 4. In 2004.000 600. while European airlines (Air France.000 tons of freight in 2004.000 0 1996 2001 2002 2003 2004 2005 2006 Asia Pacific Eastern Europe & Central Asia Latin America & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa United States Africa has.800 billion and created more than 28 million direct or indirect jobs in 2005.000 200. And two-thirds of that five percent was handled by airlines that are not members of the African Airlines Association (AFRAA). Airbus predicts a 6.75 million passengers in 2007. rapidly increased passenger loads since the end of the Cold War. British Airways.000 400. i. Lufthansa.000 500. however.000 300.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 5 The Global and African Air Picture Air traffic globally has increased at around 5% annually on average since the 1970s. However. Similarly.8% for passengers and 6. World Bank Aviation Data for Low.9% for the period 2014-33. albeit from a very low base.4% for freight in the 2000-19 period. in 2005 Africa air traffic had a growth rate higher than the world average: 11% as against 8.000 700.11 10 The top ten South African inter-continental country-routes alone accounted for 5.3% for passengers.e two-thirds of the total air traffic (108 million passengers).10 AFRAA members moved 656. the air transport industry enjoyed an estimated turnover of more than US$1. Africa accounts for just five percent of all traffic. Iberia.3% increase in the passenger traffic for the period 2004-2013 and 3. a 12% increase over 2003. Alitalia. representing a 12% increase compared to 2003. 8% as against 3% for freight. KLM. as well as a 7% increase in freight traffic for the period 2005-23 (see above and left). .and Middle-Income Countries (‘000 passengers) 800. SN Brussels and Swiss Air) transported from and to Africa 72 million passengers. Out of more than two billion passengers carried in 2006 by the 190 member states of the International Civil Aviation Organization (ICAO). This is corroborated by Boeing forecasts. According to the International Air Travel Association(IATA).000 100. 42 members of AFRAA carried 36 million passengers.

12 13 14 .2 billion.500–3. Projected Air Traffic Increase by Region14 (RPK: revenue passenger kilometre) 11 Heinrich C. Bofinger. The World Bank. with a projected traffic growth of 8% world-wide. by 2015 Africa will need about US$20 billion in additional airport infrastructure investment13(since African passenger numbers could approach 195 million). 11 March 2005. modeling on city population growth and projected infrastructure needs.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 6 Growth in Seats Offered in Africa. Firstly. with total runway investments approaching US$12 billion. 630 additional runways of 1.000 meters and 13 additional runways of above 3. 8. From Schlumberger.3 million square feet in extra terminal space at a cost of US$8. 27 February 2008.000 meters.20010712 This has a number of important implications. op cit. Preliminary Air Transport Infrastructure Findings in Africa. Ibid. Ibid.

. African customers will need 86 new freighters over the period. a figure growing at around 7% annually. Most of the main components of Africa’s air-freight trade today. 15 2002 (tons) In its Global Market Forecast 2006-2025. with great potential for growth. the total fleet of which will be 4.228 large freighters will be in use. though the biggest challenge remains the absence of regular east-west traffic. September 2007. But the value of cargo shipments will increase even more because of the growing proportion of high-value. 15 From: Charles Schlumberger. time-sensitive goods. Airbus predicts the following by 2025:16 3. notably in the regional freighter (A300s and A310s. 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. of which 22 percent will be factory built (not conversions).580 new freighters will be needed. 11 March 2005. especially passenger traffic. horticulture and floriculture exports. but a growth that can only match its economic trajectory. All this means that Africa is a relatively unregulated and undertraded environment for air traffic. World Perishable Flows. The World Bank.777 aircraft will be converted to freight use.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 7 Air cargo is sometimes overlooked in its importance to African development especially via dense-value fish. In Africa this perishable cargo share is around 80%. 16 See African Review of Business and Technology. Case Study Exercise: Insight for Transport Task Managers. are expected to grow faster than the world average at six percent per annum through to 2025. Around 15% of world cargo flows are perishables. Africa’s developing intra-Africa market is expected to continue to progress. 1. Boeing 757s and 767s) and large freighter (A330s and Boeing 747s) categories. A total of 2.115 aircraft.8 percent. such as the shipment of fresh produce to northern markets and the importation of high-tech goods from Asia.

The model’s use of ‘frills’ including lounges.pdf. while demanding a slower pace of business and more complex routing services for passengers. But the reality is. Secondly. It also relies on highly sophisticated information systems and infrastructure to optimise such complex operations. with consequent long aircraft turnaround times and flexibility built into schedules to increase connectivity. Indeed. The alternative. concomitant with the rise of low-cost airlines. enabling airlines to collect passengers and take through airport hubs to smaller destinations.boozallen. Consumers are proving less willing to absorb the cost of the hub-and-spoke model’s weaknesses. use cheaper airports and leverage resources much more effectively than hub-and-spoke carriers.com/media/file/137976. entertainment.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 8 Two Models There are two conventional models17 for international air travel. is the point-to-point model: the use of smaller aircraft travelling directly between the passengers’ destinations. low-cost carriers pay lower salaries. It makes airlines dependent on partnerships or codesharing for distribution and networking. the hub-and-spoke model is considered by some to no longer be competitive. fuel prices and seat density are made. even after adjustments for differences in pay scales. Thirdly. especially from business travellers. the cost with hub-and-spoke carriers relates to the relative simplicity of their operational model rather than the frills they offer. The hubs are no longer a bottleneck and thus a source of 17 See http://www. 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. ensuring there is time for passengers and baggage to make connections. with the point-to-point model. in essence. and 12% to financial structure. One is the hub-andspoke system used by larger airlines. 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. . Another 15% applies to compensation and related labour issues. However. that the market demands greater frequency. usually from high-density markets. The accepted cost disparity between the hub-and-spoke carriers and low-cost carriers is 2:1 for the same route and aircraft. Thus today. British Airways’/Comair’s Kalula another. The point-to-point model has three major cost advantages: Firstly. High volumes bring undoubted economies of scale. Only five percent of the difference is due to frills. time and expense are greatly reduced if no transfers are required. upgrade privileges and meals have exacerbated the expenses involved. 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. The model is made complex (and expensive) by the need to synchronise air flights. 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.

In April 2004. Kenya Airways traces its history back to 1946. Initially. while KLM purchased 26% of its shares. EAA passed into the joint ownership of the governments of Kenya. ensuring that this aspect of international connectivity provides it with a passenger advantage none of its (private) competitors currently enjoys. Kenya Airways also owns 49% of Precision Air in Tanzania. the airline produced its first profit since the start of commercialisation. An African Example: One – The Kenyan Model Kenya Airways has captured a large slice of the African market.5%). With the formation of the East African Community. Precision Air was established in 1993 as a private air charter company operating a five-seater Piper Aztec aircraft flying to tourist destinations.7%). now comprising eight aircraft. Kenya Airways was given priority among national companies in Kenya to be privatised. foreign institutional investors (4. with connections to major towns in Tanzania. This has enabled the airline to increase frequencies and to build its fleet. And because the route network is no longer interconnected. the Kenyan government (22%). Kenya Airways acquired a 49% shareholding. It has done so largely because no-one else did or could. Central and West Africa. KLM (now Air France-KLM) (26%). as well as regional destinations to . EAA was placed in liquidation. EAA had a good reputation for service and reliability. In the same year the airline started trading on the Nairobi Stock Exchange. with the majority retained in the hands of the founder (coffee-farmer Michael Ngaleku Shirima). Kenya Airways was incorporated in January 1977 as a company wholly owned by the Kenyan government until April 1996. the Airbus A380 and Boeing 787 ‘Dreamliner’. Kenyan institutional investors (15. in 1995. In 1993/4.07%). delays tend not to spread around the system.580 in the 2004/5 financial year to 340. A growing demand for air transport services led to Precision operating scheduled flights and maintaining Arusha town as its base. This is built on the SkyTeam alliance (around KLM and Air France). With assistance from the World Bank’s International Finance Corporation (IFC). the company reintroduced Kenya Airways Cargo as a brand and in July 2004. the smaller Boeing the latter. The first flights were scheduled using a small Cessnas until the mid-1990s when the bigger ATR-42 fleet was introduced. But this debate is not over.36%) and individual foreign investors (0. with the formation of the East African Airways Corporation (EAA). the two major offerings by the two major aircraft manufacturers. Kenya Airways restructured its debts. Indeed. and because it is respected as having a good business model. Shortly after the collapse of the East African Community in 1976.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 9 delay and cost. In 2003. Today it has 2. it also allows for more efficient utilisation of expensive aircraft.000 in 2005/6. The airline is today owned by individual Kenyan shareholders (32. In 1992. Tanzania and Uganda. opening up routes across East. are precisely aimed at each of these models: the 600-seater Airbus at the hub-and-spoke distribution system. thereby becoming the largest shareholder.862 employees. and in October 2004 on the Dar es Salaam bourse. Total passengers carried increased from 268. the company’s domestic subsidiary Flamingo Airlines was reabsorbed. Not only does this improve customer satisfaction.

There is a growing domestic and regional commuter market feeding the Nairobi hub. reliability. This may lead to a new round of mergers between competitors. cost structures. after-tax profits nearly tripled over 2003/4 to US$50 million. takes time to build up a route. Nairobi is best positioned to fill this role. with the emergence of private airlines. Again. Passenger numbers in 2006/7 were 2. with fares reducing from US$700 to under US$200. Currently there are large gaps between capacity and usage.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 10 Malawi and Kenya. While greater loads follow greater frequency – the airline equivalent of the ‘build and they will come’ logic – it. Four Kenya-based airlines today fly the Juba (South Sudan) route. with over two million passengers carried. Overall. If there is to be a single East African regional hub. much of Kenya Airways’ success has been attributed to the KTAP (Kenya Airways Turn Around Project) overhauling the airline’s revenue management. Kenya Airways’ interAfrican routes reputedly comprise up to 40 percent of its profits. where they are currently operating at the 75 percent level. and route and fleet planning. Its success has spurred greater domestic competitiveness domestically.6 million. In the 2005/6 financial year. the experience of Kenya Airways and the concomitant rise of its domestic competitors suggest that: Cheaper fares are not the critical competitiveness factor. . however. Kenya’s use of the huband-spoke model has been enabled through the correct scheduling and acquisition of the proper aircraft type for these routes. KQ’s break-even load factors are apparently in the 65-70 percent margin. suggesting that supply has been growing faster than demand. The introduction of new airlines has led to a price war on internal routes. and the connectivity and code-sharing offered by its KLM-AF alliance. in 2005/6. Precision operates as a Tanzanian and regional connector for KQ into Nairobi. after-tax profits increased to around US$65 million. a level at which operations are unsustainable. From 2004. Consistency. frequency and location of the airport are at least equally as important. and creating problems within the industry around profitability and potentially safety. which may lead to a shake-out of domestic players.

Three major developments altered the airline. This has been achieved despite an increase in operating costs of over 10% mainly due to increased fuel costs. Firstly domestic South African deregulation in 1992. The third development was the establishment of the low-cost airline.900 employees. For the short-haul flights. Kulula. institutions and the public (46%). Founded by former servicemen. In 2006/7. permitting it to compete on major domestic routes using Boeing 737-200 aircraft. . The group carried 3. British Airways (14%) and black empowerment shareholders (35%). through the increased use of on-line (as opposed to travel agency) bookings. especially in an environment of increasing fuel costs. Kulula today operates at the 6 US cents per available seat kilometre margin. Comair operates 25 aircraft (with another three on order in 2008). with an average age of 12 years.or dry-lease. do so. The importance of generating income from the skills set of management and personnel rather than investing more in equipment. Markets demand frequency. Today. BA acquired a minority holding four years later. The need for volume. and the need to integrate with international carriers in Africa as a domestic/regional feeder operator from hubs. The newer you can afford to purchase. Fleet standardisation also allows further economies in spare-parts inventory and technical expertise of maintenance personnel. The need for the right aircraft. 18 19 Year ending 30 June.com.2 billion. Johannesburg and Durban in 1948. and reducing training requirements of flight personnel. The airline is today owned by the management (15%). around the low-cost airline benchmarks in Europe and the United States.19 The importance of route selection. and if you can afford to keep them on your balance sheet. for example). it started operations with scheduled services between Rand Airport. as a wholly owned division of Comair. through improving load factors to 87%t (from 85%) on Kulula flights. rather than wet.1 million passengers in 2006/7. which brings economies of scale. The airline’s growth over the next decades was as a charter service on secondary routes.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 11 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. The second change came with the 1996 franchise agreement with British Airways.18 Comair turned an operating profit of R170 million on a turnover of R2. the better. and through the use of more fuel-efficient aircraft (the use of Boeing 737-400s over MD-82s enables a 26% fuel saving. The lessons from Comair/Kulula’s operations are: The importance of controlling costs as carefully as possible. and has around 1.

Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 12 Making safety a priority. An International Example: easyJet20 Based at Luton Airport just north of London. easyJet is one of the largest low-fare airlines in Europe. easyJet has seen rapid expansion through acquisitions and base openings. easyJet was among the first in Europe to move away from a hub-and-spoke towards a point-to-point architecture. Finally. jets.html. easyJet was launched by (now Sir) Stelios Haji-Ioannou with two wetleased Boeing 737-200s. It operates domestic and international scheduled services on 387 routes between 104 European and North African destinations. Styling itself as ‘the web’s favourite airline’. Ryanair. It offers only limited in-flight entertainment. initially operating two routes: London-Luton to Glasgow and Edinburgh. originally designed for feeder flights would make excellent point-to-point platforms. Recruiting and retaining high-quality management and staff. Along with other low-cost providers such as Jet Blue and Ryanair. 20 This is drawn partly from http://radar. cosmetics and easyJet-branded items onboard. the former easyJet CEO. Similar to its largest rival. Though it was not the first no-frills carrier or the first large one in Europe. charging for extras (such as priority boarding. The first was that the European Union had agreed to deregulate travel within Europe. hold baggage and food) and keeping operating costs low. they realised that demand for air travel was extremely sensitive to price and that a lowerpriced product could attract a whole new range of customers rather than just competing with existing offerings. easyJet’s success arguably paved the way for the boom in cheap air travel in the late 1990s and early 2000s. . were drawn to such an architecture by a number of insights. like Ryanair. and its founder. The key points of this business model are high aircraft utilisation. Its early advertising consisted of little more than the airline’s telephone booking number painted in bright orange on the side of its aircraft. Onboard sales are an important part of the airline’s ancillary revenue. Building strong brands that customers trust. In so doing. Both airlines have adapted this model for the European market through further cost-cutting measures. Haji-Ioannou. The second was that the smaller. and a charge is made for movies on longer flights. Established on 18 October 1995. borrows its business model from the American air carrier Southwest. as well as tickets for airport transfer services. Ray Webster.oreilly. 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’.com/archives/2006/12/a-startup-airline. easyJet. thus breaking the stranglehold of the national carriers. including not selling connecting flights or providing complimentary snacks on board. easyJet played on the British Airways’ slogan ‘the world’s favourite airline’. easyJet also sells gifts such as fragrances. both of which have been fuelled by consumer demand for low-cost air travel. quick turnaround times. efficient.

Apart from the initial pair of 737-200s leased from GB Airways and some 737-300s inherited from Go. using this to expand easyJet operations at London Gatwick Airport and establish a base at Manchester Airport. London Stansted-based Go for £374 million. 737-100’s. though they do not play a large role in scheduled passenger travel in Africa. and 37.165 commercial aircraft. From Bofinger. Western Old: 1970s to 1980s. The deal expanded easyJet’s operations to existing destinations in Spain. Africa has proportionately more aircraft that are noisy. France. made up of 5.2 million and £200m profit in 2006/7. On 16 May 2002. include 727s. and most dangerous for air safety. African Development Bank. shrink or disappear’. Italy and Spain. 539 in the Middle-East. From 6 million passengers in 2000 and £22m profit. 737-700s or Airbus A319s. easyJet purchased rival airline. it has 4. easyJet has voiced concerns recently over the impact of rising fuel costs. Africa had a fleet of 1. East Midlands and London Stansted. France. easyJet purchased GB Airways Ltd for £103. easyJet purchased a 40% stake in Swiss charter airline TEA Basle. with over 10. p. merge. The newer aircraft are advertised to produce lower emissions and be more environmentally friendly. however. The figures below indicate how this is changing in Africa. including 128 Airbus A319-100s. On 25 October 2007. compared to 12 years in North America. which it sees as ‘going to put enormous pressure on all airlines. Like others. 27 February 2008. More important than numbers in the commercial world are. May 2008.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 13 In March 1998. with an aim to increase capacity by about 15% in 2008.21 Africa’s Aviation Picture In 2003. 23 .1 years. Strategy for Air Transport Development in Africa. Western Recent: Group of the newest aircraft.. in so doing inheriting three new bases from Go at Bristol International Airport. South Africa is the epicentre of aircraft registrations in Africa. 3. the average age of the aircraft being 3. Western Somewhat Recent: 1980s to the 1990s. Portugal.000 aircraft of all types. May 2006.5 million. The airline now operates 137 aircraft from 17 bases across Europe. The airline views profit growth coming from new capacity and higher margins. Listed on the London Stock Exchange.’ It sees airlines ‘having to ‘restructure. In 2001. 2. reflecting the health of its general aviation sector. expensive to run in terms of fuel and maintenance. new bases were created in Germany.535 in America.22 Then the average age was 20 years. Put differently. such as the Boeing 757. etc. Western Very Old Vintage: DC 3. 605 jets and 400 turboprops. and seven years in Southeast Asia. The world total of commercial aircraft operated in 2003 was 13. Eastern Built: Not broken down by age. and to new destinations in the north of Africa.612 in 2003. the Greek islands and Gibraltar. Western Very Old: 1960s-1970s. 272 in the Pacific.15. and between 2003-2007. the airline has only ever operated new aircraft. etc. The easyJet fleet consists of 173 aircraft (at April 2008).. generally from the mid 1990s onwards.368 in Europe. Malta. though Kenya has today around 750 aircraft on the national registry. Austria and the Canary Islands. types and age profiles of aircraft.418 in Asia. op cit. nine in Europe. easyJet opened its base at London Gatwick Airport.859 employees. in 2005/6 it flew 33 million passengers with £130m profit. either 737-300s. illustrating the following patterns over the 2001-2007 period:23 21 22 Aviation News.

in 2007. but not wide body. Twin Otter included. Canadair. Since 2001. on increasing fuel efficiency. A310..5 percent. fuel efficiency has increased about 16. Commuter Jet: Embraer type. Twin Otter not included. the 737-200 model accounted. too. Big Jet: Larger. The increasing use of modern aircraft has an impact. etc. From Bofinger. Increased fuel efficiency saved the industry an estimated US$2.25 GA: Up to around a Beechcraft King Air. 707s and DC-8s. DC10 (MD11). Boeing 757. which is better than a compact car. with every one percent in industry fuel efficiency reducing annual fuel costs by about US$700 million. 27 February 2008.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 14 The age of aircraft predominantly in passenger service in Africa has moved from Western ‘somewhat recent’ (1980s-90s) category to Western ‘recent’ (1990s).. As one illustration. op cit. Commuter Propeller: ATR. from ‘wide-body’ (Boeing 747. Widebody: 747. Dash-8’s. April 2008. as is highlighted below. DC10) to ‘city jet’ (Boeing 737 type).1 billion in 2007. Fokker. especially important in an environment of rising fuel costs. Super Widebody: A380 (none in Africa yet). etc. The latter category has dramatically increased its share of seat miles flown. for 91 percent of the old Western aircraft types in operation in Africa. The type24 of aircraft has shifted. Fokker 100. etc. CityJet: Boeing 737-type category. op cit. Eastern Built: Not further broken down by size. . The Boeing 787 and Airbus A320 target a fuel efficiency of three litres per 100 passenger km. 25 24 Ana McAhron-Schulz.

Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 15 .

Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 16 Airline Competitiveness Airline competitiveness depends both on strategic (which model) and operational (which aircraft. the choice of aircraft has to be matched to routes and passenger loads. conversely. This is based both on historical data and marketing projections. A typical low-cost (and profit-making) carrier would have the following cost breakdown (in percentages): Fuel: 40 (possibly more at 2008 oil prices) Aircraft capital costs: 10 Labour: 15 Maintenance: 15 Handling: 10 Overheads. including marketing and catering: 10 . contraction). notably open skies. what frequency) considerations. These can be influenced by political developments. which routes. and economic growth (or. In simple terms.

and slow to be replaced. This is especially a problem in Africa. in the 21st century this has fallen thirty-fold. and offers airlines both exposure and the ability to gain market share on routes through others through payment schemes. op cit. given that such skills are highly mobile. A further complicating factor is code-share agreements. low-cost carriers work on a cost ratio of around 6 US cents per ASK on short-haul (under three hours) routes. the cost of transporting a passenger by aircraft 1. who can make up over 50% of the salary bill in airlines) and staff retention of maintenance personnel and pilots. the unprofitable carriers about twice as much. IATA Industry Profits. 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. April 2008. international load factors reached an industry record of 77%. easily affected by political whims and economic troubles. Today’s 747 fuel per available seat kilometre (ASK) costs show an 85% improvement over a four-engined DC4. Profitability is also a factor of load: during 2007.600km was approximately US$1 per kilometre. for example. . up from 76% t in 2006. 1998-200826 (forecast) There is also a balance between getting away with paying lower staff costs (especially for pilots. In the 1920s.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 17 The above breakdown can be altered by using very old planes (bringing down the capital figure to around 5%. Outside of Africa. Africa’s low-cost carriers operate at around that margin. but at the cost of rising fuel and maintenance costs). What does this mean? 26 Ana McAhron-Schulz.

more expensive. moves are afoot to US regional jet capacity. if you can afford to hold it on the balance sheet. the better it is. including Continental and Delta. placing pressure on this already mature US market and highlighting the need for replacing the lesseconomical and relatively under-utilised RJs with larger capacity aircraft – in the 27 28 From Schlumberger. Embraer ERJ-145s and Avro 146s) on the leasing and sale market in the near future as the major airlines. It is anticipated that there will be around half of this number in US skies in future. too. cheaper-to-run versions. there being over 1. See Flight International. begin culling such fleets.28 RJs became popular as part of the hub-and-spoke concept as replacement for turboprop aircraft. these change rapidly over time. As a general rule. But few African airlines bar a few (SAA and Kenya.600 RJs in operation. 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. the newer aircraft that the airline can afford to fly. as is the right infrastructure and right equipment in finding a balance between older aircraft with higher fuel and maintenance costs and newer. 29 April-5 May 2008. 11 March 2005. buy rather than lease it.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 18 Cost controls are especially important. 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. A second general rule is. High fuel costs have forced this change of direction. Currently. Thus there are likely to be a glut of 50-seat RJs (such as Bombardier CRJ200s. . op cit.

with far greater cargo capacity. without transferring passengers or cargo. Liberalisation and Open Skies One key factor within the control of politicians that can significantly influence air traffic flows. The seventh freedom is the right to carry passengers or cargo . except by cargo carriers. Turbo-props are slower and noisier. The second freedom is the right to stop in a country for refueling or maintenance on the way to another. And although they are less expensive to operate per hour. The third freedom is the right to carry passengers or cargo from one’s own country to another. could prove to be cheaper to operate. With the high fuel price. RJs still have among the highest seat-per-kilometre costs. Both these are usually the outcome of bilateral agreements. as skies and runways in the US have become more congested. Such aircraft generally also perform better on short and rough fields. costs and competitiveness is the decision on open skies. their 30% saving on fuel per seat kilometre is an attractive option.29 29 The first freedom is considered to be the right to overfly a country without landing. Additionally. This also reflects the preference change from hub-and-spoke to point-to-point operations. but considerably cheaper to run and to purchase. their low passenger and very low cargo capacity results in a higher cost per seat. However. then the RJ might be the best aircraft for the route. With the advent of long-haul aircraft. this right is seldom used today. one must remember that this depends on loads: as stated.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 19 100-seat range – especially at feeder carriers. while the fourth freedom is the right to carry passengers or cargo from another country to one’s own. at the same load factor (proportion of seats filled relative to capacity). It is suggested that the use of RJs might be a way for smaller African airlines to go. If a 50-seat capacity is what the market will support. 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). 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. The bottom line is that in the US market there are just too many 50-seaters currently. an RJ’s costs have to be divided by the seat loading. A larger aircraft of the same generation. In Africa. the proliferation of RJs has contributed significantly to inflight and airport delays. to one of increased liberalisation of open skies with the state not as owner but regulator.

South Africa (Airports Company. it offers major advantages and not just for the cost of tickets and frequency of flights.30 However. frequency of flights and seats per flight. as detailed by the figures above and below. including air traffic control and airports. An absence of liberalisation has implications beyond just the price of tickets to include the expenditure available for the upgrading of services. in effect. As such. The United Kingdom and Singapore have agreed. Mpumalanga and Kruger Park) and Tanzania. Madagascar (a 15-year concession ended in 2006). 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. . given protectionist instincts. to allow unlimited seventh freedom rights.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 20 The Price of Protection Key Mozambique Routes Compared to Similar Open skies means. Mauritius. from 30 March 2008. Kenya. 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. Open Skies: Impact on Volumes Johannesburg-Nairobi between two foreign countries without continuing service to 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. Côte d’Ivoire. Rand. removing constraints on a given route in terms of the number of air carriers. open skies has been slow to be adopted. There have been just ten privatisation/concession processes with African airports since 1996: Cameroon.

considerable market volatility.) and commercial (duty-free shops. parking. policing. This is not only essential in terms of safety and passenger comforts. Airport Public-Private-Investment Models31 31 Schlumberger. how and immediate impacts are a more difficult calculation.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 21 Open Skies: Impact of Discount Airlines London-Barcelona While the benefits of the opening of the skies are beyond doubt. fuel. restaurants. This applies equally to the operational (air traffic. the when. maintenance. since it may lead to a proliferation of smaller carriers and. etc. This helps to explain why those countries in need of financing. op cit. management and technology to modernise their airports have looked to privatise them. initially. but for the growth envisaged by African countries in terms of their use as ‘clearing houses’ for high-value agriculture exports. customs. meteorology. baggage. handling (cleaning. banks. None of the above should understate the importance of airport infrastructure in building African airlines. Storage and distribution facilities are crucial for perishables. 11 March 2005. . etc. bars.) aspects. services).

and crew and aircraft scheduling and rotation. as intercontinental flights usually arrive at the same time (early morning) for the feeder flights. 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. this is difficult and expensive to achieve. no hub is possible without liberalisation. Some are disadvantaged by geography (they are a long way from any market of consequence). But clearly not all countries can. And it requires having an economy to entice visitors and transport. hence the importance of creating collection point at which traffic can congregate. allowing anyone who can to fly in. employing restaurants and duty-free complexes. Also. everyone wants to create a hub in Africa. . and some by policy. Of course. African Passenger Hubs: The Intra-African Status Quo32 The diagrams immediately above and below highlight the existence already of three major sub-Saharan hubs. Hubs enable economies of scale and ease of operations by centralising maintenance. op cit.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 22 African Airports: Everyone Wannabe a Hub Most African routes are low volume. With the success of Dubai and Singapore. 32 For non-domestic traffic as of November 2007. Sourced from Bofinger. others by competition (another nearby state is already a hub). It demands a business model for the hub facility itself.

and education for all of its citizens. what might an African model look like? An African Model: A ‘Third Way’? Tourism is touted as an African niche in globalisation. cost-competitive. if Africa is to be more prosperous. it is generally accepted it must be a place that is: more accessible.200 20. Global and African Tourism Flows34 1990 1995 2000 2006 Africa 15.565 686. and offers a decent standard of living.900 (3. 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.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 23 Passenger Hubs: The Intercontinental African Status Quo33 With all of the above in mind.184 40.900 539. but the traffic would have to support it. . Sourced from Bofinger. Source: World Tourism Organisation. It would always be more desirable to fly directly from Beira to Lusaka. open for business. ibid. 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 34 As of November 2007.311 28. it is difficult to see how most African countries can compete in low-end manufacturing against China and other Asian work forces. health.738 842. After all.000 Overall.4%) World 455. Here airlines have a crucial role to play in accessing African markets.

and the aircraft should be matched to the route. But 85% of the city pairs generate less than 70 passengers per day. op cit.36 Thus the factors that influence the African airline model are: Liberalisation and competition: The extent of open skies will have a significant bearing on flight frequencies and costs.e. 35 36 ADB. oversight and policy setting. Fortunately there are many programmes developed by the above mentioned organizations as well as the World Bank and other trade associations. International Finance Corporation. FAA and other restrictions of code-shares and liability exposure. Thus getting the proper fleet mix and route structure in any regional airline is the key component of any airline strategy. Additionally The International Civil Aviation Organization (ICAO) has set up several programs specifically to promote safety and help train aviation specialist in Africa. for the express purpose of reducing Africa’s unacceptable accident rate. 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 Air Transport Action Group is also very active in not only promoting aviation safety but it also to promote best practices in aviation management. For Africa. For some African markets there may be a ‘third way’ in the hub-and-spoke versus point-to-point model debate. Chicago-Paris work but Nashville-Budapest or Beira-Lusaka does not. IATA. the imperative for a major code-share partner is essential: i. So there must be a gathering of like-minded people for the long-haul portion of the flight. Aviation Safety Enhancement Team. has developed a program of Operation Safety Audits to assist airlines in achieving compliance with ICOA rules and regulations. The International Air Transport Association. so even though it may take longer to turn it out again. The pros and cons of this debate are manifest in the strategic difference between the Airbus A380 and the Boeing 787. . and that would be taking a bit of both (perhaps a ‘hubto-point’ service). The deregulation imperative – getting government out of the business of airlines and airports – will not only assist competitiveness and reduce government burdens. a long haul from Europe. International Bank for Reconstruction and Development. While this is interesting. However point-to-point service breaks down after connecting the more recognised city pairs. and Multilateral Investment Guarantee Agency) has made available more than US$1 billion to support aviation development throughout the world. IATA also has set up a working group ASET. Asia and other places to the international arrival airport with regional distribution of passengers from there.) One study35 of the African Development Bank shows. For point-to-point to work there must be sufficient O&D in the city pairs.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 24 destination (so-called O&D) traffic that were able and inclined to pay the low fares offered. its application for a regional African airline is doubtful – other than defining the outside aviation world with which it has to connect. the local carrier would have to pass an international audit. The World Bank Group through its various components (International Development Association. But with recent ICOA. IATA. but will enable government agencies to concentrate on the aspects which they do best: regulation. that of the 276 city pairs in West Africa less than 5% generates more than 150 passengers per day. (When Southwest first got started it claimed it was not competing with other airlines. The FAA in the US conducts its annual International Aviation Training Symposium which many African countries participate. for example. It said it was competing with the bus lines. Longer turnaround times for hub-and-spoke aircraft are acceptable if they have completed long-haul flights. United States.

billing and collection. Indeed. for example. etc. this may not be commercially viable. p. If governments.40. this is not fundamentally about reforming loss-making national airlines. especially for landlocked nations. low incomes of populations.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 25 Drivers: Passengers need reasons (tourism. According to the ADB report. and dependent on tourism income. But what are the factors that go into devising an air-traffic growth strategy? Although it might be the catalyst for reform. and Fuel: The viability of airlines is a calculation based on fuel. Routes.38 poor management and ignorance by the private sector. The more reasons. political interference from governments that fail to put profitability first. Even if government does not wish to relinquish entirely. which increases market volatility even though it might lead. for strategic or business reasons. under-capitalisation and a shortage of financing and skilled personnel. business. 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. temporarily. it should contract the management of entities to specialists. . the national airline should be a secondary consideration in this process. that during stable periods the average growth rate of air traffic is double that of GDP. Conclusion: Towards a Virtuous Cycle Air routes and traffic are essential components of development. demand the servicing of politically important routes. where there is partial state ownership. the greater the passenger loads. the growth in world traffic is double that of world GDP increases over the past three decades. to a consumer boom. and the proliferation of smaller. 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. Being serviced by a reliable and ‘branded’ airline is a critical component in building a tourism market. Attraction of strategic airlines: This is especially essential for those countries without absent frequently serviced intercontinental routes by their domestic airline. it has been proven.) to travel. The reverse is also true: having a bad nationally branded one can do a lot of damage. Location: Proximity to a regional hub will assist improve connectivity with international traffic. Planes. often short-lived carriers. membership of world air alliance enabling connectivity and feeder routes. visiting friends and relatives. And the competitiveness (or not) of African airlines relates to: 37 the use of modern technology from aircraft to e-tickets. op cit. routes and load factors. Access to experienced management: Airlines and airports are complex businesses best left to professionals. leading to small markets in which it is difficult to generate sufficient returns on investment. 37 38 ADB. however. its stakes in this sector.

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. which demands setting priorities. setting priorities and making things happen. there are a number of things that countries can do to encourage air traffic: Open Skies and Commercialisation . This demands liberalisation and openness. With the above in mind. The Virtuous Air Traffic-Economic Growth Circle Economic Drivers: Tourists BusinessVisitors Shoppers Air Traffic Safety & Security Efficiency Ease of Transit Hotels So a lot of this is about policy. and also to find ways to increase investment in airport facilities and management. The future of the national airline may be one answer to another. The easiest way internationally to achieve this has been through concessioning or privatisation. In this there are many things than can be done more easily than others. A national airline should not be protected at the expense of openness. easier and with a much greater degree of safety. and attention to the details on the drivers from tourism to shopping that will bring people. the critical first consideration in reforming (and growing) air traffic is liberalisation: nothing much can be achieved without opening the skies. 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. .Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 26 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.There is no option but to liberalise to increase the flow and volume of air traffic arrivals to and from a destination. This includes everything from developing adventure tourism experiences to easing the visa restrictions on visitors and opening the skies to competition. and not just rhetorically. Indeed.

Many of the main developing country international tourist destinations do not have national airlines. in turn. 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 profitable? What is needed for profitability & expansion? Link with tourism & other drivers Timing of openness Partners & branding Aircraft suitability Frequency. Privatisation should not come at the considerable long-term cost of not liberalising regional routes. Only with this management base can an airline operate efficiently and look to make necessary choices on regional positioning. For smaller African airlines battling to survive and positioning to prosper in a world of high oil prices and with thin management capacity. along with the skills that go with it. the priority is to acquire management that can position the company in this dynamic market. rostering to on-line bookings – to run the airline. Commercialise State-Run Airlines – Here there are. two general options: Sale or concession via a management contract. Getting out of the airline business also means that governments then focus not on protecting . Thus. however. Importantly. routes and aircraft. CAAs need to be assured of sufficient revenue to carry out their regulatory tasks. connectivity & synchronicity Control costs A link-up with best airline management practice would be a necessary component to commercialisation of any airline. and the need to instil technology – from ticketing to loading. For example. neither Costa Rica nor Peru nor the Dominican Republic (arguably the three fastes-growing tourism markets) possesses a national airline. in Latin America.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 27 notably via Build-Operate-Transfer or other similar public-private-investment schemes. initially it is less about planes than people and skills – in understanding what choices are available to airlines. apart from Singapore Airlines – and perhaps Emirates – no nationally owned and run airlines are profitable.

over-regulated and inaccessible market. May 2008 . interesting and hospitable place to visit – and not a protected. it has regardless. to be run on the same principles as other businesses – on empiricism. Finally. developing local products and services. opening the skies. not instinct. © The Brenthurst Foundation.Wings over Africa? Trends and Models for African Air Travel BRENTHURST DISCUSSION PAPER 4/2008 28 and managing this asset. and evidence. sorting out visas. not emotion. while the airline industry is probably like no other in terms of technology and uncontrollable risks and costs. and ensuring that the country is a safe. but on making sure that traffic flows as smoothly as possible: fixing the airports.

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