Latest commitment to liberalisation shows Africa has its eyes on the value of air connectivity prize

The signing last month of a commitment to deliver a Single African Air Transport Market (SAATM) may turn out to be yet another unfulfilled landmark in African aviation unless the industry works closely with governments to break the barriers that are restricting the continent from reaching its true potential. But, do we dare actually use the ‘L’ word? After all, the agreement, signed by 22 nations which account for around 75% of Intra-African air transport and together have a population of approximately 600 million people, can only be seen as progress once a full roadmap for its adoption is formulated.


Summary:

  • Proposed Single African Air Transport Market (SAATM) is biggest recent step to Africa finally achieving some form of air transport liberalisation.
  • The Blue Swan Daily analysis shows intra-African air connectivity accounts for 43.2% of total air seats to, from and within the continent in 2017. 
  • With mature markets such as Europe, North America and the expanding Asian air transport market seeing intra-regional traffic hitting levels exceeding 68%, the potential for growth within Africa is considerable.

Africa covers more than 30 million square kilometres and is home to more than a billion people. Due to its challenging terrain, air transport is often the best—sometimes the only—way to connect the continent. It is clear Africa needs safe, efficient and affordable air transport links to make the most of its people and resources, but short-sighted government strategies continue to inhibit development.

We regularly hear talk about the need to develop a ‘United Africa’ to enable air transport to grow to its full potential and the need for enhanced connectivity and cooperation within the Continent, but these remain just words with very little progress having been taken since the signing of the original Yamoussoukro Declaration in 1988 and the later Yamoussoukro Decision of 1999, which promised to create a single air transport market across Africa by 2002.

Part of the reason for Africa’s under-served status is that many African countries have continued to restrict their air services markets to protect the share held by state-owned air carriers. It has been a long journey with lots of talking but very little action, albeit there has been limited liberalisation in certain regional economic blocs and between certain markets.

Now, the industry in Africa appears to better understand the economic benefits of a more liberal regime and moving from a general protective stance of state interests. We are now the closest we have ever been to allowing Africa to unlock its aviation potential, but that still remains a long and difficult process with many commentators suggesting that it will be impossible to change long ingrained attitudes.

Aviation in Africa currently supports USD72.5 billion in economic activity and 6.8 million jobs but its share of the global tourism industry remains small, with the continent’s share shrinking over the past decade from 4.8% of global arrivals and receipts in 2006 down to 3.3% in 2016. But this provides the perfect platform for growth and the potential is massive.

IATA predicts that air travel growth in Africa will outpace all other regions of the world over the next 20 years, albeit that is naturally from a smaller base. Passenger numbers could quadruple during this period with an average annual growth of around 5.6% seen as a conservative estimate if liberalisation occurs. In fact, the association predicts demand growth of 8.0% in 2018, slightly outpacing its announced capacity expansion of 7.5%, but forecasts African airlines to make small losses totalling USD100 million in 2018, similar to an expected collective net loss of USD100 million this year.

We have all seen the much referenced InterVISTAS report that demonstrates that liberalisation will create opportunities for further significant employment growth and economic development. Its findings show the additional services generated by intra-African liberalisation between just 12 key markets would provide an extra 155,000 jobs and USD1.3 billion in annual GDP. The research suggests that a potential five million passengers a year are being denied the chance to travel between these markets because of unnecessary restrictions on establishing air routes.

But, what is the actual opportunity in the intra-African market? The Blue Swan Daily has studied air capacity across all major regions of the world and compared intra-regional with infra-continental seat inventories to get a better understanding of the market potential and see how Africa compares with other areas of the world.

CHART – Africa ranks lowly when considering intra-region capacity and highlights the potential to grow air connectivity within the ContinentSource: The Blue Swan Daily and OAG 

The findings are interesting. Africa has low global totals with intra connectivity, accounting for 43.2% of total air seats to, from and within the continent in 2017. This compares unfavourably with mature markets such as Europe (66.8%), the Southwest Pacific (68.6%) and across North America (77.8%). It is also a long way behind Asia (78.5%), a region that is enjoying a growth journey thanks to liberalisation in areas across the diverse region and where like Africa air transport is essential for connectivity (NOTE: there are considerable differences between the figures across the region – from Central Asia (37.6%) via South Asia (59.0%) and South East Asia (63.2%), up to North East Asia (77.8%).

Similarly, intra-regional capacity within the Latin American and Caribbean market has a larger share at 63.7% of the total available capacity to, from and within the emerging region. But Africa is not actually at the foot of list. In the Middle East intra-regional connectivity accounts for just a 31.8% share of total capacity in 2017, due mainly to the strong intercontinental networks of the large hub airlines.

Closer inspection of the Africa data shows the intra-African share of total system capacity across the Continent has declined over the past ten years – down from 46.6% in 2007 to its second lowest level during the period in 2017. Over this ten year analysis intra-African capacity has grown to its largest system offering, up from 65 million seats in 2007 to almost 97 million this year.

CHART – While there has been a notable 48.7% growth in intra-African seats over the past ten years, the market accounts for less than half of all capacity to, from and within AfricaSource: The Blue Swan Daily and OAG

“Africa is the last continent to experience the aviation boom that has been a driving force of economic prosperity across the globe. A single air transport market will serve to remove the regulatory barriers that are keeping competition out and costs high.” says Jon Howell, managing director of AviaDev, the leading air service development event driving connectivity to, from and within Africa.

“It seems that there is a renewed vigour to see SAATM succeed since the commodity crisis. Countries are looking to diversify their economies into sustainable sectors like tourism and services. There are still many hurdles to overcome, but if the African Union is committed and drives the implementation through AFCAC, I have no doubt this will provide a catalytic effect on Africa’s connectivity,” he adds.

This analysis suggests there is a great potential; it is now up to Africa to wake up fully to the opportunity.