The African aviation market faces numerous challenges that must be addressed before it can be profitable and sustainable. The International Air Transport Association (IATA) and other commissions have launched initiatives to address the challenges and develop the aviation market in Africa.
Aviation continues to play a significant role in socioeconomic development worldwide. It has created millions of jobs, connected people and services, boosted economic activity, and helped many governments move essential goods during the COVID-19 pandemic.
However, aviation can only continue to provide opportunities if the system works efficiently. Although Africa is leading in recovery from the pandemic, the industry faces numerous challenges that stop it from working efficiently. If Africa is to have a profitable and sustainable industry, these challenges need to be solved.
Extremely high operating costs
The cost of operating an airline in Africa is much higher than in other regions, which is one of the most significant challenges. Charges on the continent are 8% higher than the industry average, while fuel and maintenance contribute to the high costs. This is weighing down airlines and preventing them from growing.
Photo: Boeing
In 2021, jet fuel and oil costs contributed about 31.2% of expenses for African carriers. Although we have seen an industry-wide price hike, jet fuel is still 12% higher in Africa compared to other regions. To better understand the costs, we look at the crack spread, which is the difference between the price of crude oil and the price of jet fuel extracted from it.
This difference or premium has increased worldwide, but Africa has been the hardest hit. Between 2010 and 2019, the premium was 18%, increasing to about 40% in 2022. Due to the infrastructure and logistics, African carriers are paying a significantly high premium.
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The effects of high costs
The price of most services and products differs with demand and supply. Very little jet fuel is refined in Africa, so there are high transportation costs. Moving oil and jet fuel to airports is very expensive, as seen in many places around the world, but if we combine all the issues, Africa remains the hardest hit.
Looking at the figures, the market is losing money, and net margins are negative. Many airlines like Kenya Airways and South African Airways have been operating on losses for many years and cannot continue to absorb excess costs. IATA Director General Willie Walsh said in a press briefing;
"The fact is more expensive fuel in Africa than the rest of the world puts a heavy burden on African carriers, and we'll continue to have significant challenges to turn the industry into a profit and the lack of profitability, as you know, significant impact when it comes to investment in growth, investment in infrastructure, investment in new aircraft or new products. So I think more has to be done to ensure that we can have a competitive jet fuel market in Africa."
These high costs have made air travel more expensive and less prevalent on the continent. Africa constitutes about 18% of the world's population and about 2.1% of the world's air travel. Air travel is predominantly in the international market. International air travel is 80%, while domestic travel is 20%.
Photo: Vytautas Kielaitis / Shutterstock
This is because passengers choose alternatives to travel on domestic routes or not travel at all due to the high costs of flight tickets. The air distance between Harare Airport (HRE) and Johannesburg Airport (JNB) is 593 miles (954 Km). This journey takes about one and a half hours, and a return flight costs $450 on average.
Image: GC Map
A similar route in Europe which cannot be covered by road would cost much less. The air distance between Dublin Airport (DUB) and Frankfurt Airport (FRA) is 677 mi (1,090 km), and a return flight on this route could cost you less than $250.
Finances and trapped airline funds
Financial distribution and trapped airline funds also contribute to the slow development of the aviation sector. Blocked funds is one of the most significant issues that will hinder IATA's Focus Africa initiative, which includes the implementation of SAATM.
There has been a 10% increase in blocked funds on the continent from January to February, bringing the total to $1.6 billion. About 66% of all blocked funds worldwide are in Africa, and if this is not addressed, the industry will struggle to survive.
Photo: afromusing via Flickr
Nigeria withholds airline funds more than any other African country, with over $743 million owed to airlines. It is followed by Algeria, which holds $165, with Ghana and Zimbabwe on the list. Every country has a different reason for holding funds, but this damages the aviation industry in that country. IATA Regional Vice President for Africa and the Middle East said;
"The commonality here is that once a country decides to block funds to airlines, the common issue is it actually damages the aviation industry in that country and also to the airlines operating to that country and, therefore, impacts their own GDP and their own aviation opportunities. I don't have the chart with all the numbers in front of me, but, you know, the significant $1.6 billion in Africa is huge. I think the largest, which is about 50% of that, is actually in just one country, which happens to be Nigeria."
The country held elections last month and has a new government coming in. It also has a new central bank governor, and IATA is engaged with them to reduce the number of airline funds trapped in the West African nation.
Check out more African aviation news here.
The lack of connectivity and prioritization
Africa is the second-largest continent by area, and with no seas dividing nations, connectivity should be reasonably simple. However, air connectivity on the continent is significantly low, which organizations like IATA, AFCAC, and the AU are trying to resolve.
Numerous destinations are in proximity and can be covered by direct short-haul flights, but this connectivity doesn't exist. Without fifth freedom flights as well, routes that should be covered in a few hours take nearly a day. A flight between Kigali and Luanda, which are only 1,256 mi (2,021 km) apart, takes anywhere between 11 and 20 hours.
Photo: Rwanda Airports Company via Flickr
Another area of concern is the lack of prioritization of aviation. African governments face other issues that require immediate attention, including poverty, housing, clean water supply, health, and education. If given attention, aviation can boost economic development. IATA Chairperson-designate and RwandAir CEO Yvonne Manzi Makolo said;
"The message to governments is that a strong air transport sector will help in dealing with these fundamental challenges. It can create opportunities for economic and social development, but it needs a supportive regulatory environment, and it needs governance to think long-term. Aviation cannot be seen as a cash cow to be noticed at every opportunity, but if it is given the opportunity to thrive, that entire economy will benefit and grow as connectivity. The value proposition of Focus Africa regardless is empowering aviation to contribute to achieving sustainable development."
Implementing the African Continental Free Trade Area (AfCFTA) and the Single African Air Transport Market (SAATM) could significantly boost connectivity around the continent. With the proper execution, this could be a solution to Africa's connectivity problems.
Lack of infrastructure and global standards
Lack of efficient infrastructure and slow adoption of global standards are additional challenges African nations face. Many airports have systems that do not offer a great passenger experience, with Murtala Muhammed International (LOS) as a good example.
Airports such as Jomo Kenyatta International (NBO) have multiple layers of perimeter and terminal security, which often pose a challenge for passengers and airlines. Another airport is Entebbe International (EBB), which has been involved in corruption scandals and bad reviews from passengers.
Photo: Fraport AG
There is also a significantly slow adoption of data and API programs, which, if implemented using industry guidance, can support governments in moving toward advanced processing capabilities. Passenger data is essential as it strengthens borders and paves the way for contactless processing.
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