SEMINAR
AVIATION IN TRANSITION
CHALLENGES & OPPORTUNITIES OF LIBERALISATION
22nd – 23rd March, 2003 - Montreal, Canada
PRIOR TO THE 5TH ICAO
WORLDWIDE AIR TRANSPORT CONFERENCE
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AFRICAN AVIATION
Presentation by
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Nick Fadugba
CEO, African
Aviation Services
Limited
AFRICAN
AVIATION
Publisher, AFRICAN AVIATION Magazine
AFRICAN AVIATION SERVICES LTD
Company Profile
1. Aviation Publishing
2. Aviation Conferences
3. Aviation Consultancy
With A Special Emphasis On:
* Aviation Finance
* Aircraft Leasing
& Maintenance
AFRICAN
AVIATION
* Aviation Safety & Security
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MAXIM
‘Aviation Can Be A Vital Catalyst For
Africa’s Economic & Social Development’
- Company raison d'etre
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Air Transport Liberalisation
•
The Underlying Theme of the 5th ICAO Worldwide
Air Transport Conference is Not WHETHER to
Liberalise but HOW to
Liberalisation is said to be Inevitable
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Africa’s Share of Global Air Traffic
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Today, African Airlines have only an approximately
2% Market Share of Global Air Traffic
•
If International Air Transport is further Liberalised
Will Africa’s Global Market Share be
Increased or be Reduced?
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Challenges & Opportunities of Liberalisation
•
Further Air Transport Liberalisation could provide
several benefits, such as enhanced air travel, economic
trade and tourism
But the Key Challenges are: How Air Transport Liberalisation
can be Structured and Implemented so as to ensure
that African airlines are not disadvantaged and
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put out business AFRICAN
and their staff put AVIATION
out of work?
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Africa: Socio-Economic Environment
•
Large & Growing Population
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Mainly Small & Weak National Economies
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Low Per Capita Income
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Little Disposable Income for Air Travel & Tourism, etc.
•
Political Instability & Conflicts in Several Countries
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Key Challenges Facing Regulators in Africa
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Implementing & Monitoring the
1999 Yamoussoukro Decision on
Air Transport Liberalisation in Africa
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Providing Effective Aviation Safety Oversight
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Ensuring Equitable Economic Regulations
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Harmonising Civil Aviation Regulations
•
Enhancing Aviation Security
•
Funding Modern Aviation Facilities &
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Expanding Aviation Training & Education
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Air Transport Liberalisation in Africa
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Is Any Progress Being Made?
•
Yes, Slowly but Steadily.
•
Thanks to the Efforts of Organisations Like:
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The UN Economic Commission for Africa ( ECA)
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The AU, The African Civil Aviation Commission (AFCAC)
•
ICAO, COMESA, SADC, ECOWAS & AFRAA, etc
•
Notably, Some African Governments Have Been
More Supportive Than Others
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Obstacles & Dilemmas
•
Some African Governments Are Reluctant
to Cede Control to Truly Autonomous
National Civil Aviation Authorities
•
Who Will Benefit Most From Liberalisation in
Africa - African Airlines or Foreign Carriers?
•
Can A Developing Country Promote ‘Open
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Skies’ & Still Protect its Own Airline Industry?
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African Position on Liberalisation
•
It Must Be Consistent With the Yamoussoukro
Decision of 1999
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Foreign Investment – National Legislation
Should Determine the Level of Such
Investment
•
Market Access Should Continue to Be Based
on Bilateral and Multilateral Agreements
•
Must Be F air Competition & Safeguards
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African Position on Airline Franchising
•
African Governments Should Require Prior
Authorisation & Verification of Any Franchise
Agreement
•
Franchising Between African Carriers Should Be
Authorised Subject To The Airlines Meeting the
Designation & Eligibility Criteria of The
Yamoussoukro Decision
•
Third Party Franchising Should Not Be Supported
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As it Adversely Impacts Competitive Position of
African Carriers
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High Operating & Capital Costs
•
Insurance
-
High Premiums
•
Aviation Fuel
-
Up to 50% Higher
•
Lease Rates
-
15%-30% Higher
•
Air Navigation
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Most Expensive
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Handling Fees
-
Very Expensive
•
Maintenance
-
Little Co-operation
Source: The World Bank
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Internal Pressures
•
Mainly Small Domestic Air Traffic Markets
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Low Load F actors
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Higher Operating Costs than Other Regions
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Government-Regulated Air Fares
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Political Interference in Airline Decision-Making
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Management Instability & Lack of Continuity
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External Pressures
•
Air Transport Liberalisation & Globalisation
•
Increasing Competition from Larger Foreign Carriers
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World Bank/IMF Strictures on Government Subsidies
to National Flag-Carriers
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External Pressures (2)
• African Market is Dominated by European Airlines
- BA, Lufthansa, Air France, KLM, etc
• Asian Airlines Are Now Showing Greater Interest in Africa
- Especially South Africa
• Threat By European Charter Airlines - Countries at Risk: Egypt,
Namibia, Kenya, South Africa, Mauritius, Tunisia, Morocco, etc
• North American Airlines Have Minimal Presence in Africa
- Previous Attempts by USAfrica Airways & World Airways Failed
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Cape Town Convention
•Gives
Aircraft Lessors and Lenders the ability to
repossess their assets worldwide in the event of default
•
Provides Aircraft Collateral Assurance
•
60 Day Repossession / With Support of Governments
•
Should Expand The Sources of Asset-based Finance
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Airline Industry – Key Regulatory Issues
•
Airline Ownership & Control – Local or Foreign?
•
Airline Market Access – Free for All?
•
Airline Product Distribution
•
Fair Competition Versus Protectionism
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The Provision of Essential Air Transport Services Vital
To National Economic Development
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Airline Growth Strategies
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Strategic Investment By Foreign Airline Partner –
Kenya Airways / KLM
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Airline Franchising –
BA/Comair, South Africa; BA/Regional Air, Kenya
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Low-Cost Carriers – Kulula.com, South Africa
•
Joint Ventures – Royal Air Maroc/Air Senegal
International
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Summary
•
Africa Has Made Some Headway in Implementing Air
Transport Liberalisation, But Still Has Much To Achieve
•
Air Transport Liberalisation in Africa Must Directly
Benefit The African Aviation Industry
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SEMINAR
AVIATION IN TRANSITION
CHALLENGES & OPPORTUNITIES OF LIBERALISATION
22nd – 23rd March, 2003 - Montreal, Canada
PRIOR TO THE 5TH ICAO
WORLDWIDE AIR TRANSPORT CONFERENCE
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AFRICAN AVIATION
Presentation by
Nick Fadugba
Email:
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nickfadugba@africanaviation.com