African nations could achieve further economic growth by liberalising their air space, a new report says.
Member states could see their annual Gross Domestic Product grow by the millions, annually, and thousands of jobs created with the adaptation of an open skies, a liberal market between signatory states allowing airlines unlimited rights to fly.
The new report released this month by the International Air Transport Association (IATA), in partnership with regional associations AFCAC and AFRAA, outlines the benefits African nations would gain by implementing a liberalised policy and uses 12 key markets as examples. These are: Algeria, Angola, Egypt, Ethiopia, Ghana, Kenya, Namibia, Nigeria, Senegal, South Africa, Tunisia and Uganda.
Air transport plays a crucial role in driving economic and social developments in Africa through enhanced connectivity. However, regulations have made it difficult to provide inter-connectivity in the region.
“Governments should support the growth of the industry by fully liberalising African skies as intended by the Yamoussoukro Decision, while providing other facilitator assistance like implementing global standards in safety, security and regulations, reducing high charges, taxes and fees and removing visa requirements for ease of movement across the continent,” said the secretary-general of African Airlines Association (AFRAA), Dr Elijah Chingosho.
According to the report, if the 12 countries were to adapt an open skies policy they would create 155,000 extra jobs in the market and grow the combined annual GDP of the nations by $1.3 billion. Five million additional passengers a year would fly.
Africa agreed, in principle, to an open skies policy 26 years ago with the signing of the Yamoussoukro Declaration. The lack of implementation saw member states, under the Africa Union umbrella, come up with the 1999 Yamoussoukro Decision, which looks at what its implementation would mean for African economies. It called for the deregulating of air services and opening regional air markets.
Holding back economies
The secretary general of the African Civil Aviation Commission (AFCAC), Iyabo Sosina, says by not adopting the Yamoussoukro Decision African countries are not only holding back growth in the aviation sector but their economies.
The study shows by adopting the open skies policy, a country like Uganda whose GDP stands at $21.48 billion according to the World Bank, could additionally grow by $77.8 million and create 18,600 jobs. For Nigeria, whose GDP stands at $522.6 billion, additional growth would be $128.2 million with 17,400 new jobs being created.
This is expected to have a trickle down effect on the economy with other sectors gaining including the farmers who supply their produce to catering companies who work with airlines. Liberalisation leads to increased air services which in turn facilitates growth in the sectors of the economy by supporting increased trade, attracting new businesses to the region, encouraging investment and enhancing productivity.
“It is essential that African governments use aviation as a critical driver of social and economic development,” said IATA’s director-general and CEO, Tony Tayler. “Greater connectivity leads to greater prosperity.”
With a population of over 1 billion people, untapped resources and poor infrastructure, the potential for aviation in Africa is big. Countries treat regional airlines with suspicion opting to open up, instead, to other third counties and not each other.
There has been evidence in Africa where countries have liberalised their air markets there has been substantial growth. An example is between Kenya and South Africa where, according to the report, liberalising the air market between the two countries in 2000, led to a 69% rise in passenger traffic.
Today, the route is served by five direct flights daily operated by Kenya Airways and South African Airlines, in addition to services provided by RwandAir, Ethiopian and LAM of Mozambique among other African carriers through their hubs. This has seen more competitive prices on the route and helped grow tourism for the two destinations with Kenya being one of South Africa’s key source tourist markets in the region.
More costly than Europe
The report shows one of the advantages would be the cost of flying across the continent coming down, with a benefit form fare reduction of between 25 and 35%.
“Liberalisation can lead to increased air service levels and lower fares, which in turn stimulates additional traffic volumes, facilitate tourism, trade, investment and other sectors of the economy and bring about enhanced productivity, economic growth and increased employment,” the report said.
Inter-connectivity in Africa is said to be more expensive than travelling to Europe or the Middle East in some instances. This has been attributed to the lack of competition and the cost of operations in the region mainly hampered by price of fuel and taxes.
Fuel, one of the major headaches in the aviation sector, accounting for up to 40% operational costs, is more expensive in Africa compared to other markets. African airlines pay about 21% more for jet fuel than the global average.
This makes African airlines less competitive compared to other rival carriers which have been expanding their reach in Africa. In the past five years there has been increased frequencies from European carriers and especially Middle East ones who have positioned themselves to connect the continent through their hubs.
There is always concern that liberalisation will harm profitability of existing national carriers. The report though says though there would be an impact initially there are major growth opportunities, especially on volumes.
“Liberalisation offers efficient, competitive carriers an opportunity to enhance profitability by expanding into new markets, accessing a wider pool of investment and through consolidation,” said the report. “Whether the incumbent carriers prosper or suffer under liberalisation will depend in greater part on the quality of management of the carriers and how they choose to respond to liberalisation.”
Mr Tayler, said beyond economic growth liberalisation of the aviation sector “is a force for good and plays a major role in helping to reach the African Union’s mission of an integrated, prosperous and peaceful Africa.”
•The author writes on aviation and tourism affairs. Twitter: @pwangui