ANALYSIS: Africa’s tortuous liberalisation journey

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Ethiopian Airlines chief executive Tewolde Gebremariam did not mince his words when he described the weakness of Africas aviation market at the UK Aviation Club lunch on 6 February.

“Today, some 80% of intercontinental traffic between Africa and the rest of the world is controlled by non-African carriers,” he warned, describing the situation as a “huge concern” for both the continent’s airlines and its governments.

Even a cursory glance at Innovata schedules gives weight to his argument. In November 2013, the top carriers on routes between western Europe and Africa, in capacity terms, were Air France, British Airways and KLM. Only three of the top 10 airlines operating between the two regions were African carriers: South African Airways, EgyptAir and Royal Air Maroc.

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A similar picture emerges on routes between Africa and the Middle East, with Emirates dominating the market, followed by Qatar Airways, EgyptAir and Etihad Airways.

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So what is holding back Africa’s aviation market? Many blame the poor progress of liberalisation: airline trade body AFRAA is calling on national governments to end their protection of flag carriers, and urging them to implement the Yamoussoukro Decision.

Signed in 1999, that agreement pledged its 44 signatories to establishing an open-skies regime across the continent, allowing for unrestricted frequencies between states, improved safety and security standards, and cross-border investment in air transport.

It was a bold course that would require unprecedented international co-operation, but to date that vision continues to elude signatories, with the 2006 deadline for implementation of open skies having long since lapsed.

Today, state-owned national flag carriers continue to operate routes under restrictive bilateral agreements, and low-cost carriers such as Fastjet struggle to make headway in establishing a pan-African network, which they blame on the protectionist policies of national governments.

So why hasn’t Yamoussoukro been implemented? Consultant Sudeep Ghai from Athena Aviation says progress has been painfully slow because there is still a lack of political will on the ground to implement it.

“Part of it is the argument that many of them [African governments] do not see aviation as a strategic national asset. They are now concerned about the things that are happening in the Gulf region, but they are not taking sufficient note of the blueprint to say: ‘How do we change what we are doing?’

“The governments have generally seen liberalisation in terms of losing control of who’s coming in and, potentially, as the end of the revenue farming they have relied on up to now."

But Ghai also says there are also legitimate concerns among governments about the effect that unrestricted liberalisation could have on the aviation market.

“It’s a double-edged sword,” he says. “One question you have to consider is how far do you decide to liberalise. How much of an open-skies or liberalised flying regime do you want to put in place on an intra-African basis? And how far do you want to have liberalised agreements on an international basis?

“The challenge is if we went completely open skies and allowed everyone in here, why wouldn’t you have, for example, Air Arabia dropping in and saying: 'We are going to start a number of new airlines on our own business model’? And that would probably spell the end for some African airlines – so there is always the risk with that.”

A similar thread is picked up by Ethiopian’s Gebremariam, who offers a nuanced view of the liberalisation debate. He argues that governments must rethink their national aviation policies but also need to stop short of allowing complete liberalisation which would lead to the consolidation of African aviation before it has had a chance to grow.

“I do not think that consolidation would help the African continent’s aviation sector today, the growth of commercial cooperation would make more sense,” he said, adding: “I think African carriers need to grow to account for 50% of the market.”

It is not the case that nothing has been achieved over the last 15 years. The African Union now has a Common African Civil Aviation Policy which includes liberalising the continent’s markets as one of its objectives.

One policy it pursues is to encourage African states to take a united position in its dealings with the EU and replace separate state talks with bloc-to-bloc negotiations on new air transport agreements – an important development if Africa is to emerge as a strong unified aviation market in its own right.

Morocco’s decision to join Europe’s common aviation area has led to a dramatic increase in traffic volumes as Ryanair and EasyJet compete to build market share, and has made the North African state an increasingly attractive leisure destination.

Meanwhile, Senegal has made a formal offer to South Africa suggesting that SAA and Senegal Airlines take equity stakes in each other and work towards a common restructuring programme, in a move that seems to bear many similarities to the Air France-KLM tie-up.

While it remains to be seen whether a common aviation area can be established on the African continent anytime soon, what is clear is that as the world continues to become more globalised and interconnected, African airlines will face a stark choice of either joining their international rivals in staking a claim to market share or falling prey to them – a scenario carriers such as Ethiopian Airlines and Kenya Airways are already acting to avert.