The African Airline industry is undergoing profound changes spurred on by growing African economies and a growing middle class.

The growth of this industry is, however, constrained by a number of challenges. If all stakeholders work in concert to tackle these, there are opportunities for the industry to emulate the kind of growth we have witnessed in the Asian markets in the past two decades or so.

The African aviation industry needs to continuously re-invent itself, be innovative, embrace competition and adopt industry best practices. Since uncertainty has become the norm, the industry needs to be able to adjust rapidly to a dynamic operating environment.

On a longer term, the outlook for the aviation industry in Africa remains promising .Africa is one of the regions in the emerging markets that are projected to drive global growth in the industry in the coming decades.

African Economic Growth

There is growing resilience of African economies from the economic crisis like the one recently experienced (from 2008 to the present) largely in Europe and America. This is as a result of increasing trade between African countries and a rising middle class.

African economies are expected to continue to grow at well above world average rates in the coming decades.

This is facilitated by the rapid growth of some non-traditional markets for African goods, mainly commodities, in countries like China, India and Brazil .The continued diversification of African markets and growing foreign direct investment, as well as investment by locals, augurs well for African economic growth.

This will be key to the development of local, regional and intercontinental airline traffic particularly to the non-traditional markets.

In 2012 airlines worldwide made a profit of US $ 7, 6 -billion, according to IATA. The performance of the global industry was adversely affected by generally high fuel prices which averaged US $ 111,8 per barrel.

The industry was also weighed down by the economic recession in the Euro-zone, the weak US economy and the slowdown in some Asian economies, including China.

The reduced revenues coupled with high operating costs largely driven by a spike in oil prices, resulted in many airlines making losses.

Global Industry Outlook

IATA forecasts airline profits in 2013 at US $ 12,7-billion on revenues of $ 711-billion,which is a 1,8% profit margin on the back of lower than expected fuel prices forecast ed at $108 per barrel .Although this is a significant improvement compared with 2012,the profit margin is still very thin.

The increase in profits is driven by increased new revenue streams from ancillary sales and better capacity management. Ancillary sales now constitute 5% of total revenues. Better capacity management will result in record load factors of 80, 3% in 2013.

The industry is expected to carry about 3, 1 billion people and more than 52-million tons of cargo.

African Airlines Performance

African airlines broke even in 2012 on the back on high industry costs on the continent. For example, whereas fuel constitutes about 30 -35% of the operating costs worldwide; in Africa it averages 45-55%.

However, the outlook for 2013 is much more optimistic with IATA forecasting African airlines to make a small profit of $ 100-million.

Africa’s share of global traffic in 2012 remained the smallest at only 2,6% .The Asia Pacific region commended the largest share of global traffic of over 32% .With Africa’s population now over one billion, there is huge potential for growth of the domestic and regional markets.

A major challenge for African aviation is that most airlines are small and under-capitalized with the majority of airlines having fleet sizes of less than a dozen aircraft. Such small airlines lack economies of scale and scope, and serve small markets using relatively older and often bigger aircraft types.

The older aircraft types have higher fuel consumption and higher maintenance costs and also higher emissions. There is need for consolidation for these carriers to survive the cut-throat competition.

The African sky in terms of intercontinental operations is dominated by non-African carriers mainly from the European Union and Middle East with new carriers coming from Asia and North America, seeking to benefit from the higher yield and growing African traffic.

The number of African carriers involved in intercontinental operations is now about a dozen whereas in the 1980s Africa had over two dozen intercontinental airlines.

Some of the intercontinental carriers have been liquidated since then including Air Afrique, Air Gabon, Air Mali, Air Nigeria, Air Senegal International, Cameroon Airlines, Ghana Airways, Nigeria Airways and Zambia Airways. In the francophone West African states, Air France enjoys a near monopoly.

Structural Challenges

Many structural issues undermine short term airline profitability. African airlines continue to deploy high-capacity aircraft on low-and mid-density markets, driving down load factors and discouraging greater frequencies where higher levels with smaller aircraft would stimulate demand much more effectively.

As a result ,average load factors are below 70% .This compares unfavorably against the global average passenger load factor of 80,3% forecast for 2013,according to IATA.

This often results in losses, or to compensate, fares tend to be high, discouraging discretionary travel.

Aviation is a crucial means of connecting cities where most of Africa suffers from poor or inadequate surface transport infrastructure.

The development of low cost carriers (LCCs) is constrained by high fuel and passenger charges. Fuel costs are up to twice the global average at some cities on the continent.

Progress on Liberalization

Liberalization is essential for airlines to grow and stimulate domestic and regional traffic to feed intercontinental operations. Though the situation is improving, it is still a long way from being ideal.

It is critical that the opening up of the African continent to African carriers be fully completed to provide freedom for airlines to fly wherever there are markets, and to facilitate investment into each others airlines.

Currently, African airlines are generally very small. Even the larger African carriers are very small by world standards.

Consolidation would be vital for the success of African carriers. It is important for States to abandon the notion of flag carriers, but rather to view airlines as business entities.

Africa may need no more than three or four mega carriers that can compete effectively against the mega carriers from outside Africa.

There will still be room for domestic and regional carriers that will act as feeders into the networks of the African mega carriers.

It is critical to strengthen the small regional carriers through equity participation along the lines of the Kenya Airways (KQ), Precision Air (PW) or Ethiopian Airlines (ET), ASKY (KP) arrangements. The growing African airlines will also need to be members of the worldwide alliance groupings along the lines of what Egypt Air (MS), KQ, ET and South Africa Airways (SAA) have already done.

Hubs in West /Central Africa

The absence of a major hub in West/Central Africa has meant that intra-Africa connectivity and especially traffic from this sub-region to other regions of the world, is largely dependent on non-African carriers.

To increase the intercontinental market share of African airlines, it is important that intro-West/Central Africa traffic is transported by African airlines via a hub in the sub-region to other parts of the world.

The creation of a hub will, however, require the existence of a major carrier .Currently none exists. Fortunately, most of the countries in the sub-region have eased their control on local airlines. Some States are encouraging cross-border investments in their local airlines. This needs to be encouraged as this opens airlines to invest in the region and help in the creation of a hub.

Already ,ET is both an investment and technical partner to SKY and this has made Lome,previously an insignificant player in air transport, develop into a preferred destination or transit point for many passengers.

Similar initiatives are needed in addition to commercial arrangements that can help improve connectivity and flight frequencies between city-pairs in the region. The failure to create a hub in this region would mean that some passengers will continue to transit via Europe or the Middle East in order to go to some destinations in Africa.

It will also mean that African airlines will continue to lose intercontinental traffic in the region to foreign carriers, since there are no local airlines to compete for such traffic.

High Industry Costs

Despite the critical role that air transport plays and its significant contribution to the economies of African countries, some governments continue to view air transport as a luxury service for the elite.

As a result, many African governments have tended to burden airlines and airlines users with high taxes and charges.

This is despite the fact that, with the relatively poor surface transport systems in Africa and the huge costs of new surface transport infrastructure projects, aviation offers a very cost effective way in facilitating the social, economic and political integration of countries, regions and indeed the huge continent.

Fuel costs average 45-55% of total operating cost in Africa compared with 30-35% global average. In addition, taxes, charges and fees are all above industry average in Africa. These are further corresponded by high cost of passenger, cargo and aircraft handling at African airports.

The high operating costs makes it difficult for African airlines to compete. They also stifle the growth of LCC airlines in many parts of Africa.

Studies by Oxford Economics and ATAG in 2011 revealed that, in Africa, aviation directly employs over 250,000 people with more than 6, 7 -million jobs if we include indirect employment, induced employment from spending by aviation industry employees. The report shows that $67,8-billion in GDP are supported by aviation.

Forecasts indicate that passenger numbers are expected to surge from 67, 7-million in 2010 to over 150, 3-million in 2030. Cargo volumes are projected to rise at a rate of 5, 2% per annum.

Already, over 1, 5-million live hoods in Africa are supported through the trade in fresh produce to the UK alone.

Anthony A Juma is the Editor and Director Commercial & Flights Operations at Wings Over Africa Aviation Limited. This is an Air Charter Company that specializes on Air News On The State Of THE Airline Industry In Africa. The website has guided thousands of travelers to achieve their dream holiday. For more information and guidance, visit the site at http://www.wingsoverafrica-aviation.com/index.php/sheduled-flights.html

Anthony A Juma is the Editor and Director Commercial & Flights Operations at Wings Over Africa Aviation Limited. This is an Air Charter Company that specializes on Air News On The State Of THE Airline Industry In Africa. The website has guided thousands of travelers to achieve their dream holiday. For more information and guidance, visit the site at http://www.wingsoverafrica-aviation.com/index.php/sheduled-flights.html

Author Bio: Anthony A Juma is the Editor and Director Commercial & Flights Operations at Wings Over Africa Aviation Limited. This is an Air Charter Company that specializes on Air News On The State Of THE Airline Industry In Africa. The website has guided thousands of travelers to achieve their dream holiday. For more information and guidance, visit the site at http://www.wingsoverafrica-aviation.com/index.php/sheduled-flights.html

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