CIVIL AVIATION & LIBERALISATION THE LATEST CHALLENGES FACING AFRICAN AVIATION AFRAA. 22 February 2017

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CIVIL AVIATION & LIBERALISATION THE LATEST CHALLENGES FACING AFRICAN AVIATION AFRAA 22 February 2017

It is great to be in Kigali, a safe, peaceful and thriving city Rwanda is realizing the enormous potential for air transport services We applaud stakeholders like AFCAC, ICAO, IATA, ACI, AASA and RECs in advocating for the full liberalisation of African skies. This presentation examines civil aviation and liberalisation highlighting the challenges facing African aviation.

In my presentation, I will cover the following: Introduction Brief about AFRAA Liberalised Operating Environment Continental Free Trade Area Unfair and Discriminatory Practices Non-Physical Barriers Need to Continue Coming Down Competitive Carriers are Emerging Need for Global Safety Standards Making Air Transport Accessible to All Performance of Airlines Africa Must be at Peace with Itself Conclusions

AFRAA is an air transport trade organization established in 1968 in Accra, Ghana. Headquartered in Nairobi, Kenya. Membership is open to all airlines registered and headquartered in African States. Current membership is 37 airlines representing over 85% of total international traffic carried by all African airlines. AFRAA Mission: To serve African airlines, promote and protect their common interests

The HOS of the AU at their Summit in Addis Ababa in Jan 2015 made a solemn commitment to fully open African skies by 2017 We applaud Rwanda for being among the initial 11 states that declared their solemn commitment to fully open its skies immediately, unconditionally in accordance with the YD The original 11 states were joined by four more to make it to 15. The 15 states are Benin, Botswana, Cape Verde, Egypt, Ethiopia, Gabon, Ghana, Ivory Coast, Kenya, Nigeria, Republic of Congo, Rwanda, Sierra Leone, South Africa, and Zimbabwe.

The far-sighted vision of a Single African Aviation market will help spur the development of African aviation which currently accounts for less than 3% of global traffic Significant progress has been achieved towards a Single Aviation Market Those states that have embraced liberalisation of their skies are realising significant economic benefits

African HOS at the AU Summit in January 2012 endorsed a plan to set up a Continental Free Trade Area (CFTA) by 2017 The CFTA is a key component of the AU s strategy to boost trade in Africa by at least 25-30% in the next decade Intra-African trade currently stands at 12-15% of total trade, compared to 60 % for Europe, 40% for N. America, and 30% for ASEAN, according to the WTO The AU is of the view that enhancing trade can contribute significantly to sustainable economic growth This ties neatly into the thrust towards a Single African Aviation Market as air transport is a critical facilitator to the movement of people and goods in our vast continent.

There is need for a level playing field in air transport services. Sometimes non-african carriers are given favourable traffic rights whilst the same is denied to African operators. Some 23 African countries have signed open skies agreements with the USA, while very few African countries have fully liberalised their skies in compliance with the YD. The EU banned list of airlines is being applied in a non-transparent manner and being used to constrain the development of African aviation. The non-african carriers currently transport over 80% of intercontinental traffic to/from Africa.

Linked to the liberalization of Africa skies is the need to facilitate the movement of goods and people across our borders Visa restrictions will not make sense in a fully liberalised operating environment Rwanda stands out as among the few that allow people from all African countries that need to have visa to have them at the port of entry Also customs clearance procedures and processes are very much streamlined and faster in Remarkable Rwanda

The African passport was launched here in Kigali, in July last year Over 13 states are allowing citizens from all African countries who need a visa to be able to obtain it at the port of entry Other countries have significantly increased the number of countries which visa requirements are relaxed or citizens can get their visas at the point of entry The momentum needs to be kept up.

Some airlines are taking advantage of increasing liberalisation to thrive Ethiopian Airlines is growing rapidly while making record profits. Since 2005, the airline has been growing at between 20-25% and recorded a profit of $270 million in 2015 ASKY Airlines based in Togo with ET as strategic partner launched operations in 2010 and already serves 23 destinations. This is a region which is more integrated & enjoy free movement in the ECOWAS region. Intra-regional trade is about 20% which is much higher than Africa s average of 12-15%.

RwandAir is a rising star, based in Kigali. The airline operates an expanding regional and international route network with one of the youngest fleets in Africa. With a rapidly growing economy and ease of doing business in the country as well as open border policies for all Africans, the airline is attracting increasing numbers of customers annually.

A Single Aviation Market can only be a reality if safety standards are up to global standards Indeed safety standards have increased significantly in the past few years In 2016, there were two fatal airline accidents in Africa and both were likely cases of terrorism. This translates to zero safety related airline accidents The improved safety standards shows that the efforts by various stakeholders to enhance a safety culture is yielding positive results These efforts need to continue to be enhanced

There are high industry costs in the continent Passenger charges at many stations in Africa vary between $40- $120 which is way above world average of about $25 The price of fuel in Africa can be 2.5 times the world average which negatively affects the competitiveness of African aviation The cost of air transport has a direct influence on the cost of tourism products and indeed on the consumer s choice of destination It is important that governments keep industry costs competitive to enable competition on an equal footing with entities from outside the continent such as Gulf or European carriers

According to IATA, the 2016 financial outlook for global air transport industry profits is $35.6 billion In 2017, IATA expects the global airline industry to make a net profit of $29.8 billion This good airline performance is on the back of lower oil prices and record load factors and increased ancillary revenues Improved efficiencies arising from airline joint ventures and other forms of cooperation are contributing to increased profitability

The situation in Africa is in stark contrast to global trends. According to IATA, African airlines made a loss of $700 million in 2015, a record loss which was followed by another record loss of $800 million in 2016. 2017 is expected to record same loss as 2016. The reasons for this includes intense competition, lack of full liberalization of African skies for African operators, blocked funds in some states, high industry costs To reverse this state of affairs, the quest for a Single Aviation Market should not be allowed to fail Failure would result in the African airline industry following the footsteps of the once thriving African shipping industry which has now virtually disappeared.

The growth of air transport in a fully liberalised African sky will only be possible if the continent is at peace with itself Africa is no longer the continent characterised with the most mindless blood-letting. Such bloody wars killing thousands of people are taking place elsewhere There have been some terrorist attacks in some African states which all highlights the need for peace to facilitate the development of transport and tourism We have also witnessed violence in Burundi, Libya, Somalia, South Sudan and Central African Republic. We need to encourage African citizens to settle their differences peacefully to create a climate for economic development underpinned by a well-oiled aviation industry.

There is growing momentum for the full liberalisation of African skies This is enhancing connectivity within the continent Africa has to emulate experience in other continents that have gained huge benefits of full liberalisation in terms of facilitating connectivity, consolidation, creating customer-centric carriers and significant growth in traffic.