SEMINAR

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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 Presentation by Nick
Fadugba CEO, African Aviation Services
Limited Publisher, AFRICAN AVIATION Magazine
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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 Aviation Safety Security
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AFRICAN AVIATION
MAXIM
Aviation Can Be A Vital Catalyst For Africas
Economic Social Development - Company raison
d'etre
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AFRICAN AVIATION
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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AFRICAN AVIATION
Africas Share of Global Air Traffic

• Today, African Airlines have only an
  approximately
• 2 Market Share of Global Air Traffic
• If International Air Transport is further
  Liberalised
• Will Africas Global Market Share be
• Increased or be Reduced?

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AFRICAN AVIATION
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
• put out business and their staff put out of
  work?

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AFRICAN AVIATION
Africa Socio-Economic Environment

• Large Growing Population
• Mainly Small Weak National Economies
• Low Per Capita Income
• Little Disposable Income for Air Travel
  Tourism, etc.
• Political Instability Conflicts in Several
  Countries

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AFRICAN AVIATION
Key Challenges Facing Regulators in Africa

• Implementing Monitoring the
• 1999 Yamoussoukro Decision on
• Air Transport Liberalisation in Africa
• Providing Effective Aviation Safety Oversight
• Ensuring Equitable Economic Regulations
• Harmonising Civil Aviation Regulations
• Enhancing Aviation Security
• Funding Modern Aviation Facilities
• Expanding Aviation Training Education

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AFRICAN AVIATION
Air Transport Liberalisation in Africa

• Is Any Progress Being Made?
• Yes, Slowly but Steadily.
• Thanks to the Efforts of Organisations Like
• The UN Economic Commission for Africa ( ECA)
• 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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AFRICAN AVIATION
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 Skies
  Still Protect its Own Airline Industry?

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AFRICAN AVIATION
African Position on Liberalisation

• It Must Be Consistent With the Yamoussoukro
• Decision of 1999
• 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 AVIATION
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
  As it Adversely Impacts Competitive Position of
  African Carriers

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AFRICAN AVIATION
High Operating Capital Costs

• Insurance - High Premiums
• Aviation Fuel - Up to 50 Higher
• Lease Rates - 15-30 Higher
• Air Navigation - Most Expensive
• Handling Fees - Very Expensive
• Maintenance - Little Co-operation

Source The World Bank
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AFRICAN AVIATION
Internal Pressures

• Mainly Small Domestic Air Traffic Markets
• Low Load F actors
• Higher Operating Costs than Other Regions
• Government-Regulated Air Fares
• Political Interference in Airline
  Decision-Making
• Management Instability Lack of Continuity

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AFRICAN AVIATION
External Pressures

• Air Transport Liberalisation Globalisation
• Increasing Competition from Larger Foreign
  Carriers
• World Bank/IMF Strictures on Government
  Subsidies
• to National Flag-Carriers

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AFRICAN AVIATION
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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AFRICAN AVIATION
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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AFRICAN AVIATION
Airline Industry Key Regulatory Issues

• Airline Ownership Control Local or Foreign?
• Airline Market Access Free for All?
• Airline Product Distribution
• Fair Competition Versus Protectionism
• The Provision of Essential Air Transport
  Services Vital
• To National Economic Development

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AFRICAN AVIATION
Airline Growth Strategies

• Strategic Investment By Foreign Airline Partner
  
• Kenya Airways / KLM
• Airline Franchising
• BA/Comair, South Africa BA/Regional Air, Kenya
• Low-Cost Carriers Kulula.com, South Africa
• Joint Ventures Royal Air Maroc/Air Senegal
  International

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AFRICAN AVIATION
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 Presentation by Nick
Fadugba Email nickfadugba_at_africanaviation.co
m