Building capacity to help Africa trade better

Air transport in Africa: A portrait of capacity and competition in various market segments


Air transport in Africa: A portrait of capacity and competition in various market segments

Air transport in Africa: A portrait of capacity and competition in various market segments
Stock photo

Sub-Saharan Africa’s air transport, though low in overall volume when compared to other regions in the world, has experienced significant growth in the last decade, both in international and domestic traffic.

The sector, in part because of its relatively small size, still faces the challenges of high concentration in services and lack of competition, with only a few dominant airlines providing international services within the continent. In addition, Africa faces challenges in safety oversight, as well as having many smaller non-viable state-owned carriers.

Contextual setting of air transport in Africa

Air transport in Africa is a vigorously growing sector. However, the growth, though an important element of the sector, does not provide a complete perspective of its health. Several important facts play a role in truly understanding where Africa’s air transport has been, is now, and where it might develop.

Air transport volumes in Africa are still very low when compared to the rest of the world. The density of traffic, measured in seat capacity, is relatively small: with 104 million seats, on all types of routes, sub-Saharan Africa is far behind the country of Brazil, with 120 million seats, of which nearly 100 million are domestic traffic only. Other comparisons are as staggering. In the area of Washington, DC in the US, three airports (Reagan National Airport, Duller Airport, and Baltimore Washington International Airport) had 68.5 million passengers in 2015, which would translate to 90 million seats at a load factor of 76 per cent. This is nearly all of the capacity offered in all of sub-Saharan Africa. A simple snapshot of current aircraft positions in flight throughout the world shows the sparsity of service in Africa.

The distribution of these capacities is also important: the main air transport corridors are along the East stretching from South Africa to Kenya and north to Ethiopia, all three being important hubs. No such hubs exist in West Africa, and Central Africa has minimum service.

Another factor is the fact that Africa still leads in hull losses due to accidents, and still retains a safety record that is in most need of improvement when compared to the rest of the world. Though there has been significant improvement from 2010 until 2013, the sharp increase since then (in 2015 at 3.49) is well ahead of the Commonwealth of Independent States (1.88), and much above of the world average (0.32).

The industry is also having difficulty in adopting more modern approaches to airline ownership and management. The notion of the national flag carrier is still deeply ingrained in the politics of the air transport sector, and though various privatization attempts have been made (e.g. PPP arrangements for Air Senegal after the disbandment of Senegal Airways), many governments are reluctant to (a) completely hand over airlines to the private sector, or (b) completely depend on airlines from the outside if a national airline is not economically sustainable. The air transport sector generally is seen as a way to show technical accomplishment and skill, which motivates many governments to pursue policies that in the end are not economically sustainable.

Both anecdotally and empirically the new challenges for African air transport market development are not so much around liberalization, but rather affordability and the rise of airport charges. Though lack of liberalization has been an issue, the implementation of the Yamoussoukro Decision for introducing liberalization amongst African countries is taking place, as evidenced, for example, by the expansion of fifth freedom routes of Ethiopian Airlines. However, new and sometimes overambitious investments in airports and terminal buildings are increasingly being financed by higher per passenger airport charges.

Policy recommendations

Three significant challenges face the aviation sector in sub-Saharan Africa: Aviation safety (a reflection of institutional oversight), non-sustainable national flag carriers, and expensive infrastructure investments that overestimate demand and fail to recognize the key functions of airports. Policy makers should be fully aware of where the separation of private sector service provision and public infrastructure should occur. Three general policy recommendations are:

1) Aviation safety cannot be compromised for any short-term economic gain or interim policy objective.

Trust in safety is key for developing the air transport sector. This is not just because of statistical implications: air transport accidents and crashes garner significant attention in the media, and tend to appear dramatic. Precisely because they are such rare occurrences, crashes are particularly visible. Preventing accidents requires a rigorous institutional approach in implementing international standards and recommended practices. Regulators, airport authorities, and airlines should be institutionally separated and have clear firewalls between them.

2) Small, state-owned flag carriers tend to drain state funds, are not sustainable, hinder the sector from developing, and often even pose a safety hazard.

There is a list of about-to-be defunct and actually defunct small flag carriers that have accumulated extensive losses for their treasuries. Airlines appear, some survive, and some fail, and the private sector should assume this risk. An open system with competition will assure that carriers will provide service—socially desired and unstainable route servicing should be accomplished with subsidies that are transparently granted after a competitive bidding process, not by state-owned carriers that are most likely to make losses on all routes, be they sustainable or not. Government intervention and ownership of assets should only occur in expensive infrastructure projects that in their own nature are a monopoly, not in service provision.

3) Airport investment should be done carefully, keeping in mind that most airports serve as gateways, not as hubs, and that creating a hub requires players who desire a hub.

Three notions need to be kept in mind when looking at airport investments:

  1. Airports are, by their very nature, monopolistic. This implies that airport infrastructure will most likely be owned by governments. But airports are also complex systems: there is, for example, no shortage of runways in Africa given the current traffic levels. However, terminal space can run out as traffic grows, and terminals can be developed with private sector participation. It is becoming more and more common for governments without the capital reserves to invest in new terminals to use PPP concessions to finance new investments.

  2. Many countries dream of developing passenger or logistics hubs at the airports, often spurred on by hearing news that a neighbouring country has the same plans. The fact is that there can only be so many hubs globally, and most likely the airport in question really serves as an all-important gateway. A properly run gateway that is effective and efficient will serve the business and tourism industry, and may, over time, become a hub if an airline decides to base its passenger transfer operations there. However, the most important function of airports in most countries is to connect the country with the outside world. This must remain the primary objective.

  3. In Africa, new airport development is often financed through very high ticket surcharges. These have the effect of reducing traffic and demand. If a US$400 ticket has a US$80 to US$100 airport development surcharge, the extra 25 per cent added to the ticket price will have a dampening effect. Very often a new airport is not even needed, and the real drawback to the current installation remains with the current terminal. A careful balance needs to be reached in airport master planning that balances true infrastructure needs with both publicly and privately available investment capital and takes into account the elasticity of final ticket prices.

This study has been prepared within the UNU-WIDER project on ‘Industries without smokestacks’, which is part of a larger research project on ‘Jobs, poverty and structural change in Africa’.


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