SIPHOKUHLE MATHE: African airline recovery hinges on infrastructure, innovation and partnership
Issues of fuel costs and interest rates are among the challenges in unlocking the industry’s potential on the continent
Intracontinental trade excites futurists surveying investment opportunities in Africa. Central to ensuring that all investment opportunities are seized, individual countries and private capital partners start their feasibility studies by looking at the infrastructure landscape. Regarding trade across borders, the transport sector remains key to unlocking such opportunities.
Research commissioned by the Economic Commission for Africa shows maritime, road and rail freight accounts for most of the trade cargo market share on the continent. That just 0.9% of cargo is transported by air implies that the market share of this mode will increase significantly by 2030.
There were restrictions on movement as a global policy of Covid-19 containment seriously affected commercial airlines, whose role was to facilitate the movement of business, goods and services through variously inspired forms of tourism.
According to the International Civil Aviation Organisation, passenger numbers fell 50% in 2020, at a cost of $370m to the industry. Similarly, the air freight sector experienced a 19% reduction in activity due to global trade bans. To mitigate against a worse effect some commercial airlines were able to repurpose their aircraft to fly cargo such as vaccines, other medical equipment and supplies.
This experimentalism bodes well for airlines to consider finding a mix between commercial passenger flights and air supply and logistics transportation, particularly those facing threats of liquidation or needing capital equity restructuring to meet operational and other cost demands.
The key challenges in unlocking airline potential on the continent relate to issues of infrastructure, fuel costs and interest rates. While emerging markets such as Nigeria, Egypt, Kenya and Ghana have set their eyes on developing new airports with cargo infrastructure in locations such as Kano, Abuja, Lagos, Mombasa, Malindi, Tamale, Akosombo and Takoradi, complementing these developments and developing the continental sector to claim a larger market share of 2031’s projected global freight forwarding market size of $285.15bn requires policy and stakeholder co-ordination.
With African cargo only accounting for 1.7% globally, the African Continental Free Trade Area agreement sets the foundation for African states to establish pro-competitive trade networks by lifting restrictions, engaging investors and ensuring that the costs of doing air business are strategically managed, particularly regarding landing costs and infrastructure capacity.
This could galvanise booming industries such as e-commerce, in which shipment time contributes greatly to customer satisfaction. It also ensures that agribusinesses that transport perishables can use this mode and reduce the spoilage rate associated with rail and road.
The SA and Kenyan governments resolved in 2022 to come to a new agreement that will enable travellers from both countries to make visa-free visits for up to 90 days annually. With both countries representing emerging markets, this is bound to set a good precedent between other countries in different regional economic zones to promote trade and the movement of people and business in future.
Airlines play a critical role in enabling such agreements as their strategies shape-shift to ensure more routes are introduced by each as part of the drive to supplement each country’s capacity to trade. Healthy competition improves quality and investor confidence for those seeking to invest in African airlines, with the potential to generate revenue and increase the continent’s market share in the global markets.
At the cusp of this possibility, the Single African Air Transport Market agreement between 17 countries is expected to create 596,000 jobs and will reduce fares and bolster continental tourism. Though its implementation time frames are unclear, businesses that promote remote working on the continent can look to spend less on headquarters and buildings and more on hotels, guest houses and other forms of accommodation as businesspeople move around to speak to clients and seek growth opportunities across borders.
Public-private partnerships (PPPs) are expected to play a role in ensuring that airlines are sustainable and the domestic markets of each country have unique offerings sold and challenges sorted. For cosmopolitan tourist cities such as Cape Town, which had forward accommodation bookings sitting at 32.9% as early as September, there are immense opportunities for airlines and their partners in hospitality and rental services to offer competitive packages and currency movement intracontinentally.
The 85% increase in international travel in 2022 also signals a recovery that provides domestic airlines the opportunity to increase their sales for intracountry movement, particularly as leisure travel is already booming over the summer season.
• Mathe is an independent political economist and researcher.
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