Low-cost carriers confront Africa’s national airlines

NAIROBI: Before Fastjet launched low-cost flights between Harare and Dar es Salaam last year, Zimbabwean businessman Jonathan Jabangwe had to brave a hair-raising, three-day bus journey to meet his clients in Tanzania.

Fastjet is among a wave of low-cost airlines launching or expanding operations in Africa as they seek to capture middle-income travellers who are tired of dangerous road journeys but cannot afford major international carriers.

The new airlines hope to undercut larger carriers by offering “no frills” services, replicating a model pioneered by European airlines like Easyjet and Ryanair.

Where low-cost routes have opened in Africa, prices have dropped by around 40 per cent and passenger numbers have risen by almost half, a study by consultants Intervistas showed.

“It makes a big difference to me. The roads are very slow and you take your life into your own hands,” Mr Jabangwe said.

“Why aren’t these flights all over Africa? With the global economic situation, every dollar counts.”

HIGH TAXES

Africa’s aviation industry is growing at 4.7 per cent, faster than any other region, and passenger numbers are expected to double to 300 million in the next two decades, according to the International Air Transport Association (IATA).

Growth is, however, off a very low base and widespread expansion of low-cost aviation is hampered by government protectionism, high taxes and stringent regulation.

An “open skies” agreement, similar to the European Union pact agreed in the 1990s that led to a boom in low-cost air travel, was signed 28 years ago but has never been properly implemented.

The 1999 Yamoussoukro Decision committed 44 signatory countries to deregulating air services and to opening regional air markets to transnational competition.

The implementation of the agreement, however, has been slow, and the benefits have not been realised.

Low-cost airlines say governments block competitors from flying international routes to protect state-owned airlines like South African Airways and Ethiopian Airlines.

African countries continue to champion national airlines, despite nearly all ventures resulting in losses or bankruptcy.

SAA has been subject to several government rescues in recent years. Kenya Airways posted record losses this year and may need several millions of dollars in a bailout. Nigeria is considering re-launching a state airline and tiny Djibouti said this month it would revamp its previously bankrupt national carrier. The new Air Djibouti will be managed by Iron Maiden rock singer Bruce Dickinson.

GOVERNMENT PROTECTIONISM

If governments were more pro-competition and reforms were imposed it could add $1.3 billion (Sh136.7 billion) a year in revenue to African economies and create 155,000 jobs, IATA says.

A potential five million passengers a year are denied the chance to travel between the 44 markets that signed the 1999 agreement because of unnecessary restrictions on establishing air routes, the agency added.

Aviation already supports 6.9 million jobs and more than $80 billion (Sh8.4 trillion) in GDP across Africa.

“Government protectionism is top of the list in terms of what’s inhibiting low-cost aviation moving forward and why Africa is so far behind the rest of the world,” Fastjet boss Ed Winter said.

Mr Winter says African air fares are on average four times higher than in Europe.

Transport Cabinet Secretary James Macharia said Kenya had one of the “most open skies in Africa”, but South African and Ethiopian regulators did not respond to requests for comment.

The lack of government co-operation means most low-cost airlines remain focused on domestic operations in South Africa, home to the continent’s most developed economy.

Comair’s Kulula and South African Airways-owned Mango are well established in South Africa, while FlySafair and Skywise launched their first flights there in the last year.

Comair posted lower profits last week and warned that South Africa was no longer a growth market.

Airlines seeking faster growth in less-developed markets are starting to branch out. Fastjet, started by Easyjet founder Stelios Haji-loannou, is based out of Tanzania.

FlyAfrica.com, launched last year, is run from Zimbabwe and announced plans on August 30 to expand routes to destinations in West Africa, the most populated region on the continent, but with the least-developed flight links.

The biggest missed opportunity is Nigeria, home to Africa’s biggest economy and largest population.

Widespread corruption and mismanagement means West Africa’s Lagos hub is nowhere near as developed as the continent’s other three: Nairobi, Addis Ababa and Johannesburg.

To get from Nigeria to other African countries, it is often faster and cheaper to fly via Europe.

Nigerian President Muhammadu Buhari has yet to appoint a cabinet more than three months after taking office, saying he needs to root out corruption before naming his ministers.

“Nigeria is an anomaly. A huge potential market but very difficult to operate in,” Erik Venter, Comair’s chief executive officer, said.

“You would expect in a market of that magnitude the likes of Comair should be climbing in there enthusiastically, but we honestly don’t want to touch it.”

Experts remain convinced that African low-cost aviation will take off, eventually.

Its young population and rising incomes bear similarities with southeast Asia, where low-cost capacity increased four-fold to 200 million in the decade to 2014, according to the Centre for Aviation, a Singapore-based think tank.

“Eventually, it will break through, but the question is, when?” Brendan Sobie, chief analyst at the Centre for Aviation, said.

“Things can happen fast if the governments start changing policies and the right conditions are there.”