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African airlines in heady winds

By | March 8th 2011

By Macharia Kamau

African airlines face the duo challenge of rising fuel oil prices and increased competition from international carriers increasing frequencies to Africa.

The International Air Transport Association (IATA) has forecast that the global airline industry will record 46 per cent decline in net profits to $8.6 billion from $16 billion the industry raked in last year.

The Association attributed the expected decline in profitability to high oil prices.

"With oil prices now being driven by speculation on geopolitical events in the Middle East, this is a significant risk," said IATA in its outlook for the industry last week.

"Fuel is the highest operational component for an airline," said Jane Ngaira South African Airways country manager for Kenya.

IATA also noted that African carriers face stiff competition from Middle East and European airlines angling for increased share of inter-continental traffic to and from Africa.

While fuel prices might reduce over time and airlines can mitigate against losses from sudden upward surges in fuel prices, invasion of local airspace by Middle East and European carriers is something African carriers have to be innovative to fight off.

"African airlines are facing competition from two fronts: domestic carriers that have grown significantly and international airlines increasing flights into Africa," said Aaron Munetsi South African Airways general manager in Africa and Middle East.

He noted that Africa is becoming attractive due to saturation in other markets, especially Europe and Asia that are extensively covered by airlines in the domestic and international routes as well as the limited effects the global economic crises had on the continent.

"Africa sailed through the global economic meltdown almost unscathed and this has made it attractive to multinational firms. International airlines have taken note and are increasing flights to African destinations," he said.

Elijah Chingosho, African Airlines Association secretary-general noted international airlines have seen Africa’s potential and the fact that they can make better margins in Africa than other markets.

"Africa is being invaded by carriers from outside the continent mainly from Europe and Middle East but there is also growing interest from US and Far East carriers, including Chinese airlines," he said.

"Carriers from outside the continent realise that there is huge potential in Africa. It is one of the few regions in the world where healthy profits can be made."

He said traffic between Africa and other continents is dominated by non-African airlines. "The result is that carriers from outside Africa account for more than 80 per cent of intercontinental traffic to and from Africa," said Chingosho.

"For instance, Air France is a virtual monopoly for operations from West and Central Africa to Europe."

The Association is also crying foul, saying African States seem to accord foreign airlines preferential treatment at the expense of African carriers.

"We have this ridiculous situation where African countries preferentially give more traffic rights to foreign carriers, than African carriers."

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