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Why affordable air transport matters for economic growth

By Willem Hondius | July 26th 2016

The concept of low-cost carriers, or budget airlines, is a fairly recent phenomenon in Kenya. The concept has, however, gained popularity as more people seek faster, safer, reliable yet affordable modes of transport for leisure and business.

Air travel was once considered a preserve for the rich. The launch of low-cost carriers in the US in the 70s, however, debunked this notion. Today, low-cost carriers control an estimated 25 per cent of the global aviation market, according to the International Air Transport Association (IATA).

Low-cost carriers typically operate a business model that features low fares, fewer in-flight frills and online booking, keeping costs lower than traditional airlines.

Reducing the cost of flying has numerous social and economic benefits. For starters, air travel generally improves the quality of life by enriching people’s leisure and cultural experiences. By facilitating tourism and other important economic activities, aviation creates jobs and generates trade and industry growth, thus alleviating poverty.

By providing affordable air transport, low-cost carriers have a catalytic impact on key sectors of the economy, like tourism, transport and trade by enabling more people to fly.

This has been the case since the concept was introduced in Kenya. From tourists to traders and students, the number of Kenyans opting to fly to their destination is increasing as it is faster and safer to travel by air than by road.

Late booking

Data from the Kenya Tourism Board shows a surge in the number of domestic tourists in the last three years. This signifies both the contribution and opportunity for low-cost carriers serving this local leisure market.

When Jambojet launched in 2014, there was scepticism regarding the low-cost concept and whether it would work in the local market. But in two years, Jambojet has flown more than one million passengers to Nairobi, Mombasa, Kisumu, Eldoret, Lamu, Kisumu, Ukunda and Malindi.

Like all novel concepts, however, low-cost flying in Kenya has not been without its challenges. The market is not growing as fast as in other parts of the world. Owing to lower price elasticity, the number of people who can afford to travel by air is limited, even with the lower fares offered.

Moreover, the local market is late booking (most passengers book in the last seven days to travel) whereas the low-cost model is based on low fares for early bookings.

Internet access is also much lower in Kenya than in more developed markets, which means low-cost carriers have to sell tickets via traditional channels like agents, yet online booking is cheaper.

Negative travel advisories have adversely affected the tourism sector, and by extension the aviation industry, leading to a decline in the number of foreign tourists flying domestic routes.

The Government is expanding the country’s airport infrastructure, but the smaller carriers continue to experience challenges, especially at the minor airports that lack adequate facilities to service larger aircraft. Delays in addressing these issues continue to constrain capacity.

That said, however, the market for low-cost carriers will grow considerably in Africa in the coming years. As the airspace is liberalised in tandem with regional integration, it will be easier for airlines to open new routes, connecting countries.

The writer is CEO, Jambojet.

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