The consensus among experts during last week’s African Aviation Summit was that standalone airlines in Africa have very little probability of surviving – and for reasons that range from costs to regulation.
With more than 200 carriers on the continent, multiple discussions centred on the fragmentation of the continent’s airlines and the need for greater consolidation and co-operation between the industry’s various players.
One of the examples that was used to highlight how the collaborative efforts of airlines can lead to success is the partnership between Ethiopian Airlines and ASKY.
According to Zemedeneh Negatu, Global Chairman at US-based Fairfax Africa, Ethiopian Airlines is one of the top 25 largest carriers in the world. As a strategic partner and stakeholder in the west African carrier, Ethiopian Airlines’ culture has been integrated within ASKY, which has been key in its success.
“It is not only bringing in the equity, but also bringing its entire intellectual property. The ability and willingness to adapt and make that work is critical.”
Negatu compared airlines from the US and Europe to those in Africa to demonstrate how a handful of major carriers can service the industry. He said the costs associated with running an airline should be considered as a factor in co-operation, as one Boeing 777 aircraft can cost between US$200 million (R3,7 billion) and US$250 million (R4,6 billion). His reasoning was that not every country in Africa needs a national carrier.
“The EU has a GDP comparable to the US – around US$27 trillion. So why do we think in Africa, where our GDP is a total of $2 trillion, we want to have 54 flight carriers?”
Rodger Foster, CEO and MD of South African carrier Airlink, presented a different side of the consolidation argument.
“Generally speaking, we have an undercapitalised industry, and I think it would be great for a big international player to collaborate more intensely with a local player or a player within Southern Africa, and for them to bring in foreign investment.”
He sees Africa as ripe for opportunity, with great scope for groupings in the long term. But, said Foster, the optimisation of each business was important for strong, robust airlines to thrive.
While he also sees much scope for airline consolidation on the continent, Miles van der Molen, CemAir CEO, cautions against moving towards a European or American model with so few carriers.
“Canada, for example, has a few carriers that monopolise the market. This introduces different problems that I don’t think we aspire to.”
However, said Van der Molen, the market that we currently see was one that was not productive, and he felt that a greater level of co-operation was needed.
