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Governments hold the key to unlock Africa's potential

Posted 23 August 2018 · Add Comment

Airbus’ top salesman for Africa, Hadi Akoum, believes that a clear dialogue with governments could be the key to unlocking Africa’s aviation potential. Victoria Moores reports.

According to Hadi Akoum, Airbus vice president for sales in sub-Sahara Africa, private sector [investors] are generally still hesitant to come to the continent.
“This is why I believe that governments need to be involved,” he said, speaking outside the Aviation Africa event in Cairo.
Once airlines have been established and proven the market, then private investors will be more willing to come in, he believed.
With this in mind, Airbus has been working with African governments – including Burkina, Ivory Coast, Mauritius, Nigeria, Rwanda, the Seychelles and Uganda – to explain the economic benefits that aviation can bring to their countries. “Mauritius really understood what needed to be done, and the Seychelles as well,” he said.
The European airframer makes these connections on EU diplomatic missions, at conferences, or during country visits. Airbus also invites government officials to visit its facilities to learn more about the industry and aircraft manufacturing.
One of the key messages that Akoum seeks to convey is the wider benefit to the country. “One airline job creates six elsewhere,” he said, including taxi drivers and workers in hotels, restaurants and agriculture.
A lot of the work involves helping governments create their own know-how on how to set up and run an airline and training facilities. Airbus also teaches governments what not to do, flagging the damage from counter-productive policy measures, like over-taxation.
“As soon as governments get a good picture of what they can really get out of this – from open skies and dropping taxes – then we will get to a position to attract low-cost carriers and private investors,” he said.
Airbus releases regular industry forecasts. African traffic is growing pretty much as expected, with one glitch. “It is not tracking well for African airlines; it’s tracking well for other airlines,” Akoum said. “Middle East and European airlines are benefitting more from the growth than African airlines.”
But are African airlines fighting back? “Not to the level we would like. It is starting, but in a relatively shy way. They could do more,” he said. “African airlines are really struggling with growth and increasing available capacity in the market. Their businesses are not profitable because governments interfere a lot with tax. It’s not easy to make money and to grow.”
While both African and non-African airlines face high taxation on the continent, this higher cost hits African carriers across their entire network. Non-African carriers also typically operate more lucrative long-haul services, where higher costs can be offset in the ticket price. On short-haul, viable pricing is far harder. Akoum called on governments to “look beyond the tax”, so African airlines can meet their potential.
Lower taxes and charges, set within a truly liberalised market, could give rise to more low-cost carrier activity in Africa. “All the blockages and tax won’t allow for the low-cost model to work,” Akoum said. Airlines need to be able to maximise their utilisation so they can spread their costs and offer low prices, stimulating demand and economic growth.
Tanzanian low-cost carrier, Fastjet, started out with Airbus A319s, but has since transitioned to an Embraer fleet. Does this mean Airbus aircraft are not the right size for the African low-cost model?
“People don’t realise how big Africa is,” Akoum said. “Sometimes you can travel seven or eight hours and you’re still in Africa. You don’t have many continents like this. You need it all. You need small aircraft below 100 seats to operate some sectors, and above 100 seats to operate others.”
Airbus is hoping to become a player in smaller aircraft by buying into Bombardier’s CSeries programme. “There is potential for all sizes of aircraft and I see no reason why that [CSeries] size of aircraft would work in Europe and not in Africa,” he said. However, for the time being, Airbus and Bombardier remain rivals. “It is too early. We hope that, over the coming months, we will have a clear decision on what our relationship is with the CSeries.”
Historically, Boeing has had a stronger presence in Africa than Airbus, but Akoum sees that progressively shifting. Over the past eight years, Airbus has added 28 operators in Africa, taking it to slightly above 243 aircraft in operation with 30 airlines. Airbus has a further 50 aircraft on order with African operators.
“We have achieved quite a lot over the past eight to 10 years on this. Yes, traditionally Boeing had much more presence than Airbus, but very often it’s their older aircraft which are still flying. Over the past 10 years, our market share in Africa has been almost equal, or higher, than Boeing. It’s small volumes, but we are recovering very quickly in terms of the number of aircraft operating on the market. Airlines are becoming more and more familiar with our aircraft”
With the increased fleet comes an increased support presence, as operators set up their own maintenance, repair and overhaul (MRO) operations. “We are working with Ivory Coast to prepare for MRO in the future. The airline is growing well and I believe this country – and airline – have the right elements to become one biggest players within west Africa. Depending on the speed of their growth, something around 2020 could be feasible.”
Size is important, he explained. “Some companies that had their own MRO decided to stop. It is very expensive to keep their own MRO with a fleet size of fewer than 10 aircraft. You need a certain size of fleet to afford to have an MRO business, somewhere near 20 aircraft to have a good business case.”
Akoum remains confident that more airlines will build up the critical mass they need to succeed.
“It’s going to happen. Just look at Latin America 25 years ago. It’s all about liberalisation and open skies. Private investors need to see political stability and easy business practices. We are not yet there in many countries in Africa.
 

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