Sydney – Strong regional airlines must be established in Africa in order to boost trade and travel on the continent, says Alexandre de Juniac, CEO of the International Air Transport Association.
Speaking to Fin24 on Tuesday, De Juniac also encouraged African governments to take part in the African 'open skies' initiative, saying there seemed to be challenges implementing it on the continent.
The AU officially approved its Single African Air Transport Market (SAATM) policy to open up African skies at the 30th AU Summit in Addis Ababa in January. At the time, Ashraf Al Sayad, Regional Manager of Egypt Air in Southern Africa, said that with 12 countries signed up to this policy, millions of new jobs could be created in Africa and GDP could be increased by $1.3bn.
It is also necessary, in De Juniac's view, to modernise infrastructure in the African aviation industry – both airports and air traffic control.
Regarding blocked airline funds in certain African countries, he said good progress had been made releasing these funds in some cases, for instance in Nigeria. In Angola, however, the issue was not completely solved.
"Africa needs connectivity and to build regional airlines in bigger regions on the continent. Being able to connect countries is very important, and this is lacking in Africa, in my view," De Juniac said at the 74th annual general meeting of Iata in Sydney.
For example, in West Africa it is sometimes quicker to fly via Brussels or Paris to a neighbouring country.
Another issue raised by De Juniac was that airport taxes in Africa are some of the highest in the world. Iata maintains lower airport taxes will be beneficial to the aviation industry and local economies.
Success in the aviation industry is not evenly spread globally, according to De Juniac. It is a challenging industry in which to operate and almost half the industry’s profits are generated in North America, he added.
Challenges in some areas include high taxes, costly and "ill-conceived" regulation, infrastructure capacity constraints, market shifts, and demands from labour.
Furthermore, the increase of protectionism in the world and the potential of a trade war could bring challenges for the aviation industry by derailing successful international joint ventures, he said.
"Aviation’s future overflows with opportunity, but the direction in which global affairs will evolve has become more difficult to predict."
About 4 billion passengers boarded planes in the world in 2017, and over 60 million tonnes of cargo was delivered by air, accounting for a third of the value of goods traded globally. The global aviation industry directly supports 63 million jobs.
"Everyone is better off when borders are open to people and trade," said De Juniac.
In 2018, passenger demand is expected to grow 7%, and cargo by 4% globally.
Another global aviation trend, De Juniac believes, is that low-cost long-haul flights are providing great value for consumers and adding a new dimension to competition.
The average profit per passenger that airlines are expected to make this year is $7.76, and De Juniac pointed out this thin 4.1% net margin is the "only buffer" against future shocks. Rising costs are already putting it under pressure.
"Robust profitability is needed to reward investors, strengthen balance sheets and fund the growth of aviation jobs and its social benefits," he said.
In his view, there are three key challenges for the aviation industry going forward. These are avoiding "creeping" re-regulation; maintaining the integrity of global standards; and finding sufficient capacity to affordably accommodate growth.
"Regulations must add value. Regulators must recognise the power of competition to safeguard consumer interests. Governments should not distort market effectiveness with regulations that second-guess what consumers really want," he said.
*Fin24 is a guest of Iata at its AGM.
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