1st African Airlines Forum 2006

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1st African Airlines Forum 2006
Strengths and Weaknesses of African Airlines
By Raphael Kuuchi Commercial Director - AFRAA
6 - 7 April 2006 Bamako, Mali
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Structure of Presentation
Introduction
1
2
Strengths
4
Opportunities
3
Weaknesses
5
Threats
Recommendations
6
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Introduction
1

• The industry began to evolve following
  deregulation in the USA in the late 1970s
• Industry consolidation through alliances,
  code-shares, mergers, etc started in the 1980s
• At about the same time, privatisation of airlines
  was happening
• Africa failed to evolve with the industry
• The continent has since not caught up

• One of the fastest growing air transport markets
  in the world but accounts for only 4 of global
  traffic
• African airlines carry only 30 of international
  traffic
• In the 1970s and 80s African airlines dominated
  the African sky
• The rules of balanced rights and reciprocity
  ensured a level playing field at the time

4
STRENGTHS
2
Core dedicated workforce despite low salaries
Prestige
Travel opportunities
Low staff turnover
5
STRENGTHS
2
Well trained and experienced pilots and
engineers (who meet international standards)
6
STRENGTHS
2
Significant number of airlines renewing their
fleet
Direct flights to most international destinations
7
STRENGTHS
2
Competitive labour cost
Self handling at their hubs
8
STRENGTHS
2

• State support
• Financial guarantee
• Debt underwriting
• Assumption of debt

Intimate knowledge of the African market
Domestic and regional routes that feed and
distribute long haul flights
9
WEAKNESSES
3
Poor service delivery
High turnover of CEOs
Ageing fleet
Under-capitalisation Most never re-capitalised
since formation
10
WEAKNESSES
3
Poor safety record
High operating cost
Government interference in operational matters
Limited network and frequencies
11
WEAKNESSES
3
Low level of automation
Low aircraft utilisation
Lack of skilled non-technical Workforce
resulting in Over-staffing
Lack of loyalty programmes
12
OPPORTUNITIES
4
Focus on tourism development
Undeveloped routes
Growing economies
Political stability Embracing democracy Trade
and business opportunities
Governments focus on tourism development as an
alternative source of revenue and employment
generation
Intra-Africa Between Africa and other parts of
the world
13
OPPORTUNITIES
4
High yields on African routes
Liberalisation
Strategic location of Africa

• Liberalisation through the full implementation of
  the Yamoussoukro Decision will result in
• Significant growth in intra-African traffic
• Rapid hub development
• Integration

Yields on flights to/from Africa are among the
highest in the world
Strategically located with natural hubs to
Europe, Middle East, North and South America and
the Caribbeans
14
THREATS
5

• Invasion of African sky by foreign airlines
• European and Middle East carrier are here
• North American carriers may start flights to
  Africa
• The effect will be
• Increased competition
• Lower yields
• Elimination of weak African airlines

Uncontrolled granting of traffic rights to
foreign airlines at the expense of African
carriers
15
THREATS
5
Globalisation and the impact of the mega-alliance
Groupings. While African airlines continue to
operate point-to-point, these airlines
criss-cross the globe with convenient schedules
and frequencies
Failure to privatise African airlines
Failure of African airlines to work together or
join mega alliances
16
THREATS
5

• Increases in charges and taxes
• Airport tax
• Handling charges
• ATNS fees
• Fuel surcharge
• Security surcharge

Limited access to preferred airports in Europe
17
THREATS
5
Proliferation of hi-tech in the industry Modern
aircraft E-ticketing, Radio Frequency
Identification (RFID), Common Use Self-Service
(CUSS), Bar-Coded Boarding Pass (BCBP), E-freight
Unpredictable business environment Forex and
interest rates fluctuation Political uncertainties
18
Recommendations
6
Where do we go from here?
19
6
Recommendations

• Privatise airlines
• Bring in needed capital
• Avoid government interference
• Management stability
• Retain skilled manpower through better
  remuneration
• Work together
• Through code share, joint operations, mergers,
  alliances, cross-border investments, etc
• Resources and knowledge could be shared by
  airlines

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6
Recommendations

• Improve service delivery by recruiting, training
  and giving competitive remuneration
• Modernise fleet
• Match aircraft with traffic
• Improve operating economics
• Improve level of safety and reliability
• Undergo the IOSA programme to assure all that
  African airlines are safe

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6
Recommendations

• Liberalise the African sky in accordance with the
  Yamoussoukro Decision
• Stimulate further growth in intra-African traffic
• Increase the movement of people and goods and
  speed up integration
• Allow airlines with the resources to effectively
  extend their network across the continent and
  beyond
• Enable Africa to evolve common positions in
  response to decisions of third countries
• Liberalisation coupled with the harmonisation of
  the immigration and customs regulations on the
  continent will put Africas development and its
  air transport industry on the right track to
  recovery

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Our flights will be full with smiling passengers
willing to fly with African airlines at all times
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This is how we see the future intra-African route
network
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THANK YOU