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SEMINARAVIATION IN TRANSITION
CHALLENGES & OPPORTUNITIES OF LIBERALISATION
22nd – 23rd March, 2003 - Montreal, Canada
PRIOR TO THE 5TH ICAO WORLDWIDE AIR TRANSPORT CONFERENCE
Presentation by
Nick FadugbaCEO, African Aviation Services Limited
Publisher, AFRICAN AVIATION Magazine
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AFRICAN AVIATION SERVICES LTD
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Company Profile
1. Aviation Publishing
2. Aviation Conferences
3. Aviation Consultancy
With A Special Emphasis On:
* Aviation Finance* Aircraft Leasing & Maintenance* Aviation Safety & Security
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MAXIM
‘Aviation Can Be A Vital Catalyst For Africa’s Economic & Social
Development’
- Company raison d'etre
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Air Transport Liberalisation
• The Underlying Theme of the 5th ICAO Worldwide
Air Transport Conference is Not WHETHER to
Liberalise but HOW to
Liberalisation is said to be Inevitable
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Africa’s Share of Global Air Traffic
• Today, African Airlines have only an approximately
2% Market Share of Global Air Traffic
• If International Air Transport is further Liberalised
Will Africa’s Global Market Share be
Increased or be Reduced?
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Challenges & Opportunities of Liberalisation
• Further Air Transport Liberalisation could provide
several benefits, such as enhanced air travel, economic
trade and tourism
But the Key Challenges are: How Air Transport Liberalisation
can be Structured and Implemented so as to ensure
that African airlines are not disadvantaged and
put out business and their staff put out of work?
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Africa: Socio-Economic Environment
• Large & Growing Population
• Mainly Small & Weak National Economies
• Low Per Capita Income
• Little Disposable Income for Air Travel & Tourism, etc.
• Political Instability & Conflicts in Several Countries
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Key Challenges Facing Regulators in Africa• Implementing & Monitoring the
1999 Yamoussoukro Decision on
Air Transport Liberalisation in Africa
• Providing Effective Aviation Safety
Oversight
• Ensuring Equitable Economic
Regulations
• Harmonising Civil Aviation Regulations
• Enhancing Aviation Security
• Funding Modern Aviation Facilities &
• Expanding Aviation Training &
Education
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Air Transport Liberalisation in Africa
• Is Any Progress Being Made?
• Yes, Slowly but Steadily.
• Thanks to the Efforts of Organisations Like:
• The UN Economic Commission for Africa ( ECA)
• The AU, The African Civil Aviation Commission
(AFCAC)
• ICAO, COMESA, SADC, ECOWAS & AFRAA, etc
• Notably, Some African Governments Have Been
More Supportive Than Others
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Obstacles & Dilemmas
• Some African Governments Are Reluctant
to Cede Control to Truly Autonomous
National Civil Aviation Authorities
• Who Will Benefit Most From Liberalisation
in Africa - African Airlines or Foreign
Carriers?
• Can A Developing Country Promote
‘Open Skies’ & Still Protect its Own Airline
Industry?
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African Position on Liberalisation
• It Must Be Consistent With the
Yamoussoukro
Decision of 1999
• Foreign Investment – National Legislation
Should Determine the Level of Such
Investment
• Market Access Should Continue to Be
Based
on Bilateral and Multilateral Agreements
• Must Be F air Competition & Safeguards
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African Position on Airline Franchising• African Governments Should Require Prior
Authorisation & Verification of Any Franchise
Agreement
• Franchising Between African Carriers Should
Be Authorised Subject To The Airlines Meeting
the Designation & Eligibility Criteria of The
Yamoussoukro Decision
• Third Party Franchising Should Not Be
Supported As it Adversely Impacts
Competitive Position of African Carriers
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High Operating & Capital Costs
• Insurance - High Premiums
• Aviation Fuel - Up to 50% Higher
• Lease Rates - 15%-30% Higher
• Air Navigation - Most Expensive
• Handling Fees - Very Expensive
• Maintenance - Little Co-operation
Source: The World Bank
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Internal Pressures
• Mainly Small Domestic Air Traffic Markets
• Low Load F actors
• Higher Operating Costs than Other Regions
• Government-Regulated Air Fares
• Political Interference in Airline Decision-Making
• Management Instability & Lack of Continuity
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External Pressures
• Air Transport Liberalisation & Globalisation
• Increasing Competition from Larger Foreign
Carriers
• World Bank/IMF Strictures on Government
Subsidies to National Flag-Carriers
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External Pressures (2)
• African Market is Dominated by European Airlines - BA, Lufthansa, Air France, KLM, etc • Asian Airlines Are Now Showing Greater Interest in Africa - Especially South Africa
• Threat By European Charter Airlines - Countries at Risk: Egypt, Namibia, Kenya, South Africa, Mauritius, Tunisia, Morocco, etc
• North American Airlines Have Minimal Presence in Africa - Previous Attempts by USAfrica Airways & World Airways Failed
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Cape Town Convention
•Gives Aircraft Lessors and Lenders the ability to
repossess their assets worldwide in the event of
default
• Provides Aircraft Collateral Assurance
• 60 Day Repossession / With Support of
Governments
• Should Expand The Sources of Asset-based
Finance
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Airline Industry – Key Regulatory Issues
• Airline Ownership & Control – Local or Foreign?• Airline Market Access – Free for All?• Airline Product Distribution• Fair Competition Versus Protectionism• The Provision of Essential Air Transport Services
Vital
To National Economic Development
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Airline Growth Strategies
• Strategic Investment By Foreign Airline Partner –
Kenya Airways / KLM
• Airline Franchising –
BA/Comair, South Africa; BA/Regional Air, Kenya
• Low-Cost Carriers – Kulula.com, South Africa
• Joint Ventures – Royal Air Maroc/Air Senegal
International
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Summary
• Africa Has Made Some Headway in
Implementing Air
Transport Liberalisation, But Still Has Much To
Achieve
• Air Transport Liberalisation in Africa Must
Directly Benefit The African Aviation Industry
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SEMINARAVIATION IN TRANSITION
CHALLENGES & OPPORTUNITIES OF LIBERALISATION
22nd – 23rd March, 2003 - Montreal, Canada
PRIOR TO THE 5TH ICAO WORLDWIDE AIR TRANSPORT CONFERENCE
Presentation byNick Fadugba
Email: [email protected]
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