Frequent air travellers within Africa agree that the cost of air tickets is too high. So serious is this issue that top African aviation stakeholders met virtually early this year to discuss factors responsible for the high cost of airfares and to come up with suggestions on how to address such factors.
At a webinar organised by the African Aviation Industry Group [AAIG] under the theme “Achieving Affordable Air Transport Across Africa,” the industry experts said high airfare costs result from a convergence of multiple factors that include the cost of goods sold, intermediary costs, government taxes, regulatory charges, time of purchase [early-bird options tend to be cheaper], fuel costs, market forces of demand and supply, and costs related to original equipment manufacturers.
They also identified safety and security concerns, poor intra-African connectivity, market access limitations, and inadequate infrastructure as some of the challenges facing the industry.
Secretary-General of the African Civil Aviation Commission, Tefera Mekonnen Tefera, noted that the aviation sector was seriously over-taxed and over-burdened with high charges and fees thereby making travel by air unaffordable in most parts of Africa.
Tefera added that “Apart from the aeronautical charges and government taxes, airlines also pay additional charges and fees for ancillary airport facilities and services, ground handling services, oversight, and regulatory services by CAAs [civil aviation authorities].
“Airlines are equally faced with high jet fuel costs; however, the charges and taxes levied by far have the highest impacts on the prices of tickets for air travel in Africa,” Tefera emphasized.
High cost of jet fuel
Participants in the webinar lamented that jet fuel costs more in Africa, including in oil-producing countries than in Europe or the Middle East.
The situation has improved substantially in recent years, they acknowledged, although there is still a perceived poor safety record of African airlines compared to other regions due to factors such as old airplanes, poor aircraft maintenance, and sub-standard airport infrastructure.
Director-General of the Kenya Civil Aviation Authority Gilbert Kibe said that high aviation costs have hindered inter-and intra-African commerce, business, and leisure travel, which have diminished the competitiveness of African products in the global market.
Apart from the aeronautical charges and government taxes, airlines also pay additional charges and fees for ancillary airport facilities and services, ground handling services, oversight, and regulatory services by CAAs [civil aviation authorities].
Kibe noted that “Lack of competition due to the monopolistic stranglehold of the big airlines has led to a few planes which charge the equivalent of travelling to European destinations.”
The outbreak of the COVID-19 pandemic has worsened the situation of African airlines, just like elsewhere in the world.
According to the International Air Transport Association, which supports aviation with global standards for airline safety, security, efficiency, and sustainability, the African airline industry lost up to $6 billion last year due to the pandemic.
COVID-19 exacerbated African aviation’s age-old problems such as limited inter-Africa connectivity, weak passenger load factors, inadequate infrastructure, high cost of inter-Africa travel, high financing premiums.
To recover, the aviation industry has been putting in place enhanced COVID-19 prevention and management measures.
Financing African airlines
In the past decade, Afreximbank has arranged over $2.5 billion in financing to African airlines and still has an active facility in excess of $200 million, says Oluranti Doherty, the bank’s Director of Export Development.
Many airlines have downsized their operations and staff to survive the pandemic, with the cost of testing for COVID-19 perceived as a new passenger tax.
Industry stakeholders say that a restart and recovery must be an opportunity for African aviation to address high operational costs.
Chief executive of Crabtree Capital, a Dublin-based aviation consultancy, Mark Tierney, says that “If we’re serious about making civil air transport affordable for the majority so as to boost economic growth and development, there are only two ways to do it: subsidies or reduced unit costs.”
Subsidies are not forthcoming, making unit cost reduction the only viable option left. For this to happen, Tierney says there is a need to stop fragmenting the small African aviation market and instead increase economies of density and scale.
He observed that the industry needs specific materials for sustainability guidelines and best practices that aviation industries can adopt.
Another solution to lower airfares could be governments’ regulatory intervention through provision of subsidies, protectionism, involvement in the value-chain system especially preferential procurement of vital equipment and ownership of critical infrastructure, and provision of necessary economic safeguards.
A communique issued after the event stated that “Appropriate measures need to be taken by the airline industry to enhance airline efficiencies. This has the potential to reduce costs so that the air transport sector can be made accessible and more affordable to a wider demographic of travellers across Africa.”
Source: Africa Renewal [United Nations]