The argument against establishing a national airline

A recent article received describes the belated formation of a national airline a ‘White Elephant‘, lacking any foundation and only serving national pride, as the expense of a great deal of money which could and should be invested in other sectors like health, education and terrestrial infrastructure.

Read on to get to the bottom of the argument:

Africa

Ugandan president Yoweri Museveni thinks it’s “a big shame” his country doesn’t have a national air carrier and is talking about creating one to make it easier and more affordable for his citizens to travel. For similar reasons, Nigeria’s president Muhammadu Buhari also talked about restarting a national airline shortly after coming into office last year.

But, like their counterparts in Zambia and South Sudan, they’re both wrong if they think a carrier will soothe national pride or make travel easier for their countrymen and women.

In fact, up to five million passengers a year are denied the opportunity to travel between African countries due to “unnecessary restrictions on establishing air routes,” says an International Air Transport Association (IATA) study. Opening up routes to airlines will mean implementing the Yamoussoukro Declaration (pdf), a 1999 agreement between African nations to open access to air routes on the continent. If this agreement had ever been followed through as it was intended, open air routes between the continent’s biggest markets would likely have impacted intra-African travel more than any national carriers could and without the billions of dollars in set-up costs.

And it’s not just the benefit of easier movement and connections for travelers. The IATA study, from 2014, says liberalizing “12 key markets will provide an extra 155,000 jobs and $1.3 billion in annual GDP.” This isn’t pure guesswork, there is precedent: after South Africa and Zambiaagreed a bilateral agreement in 2013 to open air routes, cost of travel between the two countries “fell by almost 40%.”

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The biggest hurdle to opening up these routes is getting rid of high airport fees and local taxes which IATA says makes the continent unattractive for the airline industry. “If you reduce airport taxes or charges, you tend to attract a lot more passenger traffic. More airlines would find it more competitive to come,” Raphael Kuuchi, IATA Vice President for Africa, says. These high taxes have also proven to be the bane of success of low cost airlines in Africa which, if successful, can “stimulate additional demand and come up with a new market segment,” says Kuuchi.

Opening up African air routes would boost economies

South Africa $283.9 million US Dollars
Angola 137.1
Nigeria 128.2
Algeria 123.6
Egypt 114.2
Tunisia 113.7
Namibia 94.2
Uganda 77.6
Kenya 76.9
Ethiopia 59.8
Ghana 46.8
Senegal 40.5
Additional GDP (USD)

One thing is clear, a new airline is not the best answer to cheaper travel. Several African national carriers have ended up in bankruptcy in the last decade or are racking up losses, like Kenya Airways. Buhari seems to have realized this and in March made clear that starting an airline was no longer a priority for Nigeria’s government.

 

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One response to this post.

  1. Posted by mia on July 6, 2016 at 21:09

    As an old hand in Tourism and Civil Aviation in Eastern Africa and Seychelles, I can assure President Museveni that Airlines are a massive liability and rarely turn a profit, particularly when fuel prices fluctuate the way they have done over recent years. ( South African Airways experienced losses when hedging fuel prices years ago.)

    Air Tanzania has repeatedly tried to grow its airline but ended up borrowing millions from state coffers and have built up a massive debt in their Treasury.
    The safest way is to run a paper airline and charge landing fees and commissions from international and regional airlines that land and overfly your country. You have no overheads, no fleet and no expensive crew to pay.
    I think KQ has to be commended for managing to keep in the air, particularly when
    the Gulf carriers started to service Eastern Africann routes. Emirates/ Etihad etc., are backed by petro-dollars, KQ is not. Besides, the Gulf airlines have constantly sourced qualified air and cabin crew from Kenya… who were trained by Kenya Airways, at great expense! Asante KQ.

    Reply

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