This paper was presented at the University of Johannesburg’s first management conference in 2006 where it was awarded best in track, much to my surprise as some very good papers were presented.
Tom Considine
ABSTRACT
Air Transport in Africa does not effectively serve the continents needs. This is in part due to poor safety and security. In addition poor operational efficiency leads to high costs and contributes to the relative lack of connections between African cities. African transport is organised on North South lines because of traditional trade routes yet there are opportunities for intra-African trade in commodities which can be beneficiated within the continent which have not been taken advantage of.
INTRODUCTION
If you can’t get there you can’t trade there. US Transportation secretary Rodney E Slater. [30]. However……..If you don’t trade there you can’t get there. This is Africa’s air transport downfall. This paper explores the problems of African Air Transport, examines what is done in other markets and suggests how solutions to similar problems in other areas can be applied to mitigate the problems. The organisation of air transport on the continent needs fresh thinking and new ways of operating; learning from other markets and industries, not slavishly copying but adapting and improving.
“Air transport was thought of as an elitist concept. It was forgotten that it promotes trade and commerce, transports perishables and patients and brings people together.” [42]
OBJECTIVES
The objectives of the paper are to examine the current state of air transport in Africa, developments in other parts of the world and to suggest possible solutions to the problems found.
BACKGROUND INFORMATION
Types of Air Transport users:
1) Perishable cargo,
2) General cargo,
3) Courier services,
4) Business and official passengers,
5) General passengers,
6) Tourists,
7) Sick people.
Types of Air Transport – Passengers
1) Legacy airlines
2) Low-cost airlines
3) Business airlines
4) Air taxis
5) General aviation including business aircraft
Types of Air Transport – Cargo
1) Belly cargo in passenger aircraft
2) Dedicated cargo aircraft of varying sizes
3) General aviation
Africa and Middle East Air Transport Statistics
4.6% of world passengers
6.0% of Route Passengers Kilometres
5.5% of Freight Ton Kilometres [45]
60 scheduled airlines operate in Africa with the majority operating at a loss and only surviving as a result of government subsidies. [49]
African Aircraft Numbers
1325 aircraft of which approximately 500 are general aviation aircraft and approximately 800 are airline class aircraft with 30 or more seats. [48]
General aviation aircraft operate on a regular basis to 76% of all airports. [48]
Airports
There are about 170 paved airfields in the SADC region not including South Africa which has about 140. [32], [33]
What is important to passengers?
Qantas Airlines surveyed 2500 passengers to secure their views on the priority of essential needs. [13]
1) No lost baggage
2) No damaged baggage
3) Clean toilets
4) Comfortable seats
5) Prompt bag delivery
6) Ample leg room
7) Good quality meals
8) Prompt reservation service
9) Friendly/efficient cabin crew
10) Clean and tidy cabin
11) Comfortable cabin temperature/humidity
12) Assistance with connections
13) Being kept informed of delays
14) Transport to cities
15) Accurate arrival information to relatives/friends
16) Well-organised boarding
17) Quick/friendly airport check-in
18) Self-service baggage trolleys
19) On-time arrival
20) Provision of pillows/rugs
21) Assistance with customs/immigration
22) On-time departures
What is important to the Air Cargo Industry?
Air Transport World polled airlines and found that service outweighed price in importance to their customers. On a scale of 1 (totally unimportant) to 5 (extremely important) service earned a 4.4 average 3.9 for price. [29]
Service Attributes
1) Operational capabilities
2) Proven expertise/reputation
3) Shipment tracing/tracking
4) Knowledge sales rep
5) Condition of equipment/facilities
6) Information technology
7) Global scope and coverage
8) Expedited services
9) Information reporting capabilities
10) Management culture
11) Location near customers/suppliers
12) Financial strength
13) High technology warehouse
Some factors scored equally so the list is not quite accurate but it is good enough to indicate what is expected by cargo handlers from air transport operators.
METHODOLOGY
We determine the African air transport problems, their causes and examine developments in other parts of the planet and their relevance in Africa.
AFRICAN AIR TRANSPORT PROBLEMS
1) Image,
2) Safety,
3) Poor operational efficiency,
4) Costs,
5) Poor connections,
6) One-way trade,
7) No trade,
8) Dumping by European airlines.
FINDINGS
Image and Safety
Air Partner International quoted in the February 2005 edition of Aviation International News listed 22 African nations as a risk for foreign travellers. The list has probably reduced over the 18 months since this was published and travellers from Africa are possibly at less risk in some countries than European and American travellers may be, however, the perception is more important than the fact in that the rest of Africa gets the image of riskiness as well which tends to push up airline charges. Many African airlines are not allowed to operate to the United States because of poor maintenance. The EU has published a “blacklist” of countries and airlines that have been banned from operating through EU airports. The list includes a number of African airlines and countries.
Safety includes passenger’s baggage, as shown in the list above:
The theft out of checked baggage at Johannesburg airport is normal for this airport. Who cares how nice it is when your luggage is pilfered. [7]
Image of Operational Efficiency: Maintenance
In a recent copy of World Airnews only two of seventeen advertising maintenance organisations claimed ISO 9001 or CAA certification. None claimed AS9100. This is not to say that the organisations are not competent; there were some very well known organisations with excellent records among them. But, for example, ISO 9001 accreditation presents an image of competence which many organisations in Africa lack.
Safety and Operational Efficiency
“There are serious deficiencies in air traffic control over much of Africa’s airspace and there is unsatisfactory security at many of the continents airports.” [51]
“An air passenger is 30 times more likely to die in a crash in Africa than in the worlds safest country for aviation, The United States according to the World Bank, IATA and other aviation groups.” [52]
“Africa’s poor safety record is compounded by inadequate or non-functional air traffic and navigation aids and management, obsolete equipment, inadequate staff training and the operation of old, often poorly maintained aircraft.” [53]
Poor Operational Efficiency
Many African airlines are under-funded. Consequently the handling infrastructure is inadequate. This includes maintenance, both of aircraft and equipment. This compounds the problem of the lack of connections between cities in Africa.
“Some countries have found it very profitable to rubber-stamp certification of airlines and aircraft, perhaps never even seeing them.” [52]
…Ghana Airways poor performance is not uncommon to airlines in developing countries, according to Steve Lott, business editor at Aviation Daily. “Larger Airlines can track bags and rebook in minutes, but smaller airlines in developing countries have nowhere near these types of resources – meaning that if something goes wrong, all the dominoes start to fall, “ [3]
Some of the air services are also unreliable, as flights are either delayed or cancelled without prior notice to travellers. [5]
Inadequate Facilities
Nairobi has only one runway. A recent accident closed the airport as the runway was blocked. But can the building of an extra runway be cost-justified without an assurance that the traffic will increase to pay for this? Private enterprise would not take the chance. Governments may, provided they have the money available, generally not the case in Africa, there are more pressing needs, health and education for starters.
Poor Training
Training facilities in many African countries are inadequate. This means that there is a small or no pool of technicians. Poor pay encourages technicians to emigrate to desirable countries in Europe or Southern Africa.
“One of the institutional obstacles to overcome in allocating resources to training is that it may not always seem to be a convincing investment. Those who advocate training investment must leave the decision-makers in no doubt as to the necessity for training and career development at all levels. [50]
Air Transport Costs
Air transport costs are generally higher than in the rest of the world. The recent fuel prices increases have not helped either.
However, “airline ticket fares for travelling within Africa remain high” [5]
“African airline operating costs are higher than the industry averages as a result of which most carriers on the continent are barely profitable and do not generate sufficient funds for expansion and growth.” [2]
“Yet the African airline market is fragmented and inefficient, with some 50 national airlines, most of them losing money or heavily subsidised, resulting in high ticket pricing and inconvenient routing.” [1], [8]
“Operators and consumers alike often complain about high user charges that are apparently not matched by corresponding levels of service” [53]
Justifications for State Assistance to Airlines
60 scheduled airlines operate in Africa with the majority operating at a loss and only surviving as a result of government subsidies. [49]
Economic
Some countries are concerned about the impact on employment if the national airline were to fail. In other instances, airlines, particularly in some developing countries, are said to require state support because they are infant industries and require protection. Some governments maintain that their national airline is an important source of revenue, particularly from tourism and that state backing is necessary to preserve that revenue as a benefit for all citizens. [35] Tourism dependant nations need national carriers to get some return on tourism. “Of each US$100 spent on a vacation tour by a tourist from a developed country, only around US$5 actually stays in a developing-country destinations economy” [11] This is because the air fare is paid in the tourists home country, the food and drinks which the tourist demands often have to be imported because the local industry cannot supply them and if the hotels are owned by multi-nationals not local companies profits are remitted to the multi-nationals home country.
Psychological
“Most of the International airports in Africa are served by government-owned airlines. They are an integral part of the parent country’s national identity. Ssamula [1] likened the peoples identification to their affection for a national sports team.”
Political
Airlines are considered public utilities like water and electricity.
Poor Connections
If you can’t get there you can’t trade there. US Transportation secretary Rodney E Slater [30] The United States exports to Africa are hampered by poor connections. This trade is important to the USA. “Our exports to Africa already support close to 100,000 jobs in the United States.” [30] The reverse is also true, exports to the United States are hampered by poor communications. The corollary to Rodney Slater’s comment is: If you don’t trade there, you can’t get there! This is why connections between cities in Africa are often non-existent. Countries which don’t produce goods that are needed by other countries don’t trade with them. Goods in this case include tourists.
“Johannesburg airport functions like the regional air traffic “switchboard” through which flights to and from other destinations in the region are directed. …There are no direct flights between most countries, meaning the travellers have to use the circuitous route of going via Johannesburg. This makes it expensive to travel by air across borders, especially where the countries are neighbours and are a bit further from South Africa. There are also costs associated with time wasted in waiting for connections from Johannesburg. [16]
“Some of us attending today’s meeting left from an African city and connected through Europe to get to Tunis. It is really unacceptable for an official or businessman to spend one week to travel to an African capital for a two-day meeting because if the difficulties of connection and frequency of flights. Additionally compared to Europe, airline ticket fares for travelling within Africa remain high discouraging the promotion of tourism in Africa.” [5]
One of the greatest ironies is that in order to fly to Morocco from most parts of Africa, the easiest route is through Europe [1]
“Most African airlines try to make sure that their aircraft land regularly in European capitals, so their route maps consist of a series of lines running north-south. And because they cannot compete on cost, service and reliability with European carriers, they lose money.” [8]
“Africa, which has had only three viable carriers (Kenya Airways, South African Airways and Ethiopian Airlines) now has a new Nigerian flag carrier in the form of Virgin Nigeria, 49% owned by Sir Richard Branson’s Virgin Atlantic. Sir Richard wants the venture to open up routes across Africa, which is notoriously deficient in air connections. He thinks that Lagos, in one of the biggest and richest countries and halfway up the continent, is a much more natural hub than Johannesburg or Cape Town.” [17]
Cargo movement in and out of South Africa
“Africa is now South Africa’s largest destination for value-added goods, taking nearly 30% of total beneficiated exports” [48]
One-Way Trade
“In addition, one directional air cargo and trade poses a serious challenge to the business. We fully utilise our outbound capacity into the African markets that we serve but return with low or zero load factors. This kills the profitability of the operation.” [4]
An IATA study a couple of years ago found that Polokwane airport has outbound cargo, but little inbound cargo. This would probably apply to Upington as well. This is because Johannesburg is seen as the hub for South and even Southern Africa. The Airports Company of South Africa would like to make more use of Upington for cargo, as it is equidistant from Johannesburg and Cape Town.
Dumping of Air Transport capacity
European airlines dump capacity by selling space at unreasonable rates and usually at less than fuel surcharges which makes it very difficult for SAA Cargo {and other airlines} to compete in the cargo arena. [4]
It’s not all Gloom and Doom!
The short-term solution to this problem is a political one which is beyond the scope of this paper. However, the long-term solution depends on raising the efficiency of all African airlines and their supporting structures so that they can compete with European airlines This is an impossible dream……….or is it?
Nairobi Airport
“We found a clean airport with loads of shops, lots to eat, friendly staff and best of all, mini bedrooms to be rented by the exhausted traveller needing a few hours sleep and a quick shower.” [6]
Windhoek
Apart from the bedrooms (which I didn’t need) I found the same at Windhoek Airport earlier this year.
Ethiopian Airlines
Third, it has taken a realistic view of its market – and has appreciated that regional markets in the developing world are a better proposition than either a small and poor domestic market, or an attempt to make it in the developed worlds, where it can be beaten-up by big rich carriers. Net Profit in 2003 was 276,655,098 Birr on 1,122,018 passengers. The Birr/USD exchange rate was about 8.64. Most African airlines try to make sure that their aircraft land regularly in European capitals, so their route maps consist of a series of lines running north-south. And because they cannot compete on cost, service and reliability with European carriers, they lose money. Ethiopian Airlines is quite different. Its route map is modelled consciously on the hub-and spoke- system that now dominates American flying; it is the only airline with a daily flight east-west across Africa (it serves 3 routes across the continent). Without theses routes, business travelling from Dakar to Nairobi, say, would be tempted to fly via Paris. [8]
The World Bank has now announced a program of $150 million in grants and credits to reward those countries in West and Central Africa that agree to work together to improve safety. 4 countries in the 23 country group have already qualified for grants or credits; Burkina Faso, Mali, Cameroon and Guinea. [52]
EXTRA-AFRICAN DEVELOPMENTS
Business Travellers
Travel expenses account for as much as 7% of a company’s total operating costs. [12]
The frequency of flights offered by an airline can mean the difference between spending more time with the client thanks to a later return flight or rushing through a meeting to catch an early last flight home. Small business travellers know that their level of productivity during travel is only as good as airports best services. Although no-frill and smaller airports attract leisure travellers, Small Business Travellers say they prefer the higher level of service available to them at the major airports. American Small Business Travellers Alliance surveys have determined that a majority of Small Business Travellers take advantage of airport services such as meeting venues and wireless hotspots. They also widely utilize other business-friendly services like quiet workspaces with fax machines and printers. Many non-business related amenities at major airports such as more seating at the gate, better dining options, private showers and personal services such as haircuts, massages and manicures also help save time and help make waiting for a flight more productive. [14]
“Businessmen are often prepared to pay a significant premium to fly non-stop on direct routes not served by other carriers.” [26]
TYPES OF PASSENGER TRANSPORT SYSTEMS
1) Hub-and-Spoke or Network systems,
2) Point-to-Point systems,
3) Business Airlines,
4) Air Taxies and General Aviation.
Technological changes, combined with an evolving policy environment, have changed the face of the industry. Different models have been adopted to meet new competition and growing demand for air transport services. Air carriers have chosen between a hub-and-spoke model and a point-to-point approach to service provision. [39]
Hub and spoke network systems
The purpose of the hub-and-spoke systems is to save airlines money and give passengers better routes to destinations. Aircraft are an airlines most valuable commodity and every flight has certain set costs. Each seat on an aircraft represents a portion of the total flight cost. For each seat that is filled by a passenger, an airline lowers its breakeven price which is the seat price at which an airline stops losing money and begins to show a profit on the flight. [15]
African hub and spoke networks
As mentioned before African Hub-and-Spoke Networks are centred on cities like Johannesburg or airports in Europe and the Middle East. That this can sometimes be inconvenient is understatement. Africa is not alone in this; “During the time of the development of the air transport industry, we also chose to ignore the time-tested model of “hub-and-spoke”, with the result that small neighbouring countries have usurped our hub status. Dubai, far from India, is probably India’s largest hub airport running daily shuttles into Mumbai and Delhi and spoke services into 10 or 12 Indian cities” [42]
Hub-and-Spoke Network Advantages
The United States has the best-developed network and the most experience in using the system. This is as a result of the deregulation of the airline in the late 1970s to early 1980s.
Deregulation of USA Airline System (late 1970s-early 1980s)
Prior to deregulation many airline services were taking place on a point-to-point basis. A fair amount of direct connections exist but mainly at the expense of the frequency of services and high costs (if not subsidised). Also many cities are serviced, though differently by more than one airline and connections are likely to be inconvenient. With deregulation, a system of hub-and-spoke networks emerges as airlines rationalise the efficiency of their services. A common consequence is that each airline assumes dominance over a hub and services are modified so hubs are connected to several spokes. Airlines tend to compete for flights between their hubs and may do so for specific spokes if demand warrants it. However, as the network matures, it becomes increasingly difficult to compete at hubs as well a spokes mainly because of the economies of agglomeration. As an airline assumes dominance of a hub, it reaches oligolopolistic (if not monopolistic) control and may increase airfares for specific segments. The advantage of such a system for airlines is the achievement of regional market dominance and higher plane loads, while passengers benefit from better connectivity (although delays for connections and changing planes happen more frequently) and lower costs. [18]
The benefits of Deregulation in the United States: Lower fares and higher productivity
In the USA “between 1976 and 1990 average yields per passenger mile – the average of the fares that passengers actually paid- declined 30% in real, inflation-adjusted terms.” Most Hub and Spokes networks will support only a single airline and the superior efficiency of hubbing tends to insulate an airline from direct competition on short trips originating or terminating at its hub. All of this means that pricing may well become less competitive in the future. [19]
Any force that increases traffic volumes on the spokes of a network will reduce fares in the market it serves. [20]
“These benefits are not confined to consumers using the hub as a transfer point. Local passengers benefit too, as a network airline can serve destinations which would not be viable on a standalone basis and can offer more frequent services than an operator relying solely on point-to-point traffic.” [36]
Because of their size hub airports will tend to have facilities that are needed by cargo handlers and business passengers. These include highly automated warehouses, good rail and road connections for cargo handlers and office facilities for business travellers. If these facilities are not available or inefficient then cargo and businessmen and officials will move to a point-to-point system. In the case of perishable cargo, Namibia is developing Walvis Bay as an airport from which to transport fish. Previous extracts have shown the dissatisfaction with current hub-and-spoke systems in Africa. [16], [5], [1]
Disadvantages of Hub-and-Spoke Networks
Once airlines have achieved a dominant market position at a particular hub history tells us that fares will tend to increase.
Unless the hub has good spokes to destination airports travellers may find it inconvenient travelling through the hub. [16]
“In addition, these networks have shown to be particularly vulnerable due to their star-shaped configuration since local problems could affect the performance of all services in the network.” [43]
“However, these networks also demonstrate numerous and evident disadvantages in terms of an increased spatial, environmental and economic burden for the infrastructure providers, local community, policy makers and the society as a whole.” [43] If the turnaround at the hub is too slow customers will change to point-to-point, as is the case with the development of Walvis Bay airport to speed up fish exports. If other flights are available then passengers too will use point-to-point as in SA Airlinks Hoedspruit – Cape Town route. [16], [18], [5], [1]
Point-to-Point Systems: Low-cost airlines
Not all airlines use the hub-and-spoke approach. For example, Southwest Airlines is one of the exceptions to the hub-and-spoke system. It uses the old-fashioned point-to-point system, hauling people short distances with few connecting flights. [15] Ryanair and Easyjet in Britain and Kulula and One-Time in South Africa have shown that low-cost air transport is viable. IATA forecasts that the no frills carriers market share in the UK will rise to 35.7% by 2010. [38]
According to Cathay Pacific Airways director of sales and marketing, James Barrington, legacy carriers such as Air Canada, British Airways and United Airlines are “desperately” trying to hang on to a high-priced market that no longer exists, while the low-cost carrier is stealing the real market from underneath their noses. Loan guarantees, insurance subsidies, and Chapter 11 protection – all these contribute to the creation of unresponsive, overstaffed, bureaucratic dinosaurs. [21] The chief differences between low-cost carriers and traditional airlines fall into three categories:
1) Service savings,
2) Operational savings,
3) Overhead savings.
Low-cost airlines tend to focus on short-haul routes (of generally less than 1500km). To achieve the low operating costs per passenger required, this type of carrier needs to have as many seats on board its aircraft, to fill them as much as possible and to fly the aircraft as often as possible. In addition, low- cost airlines operate a single type fleet. By having only one aircraft type, pilots and cabin crew can operate on any aircraft in the fleet. [22] This does not completely apply to airlines using Airbus equipment as there is great commonality in the flight control systems on all aircraft from that manufacturer. “One of the strongest characteristics of the no-frills model is the ability to adapt rapidly to circumstances, to change what is not working and take advantage of new opportunities without delay. By stripping out the frills of the traditional carriers, a wide range of cost savings can be made, through effectively supplying a single standard service on all routes. But the success of the no-frills business has been to cut costs in every area, for example, by improving both labour and aircraft productivity.” [10]
Ryanair is maintaining high margins despite reducing yields through disciplined cost management. Lower costs are the only competitive advantage in the short-haul economy sector since air travel is effectively a commodity product. [23]
Labour costs account for only about 5% of the 40% cost advantage that low-cost carriers have compared to their network counterparts. Most budget airlines operate simple point-to-point flights and are free from the complex network scheduling arrangements engaged in by full service carriers. Low-cost companies opt for uniform aircraft and engines instead of a diverse fleet. They use each aircraft more intensively and rely heavily on the Internet as a sales tool. Most operate with their own aircraft rather than leasing from other companies but do not employ in-house ground staff preferring to outsource the passenger and cargo handling. [24]
How are Low-Cost Airlines doing?
In South Africa the low-cost airlines have captured 25% of the market. Only 5% of South African use air transport so the market will grow as economic conditions improves. [54] {Italics added}
In 2004 in the United Kingdom, Ryanair and Easyjet together carried 48,839,000 passengers against British Airways 35,680,000 passengers. In Net profit, of the top 25 airlines in the world, Ryanair ranks 10, British Airways ranks 7. [44]
In 2004, in the United States, Southwest carried 81,150,000 passengers against American Airlines 92,565,000 and Deltas 86,901,000 passengers. In Net profit, of the top 25 airlines in the world, Southwest ranks at 11. American and Delta did not rank in the top 25. [44]
Bearing in mind that British Airways, American Airlines and Delta fly long haul routes which the low-cost airlines do not, it is reasonable to assume that a majority of passengers prefer to fly low-cost airlines.
Airports and Low-Cost Airlines
Airports, too, are adapting to the low-cost approach by reducing handling charges (usually about 16%-20% of a legacy airlines indirect costs [46]) for low-cost airlines. The major low-cost airlines use Boeing 737 aircraft which are manually loaded and need no specialised handling equipment other than steps and possibly some form of equipment for handling sick or elderly passengers. If it is possible to park the aircraft so it will not need to be pushed out this is another cost saving for the low-cost airline. Airport equipment is expensive, loaders and aircraft tugs cost around R3 Million to R4 million depending on the exchange rate and the size of the equipment. This does not include transport and lifetime costs such as maintenance. In addition, maintenance can be a problem in areas where the pool of skilled artisans is small or even non-existent.
“Colorado Springs (airport) cost per enplaned passenger started at $5 and has dropped to around $2. This compares with $18 to $19 at Denver International, about one hours drive away. With an Average fare of $80, Western Pacific spends 2.5% of its revenue on airport rents and charges. This would be 25% at Denver.” [40]
Concession revenues have increased 200% while the average fare from the airport has gone down 40%% [40]
“Southwest passengers come to the airport early and buy their own food, looking for fast service and known brands.” [40]
“Passengers spend freely in the terminal, particularly on food and drink.” [41]
Changi Airports (Singapore) budget airline terminal includes a self-service restaurant but there are no escalators, moving walkways or air-bridges. [25]
Business Only Airlines
Long queues at Hub airports due to congestion and security measures in the United States have assisted the development of business airlines which bypass the queues and often even the hub airports. These airlines offer transport to business travellers at fares comparable to normal airlines with better on-board facilities. PrivatAir runs a fleet of 50 aircraft and had a turnover of US$135 million in 2004. Their Boeing BBJ2 is equipped with 56 widely-spaced, lie-flats seats each with a laptop connection. [9] consukc “Businessmen are often prepared to pay a significant premium to fly non-stop on direct routes not served by other carriers.” [26], [37]
General Aviation
General aviation is a bit like the taxi industry in South Africa, it fills (or should fill) the gaps where airlines do not or cannot operate.
General Aviation in the USA makes up over 1% of the US GDP making it almost as big as the petroleum industry.
One state found that 70% of new or expanded manufacturing firms had intentionally located themselves within 16km of a public airport so that they could exploit the speed and access that only General Aviation can provide. [27]
“General aviation means 98% of the aeroplanes flown by 96% of the pilots, flying 79% of the civil flight hours, covering 71% of the distances flown, carrying more than 56% of the air travellers to 100% of the nations airports. Although this definition addresses the United States, it seems as being equally applicable, give or take and percentage point or two, to most countries around the world with fairly large general aviation industries, SA included.” [48]
“In Africa, in 2002 525 aircraft were classified as General Aviation aircraft, most of which nearly half were Cessna’s, of which the majority were Caravans or Grand Caravans. These general Aviation aircraft operated on a regular basis to 76% of all airports or airfields in Africa. The number of airfields available to even the smallest airliners, were generally restricted to those with paved runways, something which is sadly lacking in this part of the continent.” [31]
AIRPORTS
Measuring the Economic Impact of an airport
The economic impact of an airport is a measure of the benefits it provides to the community. These benefits include the jobs, wages and expenditures that take place at the airport. They also include the effects of those expenditures in moving from hand to hand through the community, enhancing economic activity far from the airport itself. Economic impact is comprised of direct, indirect and induced impacts:
Direct Impact
This is associated with providers of services at the airport. These providers include the airport operator, Fixed Base Operators, air carriers, freight haulers, concessionaires, government installations, educational institutions, military facilities, flight schools and maintenance operations among others. The value of direct impact is the sum of payroll, capital expenditures, operating and maintenance costs, taxes and fees incurred by every provider of services. Direct impact also includes spending in the local area by visitors by air and spending in the local area for goods and services by airport tenants.
Indirect Impact
This is defined as the perception that the business community has on the airports impact on local business. The value of this impact is the sum of the fees and charges paid, time and cost savings and expense related to food, lodging, ground transportation and similar outlays
Induced Impact
This is called the “multiplier effect” in which, under favourable circumstances, money spent in a market induces an economic effect greater than the value of the original expenditure. [27]
Airports Council Internationals latest economic survey shows that over 50% of global airport revenues come from non-aeronautical sources. [34]
CONCLUSIONS – WHAT IS BEST FOR AFRICA?
Image
1) Improve flight safety by improving Air Traffic Control; training is available in South Africa and in Europe,
2) Improve security for passengers, baggage and cargo at airports; this requires manpower and will,
3) Obtain ISO 9001 certification. There are many institutions providing advice and consultat
Operational Efficiency – Training
Governments should provide technical education at schools and technikons as a basis on which to build up a core of expertise in, for example, aircraft and equipment maintenance, to encourage airlines to operate to their countries and to give users of their domestic airlines confidence to use the airlines.
Improve Airports
1) Lower charges for low-cost airlines leading to lower fares and cargo rates.
2) Site railway terminals at airports to move heavy cargo and passenger to markets,
3) Site road transport terminals at airports to move cargo to markets,
4) Site passenger transport terminals at airports connecting to nearby cities,
5) Increase services available at airports such as fast-food outlets. This will have the added benefit of encouraging local agriculture and food processing.
6) Improve maintenance facilities at airports.
Costs
African airlines need to cut costs.
1) Privatisation or semi-privatisation often works. It did in the United Kingdom. “When King took over in 1981, British Airways was losing £140 million a year. By 1989, there was a pre-tax profit of £268 million.” [28] Airline losses are paid by the taxpayer and use funds which could have been put to better use in schools and medical services.
2) Adopt a low-cost approach for intra-Africa transport,
3) Drop international routes as far as possible. Air Botswana flies only regional short-haul routes and makes US$20 million profit a year. However, countries which depend to a large extent on tourism will need longer range aircraft to bring European visitors to their countries. They can do this by using other African airlines aircraft under code-share agreements. Reliance on foreign carriers will result in revenue leakage as airfares are paid in the tourist’s home country.
Properly implemented, the conversion of airlines from legacy to low-cost operating systems will prevent the inevitable demise of some national flag-carriers. Though they may not be as big or fly the latest aircraft, they can make a profit and earn a reputation for efficiency. Ask yourself, which is the more admired African soccer team, little Ghana or big, rich South Africa?
Poor Connections, One-Way and No Trade
Encourage trade between nations. Countries need to explore the beneficiation of other countries products. For example, Botswana is developing their diamond cutting industry. Zambia has extensive emerald deposits. Tanzania has Tanzanite. These and other countries precious stones could be imported into Botswana for conversion into jewellery using South African precious metals. Similarly, tea grown in East Africa could be imported into South Africa for blending with South African tea and exported from there to the rest of the world. South African tea could be exported to East Africa and blended there. We drink Yorkshire Gold tea at home. This is blended in Harrogate, Yorkshire in the United Kingdom. Why not drink good South African tea? That is the point – tea grown in KwaZulu-Natal is blended into this tea in Yorkshire together with tea grown elsewhere in Africa. Madagascar and Mauritius grow some of the finest chocolate in the world [47] – does any African country export processed chocolate? Well, yes, I have found Beacon chocolates in Los Angeles. But, I suspect that the sales of chocolate products made in Africa are miniscule compared to sales of European manufactured chocolates. Tourist attractions must be more than beasts and beaches, few tourists from Tanzania travel to Botswana to see the animals and as beautiful as the beaches on the Wild Coast are how many Seychelloise are tempted to holiday there? They might travel to Cairo or Johannesburg to see the archaeological sites. Where point-to-point routes are not viable, the hub-and-spoke network system should be rationalised. Hub-and-Spoke Networks work well when there is:
1) Sufficient traffic at the hub,
2) Good connections at the hub to the spoke airports,
3) Good facilities at the hub for cargo and passengers.
This is generally not the case in Africa or even in South Africa. The facilities need to be upgraded to reduce delays of perishable cargo or passengers (time is perishable for busy businessmen and officials.)
Business Only Airlines
Business Airlines are the best of both types of service in that they offer the same or often better service than the large airlines with the advantage (if required) of transport to less congested airports or quicker throughput at hub airports than they would get flying legacy airlines. For countries which do not trade enough with each other to justify regular and/or frequent air services why not introduce a business airline for use by officials and businessmen such as that offered by PrivatAir in Europe and North America. This could be run by richer countries Air Forces and used for training aircrews in short and medium haul flights over unfamiliar terrain. This knowledge would be put to good use in the event of natural disasters in nearby countries.
Air taxis and General Aviation
Air taxis and General Aviation have the ability to operate to remote airports with few facilities which means they can move cargo and passengers to places not served by regular airlines and far more quickly than can ground transport. This will require tax regimes and cost structures which are favourable to general aviation.
Dumping of Cargo Capacity by European Airlines
This needs a political solution which President Mbeki and his government are particularly good at and will thus has not been addressed in this paper.
Lessons from Other Industries
In retailing Wal-Mart serves small towns across America very profitably. Shoprite/Checkers with 350 shops does the same in many African countries. You don’t have to be Cartiers or Harrods or Thrupps to make a profit; you just need to focus on your possible market and do a good job.
References
1 Bridget Ssamula visiting scholar, Institute of Transport Studies, University of California, Berkeley. Helping Africa take to the Skies from a paper “Analysing Cost Effective Strategies to Create a Hub network in Africa” written with Prof. Christo Venter, Associate Professor of Civil and Environmental Engineering at the University of Pretoria. From Internet
2 Christian Folly-Kossi, secretary-general of the African Airlines Association, Airline Profit Strategies Symposium. Nairobi as reported in World Airnews. July 2004, page 58.
3 Kellogg School of Management, Kellogg in the Media, News and Information quoting from the Baltimore Sun, 22 August 2004. State hits turbulence over wooing Ghana Air; Some criticise lack of caution in pursuing faltering airline.
4 SAA Cargo, Tackling the airfreight challenges, Transport World Africa, October 2005, page 4
5 Abdoulie Janneh, UN Under-Secretary-General and Executive Secretary of the Economic Commission for Africa, Strategies for the Development of the Airline Transport Industry in Africa, Opening Statement, 20-30 May 2006, Tunis. From Internet
6 Jeerahaldi www.airlinesreviewed.com 14/5/05
7 Anonymous 22/12/04 www.airlinesreviewed.com
8 Ethiopundit 18/8/2004. Why Ethiopian Airlines Works. From Internet
9 PrivatAir expands its transatlantic shuttle service, Aviation International News, February 2005, Page 77.
10 CORDIS, Articles on Innovation, Creating new travellers, 27/11/2003. Source: European Innovation, 6/03. Published 27/11/03
11 UNEP Production and Consumption Branch. Economic Impacts of Tourism – UNEP Tourism.htm
12 American Express Corporate Travel Barometer quoted in My Business – Cheap airlines fail to bag SME market from Internet
13 Quoted by JM Juran in his book; Juran on Quality by Design. Free Press. Pages 98-99
14 American Small Business Travellers Alliance from Internet
15 How things work. From Internet
16 The Southern African Development Community Today, Volume 9 No 1, April 2006
17 Economist 10/11/05, World Airlines Lining up for Profits
18 Airline Deregulation and Hub-and-Spoke Networks. From Internet
19 Alfred E Kahn, The Concise Encyclopaedia of Economics
20 Fare Determination in Airline Hub-and-Spoke Networks, Brueckner, Dyer, Spiller, RAND Journal of Economics, Volume 23, No 3, Autumn 1992, pages 309-333.
21 Vancouver Board of Trade, Event Speeches and Presentations Archive, ‘No-frills airlines capture domestic market, 8 February 2006. From Internet.
22 The Impact of Low-cost Carriers in Europe, February 2003, from the Internet
23 Research and Markets, European Low Cost (No-Frills) Airline Industry, from Internet.
24 Transport International Online Issue 11 April 2003. Flying high on a budget from Internet
25 IOL Asia’s second budget terminal opens. March 2006 from Internet
26 PrivatAir Website. Internet.
27 The Trinity County Pilots Association from Internet
28 Dirty Tricks, Martyn Gregory, Warner Books. Page 19
29 Air Transport World, September 2000, page 97
30 Prepared remarks. US Transportation secretary Rodney E Slater, African Aviation Conference and Exhibition, Washington DC, 28 June 1999 from Internet
31 From a paper presented to the Minister of Transport in 2002. From World Airnews, September 2002, page 72
32 CIA World Factbook 2000 as quoted in UD-Diffusion of Information Technology, SADC and International Production.htm. Transport and communications in the SADC region. Internet
33 Airfields of Southern Africa 1998/1999. SA Fliteguide Publications
34 Voice of the Worlds Airports – Airports Council International (ACI) from the Internet
35 International Chamber of Commerce, Policy and Business practices, Policy Statement State Aid to Airlines. Commission on Air Transport 13 June 1995.
36 ACI Europe.htm E-Communique, The Role of the Network Carrier in 2002, Issue 135, June 2002.
37 Airsider – Commercial Aviation News and Reports.htm. PrivatAir – Your Private Airline.
38 American Express Study reveals improved prospects for business travel industry in 2004, 8/10/03
39 WTO 2005 Press Releases – Standards, “off-shoring” and air transport focus of 2005 WTR – Press 411, 30/06/05
40 Fast Growth for Small Airports, Adele Schwartz. Jane’s Airport Review – October 1996. Page 56.
41 No-frills routes are good for small airports. David Carter. Jane’s Airport Review. October 1996. Page 56.
42 The Economic Times. Editorial. How should airports be modernised? Private players should do the job. Ashwinni Kakkar, Chairman. WTTC. Economictimes.indiatimes.com/articleshow/1606594.cms. 9/6/6
43 Hub and Spoke Networks. Analysis, modelling and assessment of hub-and-spoke networks. Project Leader: Dr M Janic. www.nginfra.nl/index.php?id-112. 9/6/6
44 Air Transport World, World Airline Report, July 2005. The Worlds Top 10 Low-cost Carriers 2004. Page 32.
45 Air Transport World, World Airline Report, July 2005. The Worlds Top 10 Low-cost Carriers 2004. Page 32.
46 Air International, June 2001, Fundamentals of Airliner Design – Part 3 Airline Operations and Economics. Page 374.
47 The Chocolate Companion, Chantal Coady, published by Apple, Page 17
48 South African Aviation – National Security Enhancer or “Economic Millstone” Brig DE Barker (SAAF), World Airnews, September 2004, page 49.
49 The Current State of the Airline Industry in Southern Africa. John Morrison, Chief Executive of the Airline Association of Southern Africa as reported in World Airnews, September 2004, Page 83.
50 Challenges Facing Developing Countries. Dr Assad Kotaite, ICAO Council President. Reported in World Airnews, April 1994, page 89.
51 Dullah Omar, SA Minister of Transport. As reported in World Airnews, October 2003, page 51
52 No Safety, No Cash Warning, World Airnews, July 2006, Page 72.
53 African Air Safety Under Fire. Jeff Radebe, SA Minister of Transport as reported in World Airnews, July 2004, Page 71.
54 Engineering News July 21-27 2006
Air Transport Research Institute SA Publications 