The International Air Transport Association (IATA) expects global air passenger traffic to grow by 4.9% from five-billion passengers this year to 5.2-billion passengers in 2026.

In Africa, the association expects passenger numbers to grow from 142-million this year to 149-million next year, marking 6% year-on-year growth, which is ahead of the industry average globally.

In turn, IATA says air traffic will grow by about 2.6% next year globally and by 2% in Africa.

The aviation industry is projected to earn a $41-billion net profit next year, with African airlines earning $200-million. This translates to profit of $7.90 per passenger globally and $1.30 per passenger in Africa.

In turn, Africa has the highest unit cost globally with an average cost of nearly $140 per available tonne-kilometre, which is double the industry average globally.

Demand for air travel in Africa is rising faster than in many other parts of the world, but profitability is not keeping pace. With margins of just 1.3%, African airlines are capturing only a fraction of the economic value there is in aviation, says IATA Africa and Middle East VP Kamil Al-Awadhi.

For IATA, addressing these barriers that constrain growth for African airlines is essential to ensure the region’s traffic expansion also delivers financial strength.

Africa’s most pressing operational challenge is that of higher costs of doing business compared with airlines globally. Fuel prices are 17% higher, taxes and charges are between 12% and 15% higher, air navigation charges are 10% higher and maintenance, insurance and capital costs are between 6% and 10% higher.

Some of the other key constraints faced by African airlines include low GDP per capita, which limits demand and raises price sensitivity; limited connectivity, with only 19% of intra-African routes having direct flights; and the issue of blocked funds.

Africa remains the largest contributor of global blocked funds. Of the $1.2-billion in airline funds blocked globally as of October, Africa accounts for 79%, or $954-million, with Algeria being the largest blocked-funds market.

Al-Awadhi explains that blocked funds involve repatriation by governments, where airlines are unable to access the proceeds of their sale activities if the national reserves are depleted to the extent that foreign currency allocation to airlines is nonexistent.

Effectively, airlines cannot convert their earnings into hard currency such as US dollars and move it home. This often leads to difficult decisions such as moving flights to more reliable markets or raising fares.

In South Africa’s case, Al-Awadhi confirms that there are no blocked funds issues but private airlines do face the challenge of money owed to them by other countries.

African airlines also struggle with supply chain pressures, with aircraft in Africa being on average five years older than the global average. Some African airlines have limited fleet sizes and route networks, which impacts on economies of scale.

Despite all these challenges, Al-Awadhi says, Africa’s aviation sector has substantial long-term opportunity, including for sustainable aviation fuels (SAF) owing to its vast land mass and abundance of resources.

Over the next 20 years, Africa’s market is forecast to grow by 4.1% every year to reach 411-million air passengers. However, realising this potential will require focused reforms to reduce barriers, improve affordability and expand connectivity.

Al-Awadhi says Africa can benefit from both internal and external investment by developing SAF expertise and implementation, as well as uniformity of standards.

South Africa, for one, has the potential to produce between 3.2-billion and 4.5-billion litres of SAF every year – more than double the domestic aviation fuel demand.

Uganda also has strong potential for producing these fuels using agricultural waste and municipal solid waste, with a deal expected for commercial-scale production in 2027.

Feasibility studies on SAF production have been conducted in Kenya and Ethiopia, with Kenya exploring the power-to-liquids pathway using renewable energy.

REALISING POTENTIAL

An encouraging effort by African governments has been that of visa reforms, for example. Al-Awadhi points out that five countries – Benin, Gambia, Rwanda, Seychelles and Ghana – now offer visa-free entry to all African nationals.

Twenty-six African countries now offer e-visas, compared with nine countries in 2016, representing 44% of the continent, and 28% of intra-African travel scenarios are now visa-free – up from 20% in 2016, which encourages air travel and regional integration.

Kenya, for one, has significantly eased visa restrictions, and now offers visa-free entries to all African countries barring two.

IATA has called on African governments to recognise aviation as a strategic economic enabler and not just a revenue source; to avoid excessive taxes and charges on the industry; to invest in efficient and scalable infrastructure without passing unsustainable costs to airlines and travellers; and to facilitate market access and competition by advancing the implementation of market liberalisation frameworks such as the Yamoussoukro Decision and Single Africa Air Transport Market.

Open skies policies can facilitate access and cooperation among airlines and foster better connectivity, IATA says. 

“With the third-fastest growth rate in the world over the next two decades, Africa’s aviation potential is immense. The continent could serve more than 400-million passengers a year by 2044.

“Governments must start treating aviation as a catalyst for development, which means reducing costs, improving infrastructure and advancing market liberalisation. With the right policy support, aviation can be a powerful driver of economic transformation across Africa,” Al-Awadhi concludes.