Turbulence in aviation industry is momentary

Aviation industry in Africa will be driven by rapid urbanisation and population growth. FILE 

By Elijah Chingosho
 

 

In Summary

• African airlines have not been spared shocks from global financial crisis and increasing costs.

The recently released Economic Survey 2013 paints a bleak picture of Kenya’s transport sub-sector. The sector was one of the casualties of a turbulent global economy in 2012.

Growth in the sub-sector, the survey indicates, slowed down to 3.1 per cent during the year –significantly less than the previous year’s – besides lagging behind the national economy. This was mainly as a result of turbulence in the aviation industry, which tempered the healthy growth curve in other industries like the railway, port and pipeline.

This turmoil in Kenya’s aviation industry was, however, not isolated. On a global scale, the industry grappled with tough economic times, largely as a result of the knock-on effects from external shocks.

A slump in global economic growth in 2012, triggered by effects of the Eurozone crisis, significantly shrunk passenger numbers from the crucial European markets.

The reduced revenues, coupled with heightened operation costs driven by a spike in oil prices, have consequently delivered losses for many airlines across the world– and Africa has not been spared.

However, indications are that this turbulence in Africa’s aviation industry is only momentary, and will gradually fade out. Already, things are looking up. The global economy is easing and the oil prices have dropped and stabilised in recent months.

Thus, 2013 is poised to be a better year; and the short term projection for the industry in Africa is looking good. An improvement in the fundamentals is expected to allow for an enhancement of travel and cargo, and consequently airlines’ bottom-line.

However, this does not rule out possibility of external shocks, which the industry is highly vulnerable to, spoiling the party. It has happened before – the oil crises of the 1970s, the 1990s Gulf Crisis, the World Trade Centre terrorist attack in 2001 and the financial crisis of 2009.

It could still happen without warning. It is an industry wrought with uncertainties.

The lean years seem to be over, if projections by the International Air Transport Association (IATA) are anything to go by. The IATA projections forecast a surge in passenger numbers and air freight volumes after the two years of decline.

In fact, 2013 is expected to be the year that the number of scheduled passengers globally crosses the three billion mark.

On a longer term, the outlook for the aviation industry in Africa remains promising as well. Africa is one of the regions in the emerging markets that are projected to drive global growth in the industry in the next two decades.

Different studies have shown that annual traffic growth in Africa is on its way to not only surpassing global averages, but also overtaking dominant markets such as Europe.

 

The growth in the aviation industry in Africa will be driven by rapid urbanisation in the continent, and growing populations, increasing sections of whom fall within the middle class bracket with higher disposable incomes to pay for air travel.

Other factors that are expected to nudge the industry in Africa are: political stability that many African economies now enjoy; ongoing efforts towards regional integration; growth in tourism; and emergence of low cost carriers.

 

With its anticipated growth, Africa will be able to provide passengers for herself, and make up for the decline in key markets, such as Europe. At the moment, Europe is a key source of traffic for African carriers, contributing about half of the passengers that they carry.

This has been the case for some time but is expected to wane. This means that African carriers would have to look elsewhere for alternatives – including within. However, all said and done, Africa still has a major role to play if it to take an enhanced role in the global aviation industry.

Key amongst this is infrastructural development and supportive government policies that will encourage the development of more African cities into aviation mega-cities with the ability to handle more than 10,000 long-haul passengers.

Stronger

In Kenya, the ongoing improvement and modernisation of the Jomo Kenyatta International Airport that will see the facility get a new terminal, extra runway among other enhancements, is a step in the right direction. Africa needs more such facilities.

In addition to this, there is need for acceleration towards strategic partnerships, alliances and collaboration among African carriers. A few airlines have joined the major global groupings – Sky Team, Star Alliance and One World – which come with immense benefits in terms of increased footprints, opportunities to grow revenues and seamless travel for passengers.

At the end of the day, there is no cause for alarm over the current difficulties in Africa’s aviation industry since it will emerge stronger and ready to play its role on the global scene.

Considering the enabling and catalytic role that aviation (and transport in general), plays in economic growth, an enriched role in aviation will trigger growth in other sectors.

Dr Chingosho is Secretary- General of the African Airline Association.