Low cost airline EasyJet parked at Paris Roissy Charles de Gaulle airport in Paris. AFP PHOTO
By DANIEL ONDIEKI
International coverage of Africa tends to be overly
negative, focusing on war, disease and poverty. Unfortunately, the facts
of life are that we are indeed bottom of the table as pertains most
measures of economic development.
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As a consequence, African consumers are extremely price
sensitive. There are many consumers in Kenya who will choose one
supermarket chain over another because of a shilling difference in the
price of basic household commodities.
While the poorest of the poor may not be the target
customers for airlines, fares between African countries are some of the
highest in the world, prohibitive even for the middle-class. On paper,
Africa would be the best suited for low-cost operations.
However, as of late last year there were only a
handful of budget airlines in the whole continent and only three had
intra-African international routes. In recent years several budget
airlines have gone bust.
There are many reasons for this sad state of
affairs. For a start, costs in Africa are not low. Insurance and leasing
costs are higher than in developed countries due to poorer safety
records and weak legal frameworks.
Of the costs that they can control, it is unclear
that budget airlines have enough margin for further reductions.
Techniques that have worked so well for them in the developed countries
are inapplicable in Africa.
There are very few smaller secondary international airports that they can operate into.
Labour costs in most African countries are already
low and contribute a smaller fraction of an airline’s direct operating
costs as opposed to a European carrier.
It is also unclear whether the number of passengers
necessary to drive the high fleet utilisation that no frills airlines
rely upon exist due to low trade and tourism between African countries.
African countries also impose high taxes on air
travel. For example, a 100 per cent rebate ticket for airline staff
ticket from Nairobi to Kigali still costs Sh7,000 in taxes. This means
even if a low-cost carrier charged nothing for the flight, we would
still not approach the one dollar prices seen in Europe.
In any case, quite a few of the budget airlines are
owned by bigger, established carriers. More than any other region,
these parent companies derive a good chunk of their profits from the
African market.
Despite protestations to the contrary, they would
be unwilling to allow their low cost children to cannibalise their main
source of income, at least not in the unfettered free market sort of
way.
Probably the biggest hurdle though it the poor
implementation of various open skies agreements signed by African
countries. As it stands, opening a route between two African countries
is an ordeal with uncertain outcomes.
Sooner or later, the markets will be opened and no-frills airlines will thrive and with them bring a new wave of growth.
Hopefully the current operators will survive the significant losses that are being incurred long enough to see that day.
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