Will ASECNA meet the need of African air navigation for the 21th century - An analysis of ASECNA strategy for adopting CNS/ATM

2.3 Air Transport industry

A developed air transport industry is a driving force for economy, and a catalyst for development and trade. It facilitates exchanges between countries in which air transport substitutes, the road and rail systems are underdeveloped.

Passenger aviation is the principle mean of transport for business and tourism travellers. Airports link the movement of passengers and goods to national economies; they serve as a primary hub for the tourism industry, and as key logistical centre for international trade.

Stakeholders in ASECNA are the states, airlines, ANSPs, airports and international institutions. The study focuses on the relation between ANSPs and other stakeholders (Figure 2.3).

States are represented by civil aviation authorities and Governments. They make air transport policies, on the basis of strategic objectives, through legislations applying to all the others stakeholders in the region.

Airlines are of different types: International, Domestic, and Regional. Both ASECNA originated airlines and the others are considered.

Airports are divided into main and secondary airports.

The region only air navigation service provider is ASECNA. The institution has links with others neighbouring ANSPs.

Figure 2.3: The stakeholders²

Policy Makers
Governments
Civil Aviation

Authorities

Air Travel
Customers

Other ANS
Providers

Policy
Objectives

Cooperation

Airlines
Domestic
Regional

International

Legislations
Institutions

Air Navigation
Provider

ASECNA

Performance

Airports
Main
Secondary

2.3.1 Airport Infrastructure Main Airports

The airport infrastructure (airstrips, air terminals, aircraft hangars) of ASECNA member states comprises about 25 international airports (2400 to 3500 m of tarred runways) regularly used. The main airports are Dakar, Abidjan, Douala, Libreville, Brazzaville and Antananarivo. They are served by major regional, continental and intercontinental airlines. The service provided is acceptable, but is far from being good.

The airport sector is not free from financing, safety and security problems. Built for the
most part in the 1960s and 1970's, they present deficiencies. These vary from State to
State. Runways are generally in a bad state, taxiways and parking areas are often

² All the stakeholders are not taken into account: Ground Handling, Maintenance, Catering... etc

unsuitable; passenger terminals are cramped or saturated in peak hours. There are insufficient cargo hangars, refrigerating warehouses and fencing (African Union, 2005). There are needs for the updating of these installations to meet international standards. The inexistence of airport fences or in disrepair poses serious security and safety problems.

Secondary Airports

The region counts about 150 domestic airports (runways of 1000 to 2000 m, usually unpaved) and about 200 other national aerodromes (poorly maintained), with for several of them inexistent traffic. These airports do not often have adequate navigation aids, or basic airport commodities, which constrains their accessibility.

2.3.2 Airlines

In West Africa, and particularly in ASECNA, the liquidation of Air Afrique after 40 years of existence marked the end of a symbol of African airline integration.

Data from Air Transport Intelligence show that nearly 81 per cent of airlines serving ASECNA are African. 50 per cent are from member states and 31 per cent from other continents.

The main local carriers are Air Madagascar, Air Senegal international, Cameroon Airlines, Air Gabon, Air Ivoire, Air Burkina, Air Mauritania, Air Togo, and Toumai Air Tchad.

Domestic Airlines

The poor domestic markets are served by national carriers or very small companies of which the fleet is often constituted by a single aircraft.

Regional Airlines

Air Senegal International, Bellview (Nigeria), Air Ivoire, Cameroon Airlines, Toumaï Air Chad and Air Burkina have put in a lot of efforts to fill up the vacuum left following the demise of Air Afrique. These airlines propose flights to travel within the region from and to the main cities in the regions.

International Airlines

The region can be divided into two groups of countries:

1) Those that no longer have national long-haul carriers with their market largely dominated by foreign companies.

2) Countries that still have national airlines but these are facing strong competition from foreign companies (Cameroon, Gabon, and Madagascar).

Local Airlines

Cameroon Airline, Air Gabon, Air Madagascar and Air Senegal International are the three main local flag carriers. They link the respective countries to Africa and mainly Western Europe and less regularly the Middle East (During the hajj³)

Foreign Airlines

Air France-KLM is the dominant carrier on the long haul market. It serves all ASECNA's main airports. Swiss, SN Brussels, Iberia, Lufthansa and Alitalia also regularly flight to the region. An important figure to highlight is the percentage of international traffic ensured by Western airlines. In fact, according to ASECNA about 80 per cent of the commercial traffic is operated by these carriers⁴.

The Libyan carrier, Afriqiyah Airways is now operating to most of the defunct Air Afrique member countries transforming Tripoli into a hub for passengers connecting to Europe and the Middle East. Tunisia has also started flying to Bamako and Abidjan. Royal Air Maroc (RAM) has opened routes to Dakar, Douala and Gabon.

Ethiopian, South African Airways, Kenyan Airways and Air Inter⁵ also have regular connections with ASECNA.

2.3.3 Fleet

A study by Boeing showed that about 75 per cent of African fleet is composed by
regional jets or single aisle aircraft (Boeing, 2005). This does not take into account
secondary airports exclusively exploited by very small aircraft (Less than 30 seats).

³ Pilgrimage to Mecca

⁴ Air France-KLM, TAP, Alitalia, SN Bruxels, SWISS, Iberia, Lufthansa...

⁵ South African carrier

Most intra African routes are operated with narrow bodies, or very small jets or turbo propellers.

Figure 2.4: Proportion of Aircraft types in Africa

415

78%

92

17%

24

5%

Jets Turbo PropellersSmall size aircraft

Source: Afraa, 2005

Figure 2.5: Intra African market Fleet (Jets + Turbo Propellers)

Source: Ambraer, 2006

	New	Average	Old	Total	% of Old
Africa	162	111	316	589	54
America	1654	2581	1301	5536	24
Europe	1768	1363	237	3368	7
Asia	1154	969	295	2418	12
Middle East	240	144	155	539	29
Pacific	155	102	15	272	6
WORLD TOTAL	5371	5529	2712	13 612	20

Table 2.2: Situation of aircraft operated in the world
Source: African Union, 2006

About 54 % of aircraft operated in Africa are considered to be old or very old. Nearly 45 % of aircraft are more than 15 years old. 20 % are between 10 and 15. 13 % are aged between 5 and 10. Around 22 % are less than 5 years olds (figure 2.5). The average age of the fleet is comprised between 16 and 20 years old. A large proportion of aircraft still operated are aged over 25 and even 30. These aircraft are largely fuel inefficient.

Figure 2.6: African fleet annual utiization

2500

2000

3000

1500

1000

500

0

(Flights Hours per Aircraft)

Fleet age (Years)

45

40

25

20

35

30

5

0

15

10

TP20 TP35 J35 J44 _TP50 ^J50 _TP70 J70 J80 J100 J120 J150 J175 J250 J>300

African annual fleet utilization African Fleet Average Age

Source: Ambraer, 2006

The average annual utilization is 1167 hours per aircraft. There is a strong correlation between fleet utilization and fleet age (Coefficient of correlation equal to «- 0.8»).

Figure 2.7: African fleet Evolution from 2003 to 2023

392

Growth

309

Replaced

332 Stay

60

641 aircraft

701

Source: Airbus, 2005

Airbus estimates that African airlines will take delivery of about 641 new aircraft to replace the current fleet or to sustain growth (Figure above).

2.3.4 Performance

Figure 2.8: RPK, ASK (Billion) and Passengers load factors in Africa

Source: AFRAA, 2005

Load factors, RPK and ASK are improving. But the overall industry's health remains critical in Africa. Load factors may look remarkably high, but they highlight the airlines' dilemma in the African operating climate. The problem is that break even load factors remain higher.

Financial Performance

A sample of 8 airlines serving ASECNA region, comprising South African Airways, Royal Air Maroc, Ethiopian Airlines, Kenya Airways, Air Mauritius, Bellview airways, and Tunisair, made a net profit of over $200 million in 2005 (AFRAA, 2005, p.4). These are encouraging and remarkable results in a world where airlines made huge losses in the recent past But they do not reflect the real picture of the industry's performance. Most airlines, some very small, some bigger, are facing serious difficulties.

Excessive debts, uncoordinated operating networks, liquidation, bankruptcy, are examples of discrepancies generally observed (African Union, 2005). Airlines post very poor financial results. The issue of profitability is crucial in the region: as the market is narrow; it is difficult for local airlines to raise the necessary investment required by the standards of modern airlines. These airlines often operate the same routes. That competition leads to a price war resulting merely in weakening the economic health of these companies which have difficulties in covering their operating costs. Air Afrique⁶ best represents the airline industry's situation in the area. Air Afrique officially lost 194 million dollars between 1984 and 1996. It almost never made significant profit. In 2002, after years of financial crisis, the 11 states that owned the pan-African airline decided to file for bankruptcy. The Bankruptcy came after the failure of a restructuring plan brokered by the World Bank.

The Yaoundé treaty countries have revised their national carriers by designating them as the flag carriers. But they are left under the control of private interests, like Air Ivoire, Air Senegal International, Toumaï Air Chad... etc. Cameroon Airlines and Air Gabon, once the two leading carriers in the region, are now being liquidated or privatized.

High Fuel prices

Fuel price is constantly rising. Fuel represents on average 25 per of operating costs. One
barrel costs on average 70$ world wide and up to 90$ in Africa (2005). The trend is

⁶ Air Afrique was established in 1961 to provide passenger and cargo service within the 12 West African Nations of Benin, Burkina Faso, Central African Republic, Cote d'Ivoire, Congo, Mali, Mauritania, Niger, Senegal, Chad, Togo & Guinea Bissau.

expected to last. These sky-rocketing fuel prices are devastating the industry. As airlines are struggling to improve their bottom lines, fuel efficiency is critical.

Figure 2.9: Trend in Aviation fuel cost

Source: Airbus, 2005

Yields and Unit Costs

Figure 2.10: Yields and Unit costs in Key markets

14,0

12,0
10,0
8,0
6,0
4,0
2,0
0,0

Europe Southern Europe Western Within Europe North Atlantic

Africa Africa

Yield Unit Cost Yield Cost Margin

Source: Airbus, 2005

Yields are declining and the margins remain low. The Southern Africa - Europe market has the lowest unit cost but also the lowest yields, and the lowest margins. Europe - Western Africa is a healthy market for efficient airlines, mainly European, with relatively high yields. Yields are also low in the domestic market. The industry is not expecting a significant improvement of yield.

Most African airlines are inefficient. This results into high unit costs as the figure below shows it. These airlines possess old fleets which are highly oil-consuming. High unit costs reflect low aircraft utilization rates, high maintenance, rental and insurance costs. High air navigation and airport unit costs reflect their old avionics, and their low aircraft utilization.

Figure 2.11: African Airlines ⁷ Operating costs (Unit cost $ per tonne per Km)

0,5 0,4 0,3 0,2 0,1

0

0,6

Fuel & Oil Flight Equipment Airport and Navigation

Charges

Avg inefficient Airline Avg Efficient Airline Avg Efficient Worldwide

Source: Airbus, 2005

⁷ Flight Equipment comprises maintenance, insurance, and rental. The others operating expenses are not mentioned here. But it's interesting to note that administration unit costs for non efficient airlines are extremely high, almost twenty times higher than an efficient airline' unit costs.