November 18, 2017

Challenges holding down African airlines

Challenges holding down African airlines... NAIJA INVEST

AFRICA is said to be the continent with the second largest population but only accounts for less than four per cent of global air traffic.

Poor infrastructure, stalled liberalisation, high taxes and fuel surcharges are reasons for such a small share of the aviation market for decades.

The continent’s aviation industry is beset by a wide range of negatives that impede growth, including strong state protectionism, a lack of desire to liberalise, a poor safety record stemming from ageing aircraft, weak finances and inadequate regulatory supervision, underdeveloped infrastructure across most of the continent and a lack of professional expertise.

Added to this mix is widespread corruption and an overall lack of funds available for investment.

In global terms its international markets are still notably small.

The highest ranking, Egypt, for example, would feature at 18th position among European countries for numbers of international seats. Nigeria, with its over 160 million population, ranks 26th, just behind Latvia. Zambia, which ranked just below this Top 20 list, has substantial potential, as its resources appear increasingly attractive to foreign investors.

There are also one or two marked exceptions to this less than rosy picture. Ethiopian Airlines is one of the region’s most successful and profitable airlines (assisted by some protective regulation); Kenya Airways too has been a benchmark for African airline operations. And the renewed interest of private investment in airlines suggests that, where vacuums exist, opportunities are opening up.

Africa is as a result poised to become the next emerging growth story as the world turns to the continent’s bountiful resources, from minerals to oil and water.

Challenges holding down African airlines... NAIJA INVEST

Challenges holding down African airlines… NAIJA INVEST

The emerging middle class, with its higher propensity to travel, will inevitably have an increasingly substantial role in regional aviation as will the upswing in local and international tourism traffic.

China in particular has taken a leading role in investing in Africa’s vast natural resources, which in turn has attracted investors from other regions. China is highly dependent on sub-Saharan Africa for its supply of cobalt, manganese, chromium and timber.

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