A long way to go

posted on 25th April 2018

Africa has enormous potential in the aviation sector. But a toxic mix of infighting between nations, political corruption, state monopolies and economic mismanagement is holding the industry back. David Smith finds out more

Though there are pockets of excellence in the African ground handling sector, there are far too many examples of inefficient management, ageing infrastructure and poor safety standards.
“We can’t take ground handling in isolation because everything is interrelated and the economics of the whole industry have to work for everyone,” says ground handling consultant Maurizio Anichini. “But other continents are seeing profits of between 5% and 30%, according to IATA [International Air Transport Association] statistics, whereas the African sector comes up with a loss at the end of the year,” he argues. He finds it frustrating to see so much potential going to waste.
At the root of Anichini’s wish to see Africa thrive is a strong personal connection with the continent. He co-founded Twiga Aero with his Kenyan-born wife, Brenda Aremo-Anichini, and the couple named the business after the Swahili word for giraffe – ‘twiga’. Anichini finds the persistently negative images of Africa in the Western media frustrating. He describes a continent that is blessed with tremendous natural resources and bursting at the seams with well-educated, energetic young people.
But he also observes a high level of poor practice in the air industry there. He tells a story that eloquently sums up the problems: “There was the inaugural flight of a B787 at an airport in south-west Africa. The airport made a big brouhaha to impress the international airline, putting on a festival with watersprays from the fire brigade. But as the aircraft taxied in, one of its wing tips struck a flagpole and put a hole in the fuselage.
“Why was the flagpole there? Because the sub-standard airport infrastructure was designed for aircraft from the 1960s and 1970s. The airline’s CEO was so angry he was doing double backflips. The damage meant a US$2 million bill and the airplane had to be grounded for weeks,” Anichini says.
The airport infrastructure might be the responsibility of the aerodrome operator, but if it is left in shoddy condition it has a harmful impact on ground operations. “We see a lot of airlines using unfair service-level agreements against the GSPs [ground service providers] and penalising ‘poor service’, such as not smiling enough. But when airports are not doing their job properly, or investing in airport infrastructure, ground handlers get blamed unfairly,” Anichini says.
“You see aircraft squeezed into parking bays that are too tight so there’s not enough operation space to handle them. There’s a lot of sub-standard machinery, such as old baggage systems that slow everything down. If a passenger gets bogged down in a 45-minute queue for check-in, then an hour for immigration security, it won’t matter how much you smile at them,” he points out.

Opening up
In Africa, a lot of state-owned airports act as monopoly providers of ground handling services. Aremo-Anichini, who used to work for Kenya Airways, says airports “don’t want to open up services because they want 100% of the pie”. But lack of competition makes them complacent about improving service and they are often incapable of coping when demand rises.
“When the aerodrome operator is also the GSP, it’s hard to ensure regulatory oversight of operations. The two services should be separate. Competition is nearly always a good thing as it forces GSPs to raise standards. Otherwise there’s no incentive to improve,” she says.
Airlines tend to be uncomfortable with monopoly providers, she observes. “They feel a degree of vulnerability in case the GSP doesn’t have robust processes and training to ensure their asset is secured. Being sure their asset won’t be damaged is a major concern for airlines, but it’s all too common in African airports,” she says.
IATA research suggests airlines are right to be worried about their assets. The aircraft hull-loss accident rate in Africa is more than six times higher than in Asia and Latin America, and more than 12 times higher than in Europe and North America.
In some parts of Africa, the arrival of international GSPs has raised standards. Swissport is located in nine countries on the continent and Menzies Aviation is in seven countries. However, Aremo-Anichini says that international GSPs still have to demonstrate that their local provision is the same as in their main stations.
Liberalising the African industry has helped to make the market more efficient in some parts, but it’s not straightforward for private companies to thrive when margins are so tight. “Even where the industry is liberalised, there are several small handling companies at a single airport and this results in price undercutting as they’re all competing for business,” says Amr Samir, CEO of Link Aero Trading Agency. “As a result, the quality of both services and safety is lower in some places compared with global figures.”
Anichini says economic realities force airlines to encourage price undercutting. African governments could ease the pressures by lowering fees for airlines, but they usually insist on high levels of navigation and airport charges, as well as high passenger taxes and overnight user fees.
“As a result of all the charges, airlines are unable to put on more capacity. By lowering charges, they would stimulate the market. There’d be more flights and more seats, and that would result in lower prices and more people would fly,” Anichini argues. “Then you’d have more people spending money on duty-free whiskey and perfume. We’ve seen in Europe how Ryanair and easyJet have reached whole populations who would otherwise not fly. Part of their business model is to convince airports to lower their charges.”

Working together
Aremo-Anichini would like to see African GSPs position themselves as key stakeholders in the market. But in order to do so, they have to stop focusing only on how much money they’re making and work together as partners to improve conditions for everyone.
“They need to build long-term relationships with airlines and airports. Most GSP contracts can be severed with a 60-day notice period, which makes it hard to invest in better equipment,” she says. “But if they know they have a long-term business partnership with airline x, or aerodrome y, they will be able to recuperate costs over time. It’s a more sustainable model. But it will take innovative thinking, which is best done together,” she says.
Greater cooperation is also necessary at a national level, Anichini adds. If African countries ended their infighting, it would benefit the entire continent’s aviation sector. Many countries restrict their air services markets to protect the market share of state-owned carriers. This practice originated in the early 1960s when many newly independent states created national airlines. However, the strict regulatory protection that sustains these carriers inflates fares and reduces air traffic growth.
Indeed: “All the protectionist measures and intra-African competition have served to benefit major foreign airlines, such as Qatar, Turkish and Emirates, at the expense of African airlines,” says Anichini.
Collective agreements to address the lack of cooperation issues have largely failed to date. In 1999, 44 countries signed the Yamoussoukro Decision to deregulate air services and promote regional air markets. It followed up on the Yamoussoukro Declaration of 1988, in which many of the same countries agreed to principles of air services liberalisation.
Implementation of the agreement has been poor, however, according to the World Bank. Nevertheless, in January this year, 23 African countries made stronger commitments to work together to liberalise the market by launching the Single African Air Transport Market (SAATM). The goal is to transform intra-African air travel by lowering prices and increasing the frequency of flights. Although the total population of Africa accounts for 17% globally, the proportion of air travel passengers is somewhere between 2% and 4%.
Significant liberalisation of the market could have major benefits, according to an IATA study of 12 strategic African states. IATA’s research suggests that if the skies in the 12 countries were fully liberalised, air traffic flow would increase by 82% and it would generate 155,000 jobs in aviation, tourism and the wider economy.
Anichini’s hope is that this time, the African nations will make more effort to implement the policies, although he sounds a note of caution. “With protectionist governments, we cannot rule out the question of corruption. Many African countries are sorely in need of revamping their leadership. People like Mugabe have corrupted nations and held them back for years. The problem is that the guys replacing them are just as corrupt. A handful of people in African make it hard for the rest,” he concludes.

 

Reinvesting

If airlines in Africa were making more money, they would be able to pay “adequate” rates to the GSPs, who in turn would then be able to afford to refurbish their GSE fleets.
However: “If airlines continue to drive the GSP down to the lowest levels, it’s not good for anyone – starting with the airlines themselves, as they are not getting a good service,” Anichini says.
A further problem for GSPs wanting to upgrade their GSE in Africa is that high import taxes double, or even triple, the price tag. It compels them to buy refurbished equipment from companies such as Belgium-based Aviaco. Inevitably, these machines perform less well than modern ones and tend to be less environmentally efficient.
Anichini says one common practice in Africa is to use agricultural tractors on the ramp. “If you go to Johannesburg, or just about anywhere in sub-Saharan Africa, you see a lot of agricultural tractors, which are not designed for the ramp. They have enough power and torque, but they’re too heavy and big and the brakes are not suitable for towing 40 or 50 tonnes of cargo around an aircraft,” he says.
One reason GSPs buy the tractors is because they are made under licence in Africa by US company Massey Ferguson. Without import duties, they are more affordable. Anichini would like to see a similar economic model used in the manufacture of GSE. “There’s a tremendous opportunity for European providers to team up with African companies and build machines there under licence to avoid import duties. You see a similar model in Thailand for GSE equipment, and also BMW cars, as import duties are around 300%,” he says.
African GSPs have a chance, Anichini contends, to leapfrog ahead by purchasing electric GSE equipment to replace their refurbished diesel ones. “Ideally, I’d like to see them go straight from agricultural tractors to electric tractors and live in the future. More and more airports are looking to achieve ACI [Airports Council International] environmental certification,” Anichini says