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Economy

African airspace abuzz with activity as airlines flock continent’s routes

Demand for air transport in Africa is forecast to grow by five per cent per annum over the next 20 years. Photo/REUTERS
Demand for air transport in Africa is forecast to grow by five per cent per annum over the next 20 years. Photo/REUTERS 

At the Jomo Kenyatta International Airport in Nairobi contractors are still on site as the expansion of the facility continues.

With phase one of the expansion project already completed, giving additional parking space for international aircraft, the facility is preparing itself for boom years as more airlines target the African route.

“There are great opportunities in Africa and we are eyeing the region keenly,” said George Mawadri, British Airways’ commercial manager in Kenya.

The economic and business climate in Africa has not gone unnoticed as major overseas airlines position themselves for a greater slice of the continent’s market share.

The demand is mainly driven by tourism, corporate and business travel as well as cargo – especially from Africa to other markets.

Major carriers such as Emirates, Qatar Airways, British Airways, Brussels, Lufthansa, Turkish Airline, Swiss International, and Delta have been introducing new African routes on their networks and increasing frequency to tap into the raising economic profile of Africa.

In addition to the oversees airlines, indigenous airlines like Kenya Airways, Ethiopian Airlines, South African Airways, Egypt Air and the Royal Air Morocco have been increasing their presence in the region and connecting their hubs to other international routes.

As the world emerges from the financial crisis, which saw the aviation industry hard hit, Africa is seen to be recovering at a faster rate.

The continent offers promising investment prospects as emerging markets grow more important as trade partners.

Africa withstood the financial crisis better than many predicted, and the region’s economic growth is forecast at 4.75 per cent this year.

Next year, half of the world’s 10 fastest growing economies are expected to be in Africa.

World Bank reports say developing economies will lead the global recovery with almost half of the rise in global demand in 2010-2012 coming from these countries.

“Although Africa was the hardest hit by the crisis, its recovery has been so remarkable that we could be at the beginning of what history will describe as Africa’s decade,” said Shanta Devarajan, the bank’s chief economist for Africa, on the bank’s website in April.

As the world sets its sights on Africa, airlines are strategically positioning themselves to tap into the forecasted economic growth and demand for air transport.

A report by Oxford Economics released last year said demand for air transport in Africa is forecast to grow by about five per cent per annum over the next 20 years.

The report Aviation: The Real World Wide Web, says that by 2026 air transport will provide and support jobs for almost 700,000 people with a $25 billion GDP contribution.

International Air Transport Association (IATA)

Fly 540’s operations manager Nickson Ooko said there is a lot of business in the region, adding that airlines are able to get high yields.

“It is only in Africa that aviation is expanding very fast,” he said.

The air transport sector’s contribution to the economy is much wider and further reaching than the direct contribution of tourism and job creation.

The report says that the benefit that air transport brings to international trade also fosters investment, both by domestic firms and foreign direct investors.

“Air transport provides accessibility to national and international customer and supplier markets for firms,” the report says, adding that it raises productivity and efficiency which in turn stimulate greater investments in the region.

When venturing into a new route airlines have to invest both in the hub and in the new destination by employing people.

They also have to spend on promoting the route, airport taxes, and other charges required by the destination.

Dubai based Emirates has in the past few years been spreading its wings to new destinations globally, with Africa being a key market. It has 19 African cities on its network.

Emirates President Tim Clark told the Economist last month that the airline has thrived by entering markets in the rest of the Middle East, Africa, South-East Asia, India and Latin America that were previously poorly connected to the global air-transport network.

“We had a hunch. As wealth creation spreads through emerging markets, more and more people would want to fly,” he said.

Growth potential

Africa and the Middle East are seen as having major growth potential for the airline and connect these markets to other destinations in the global network.

Other than this market, the airline has been expanding to the US, Austria-Asia, India and Europe in a bid to have an extensive network.

Last week the airline ordered for 30 Boeing 777-300ERs, estimated to cost $9.1 billion, to help in its expansion plans.

In addition to this order, the airline has 79 Airbus 380s, 70 A350s and seven Boeing freighters on order.

Just like Emirates, Qatar is pursuing an ambitious growth strategy in line with the country’s dynamic economic boom where huge infrastructure development projects are fuelling the growth.

This July Belgian airline, Brussels, launched four new African destinations to its network — Ghana, Benin, Burkina Faso and Togo — and increased frequency to Ivory Coast.

This brings the airlines’s number of destinations on the continent to 18.

To facilitate the expansion, the airline has taken delivery of a leased Airbus A330-300, which will be deployed on these routes.

In a statement announcing the new routes, the airline’s management said it was tapping into the economic development of West Africa.

The airline has also moved to offer an additional flight between Paris and Brussels to ensure transfer opportunities for French passengers travelling to Africa.

As the Turkish government builds closer diplomatic ties with African nations through various trade initiatives the national carrier, Turkish Airlines, has been moving into the region.

It has its sights trained on East, West and Central Africa.

Forge partnerships

In addition to the direct flights, these oversees airlines benefit from the various partnerships they have forged with other airlines, be it in terms of code sharing, inter line bookings or alliances.

KLM has a partnership with Kenya Airways, in which it owns a 49 per cent stake.

This has allowed the airline to have a wider reach in Africa as KQ is the leading carrier in Africa with 40 destinations in the region.

Also under the One World, Star, and Sky Team alliances airlines are able to partner and reach more destinations in the region.

Other Airlines have also been looking to partner with African carriers to increase their passenger load.

One such airline is India’s Jet Airways which entered into a code sharing agreement with KQ to increase air traffic between its base and Africa.

The airline introduced its first African destination, Johannesburg, to its network in April and sees the new move as an opportunity to tap into the growing African market.

Nikos Kardassis, Jet Airway’s CEO, said the move was necessitated by its customers’ growing interest in travelling to Kenya and beyond.

“We are confident that this partnership will translate into greater air traffic between India and Africa,” he said.

The move will also enable KQ to strengthen its presence in India.

American Airlines are also eyeing the continent, with Delta Air leading the way with an announcement last year that it would begin flights to Nairobi.

However, due to security fears by the US government the flight never took off.

Continental announced the launch of its first African service to Lagos this year.

It is expected to begin flying on the route in November 2011.

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