We were taken aback by the no nonesense hard truth article represented by the Business Daily Africa that we had to share it on our site. A well researched and factual article.
African countries seem to have found a way to turn back the hands of time. In the early 1960s, newly independent African states established national airlines as a matter of asserting their newly acquired status. Fifty years later, African countries are at it again.
The past five years have seen Ghana, Mali, Senegal, Zimbabwe, Zambia, Rwanda, Cote d’Ivoire, Tanzania and now Uganda relaunching flag-carriers; Nigeria also plans to establish one.
But is establishing national airlines good economics? No! its bad economics.
First, economist Alfred Kahn who led airline deregulation in the US in the late 1970s under the Carter administration described airlines as marginal costs with wings and saw the sector as a societal aspiration for the rich people to fly around the world.
In Africa, out of a population of around 1.2 billion people African air travellers only form a paltry 12 percent of the world’s total air travellers, so any government establishing a national carrier as a public policy intervention is using an elitist approach.
Second, African countries are also launching national carriers in the name of nationalism.
When Nigeria announced its intended takeover of Arik Air – the country’s biggest airline— it claimed that it can’t allow the airline to collapse because it closely represents a flag-carrier.
Also, President Museveni when launching Uganda Airlines claimed that Ugandans spent $11.3 million annually on air travel and so the national carrier will help stop the hemorrhage.
The success of Gulf carriers — known as ME3, Emirates, Etihad and Qatar — that also taps into economic nationalism have been the inspirations of many national airlines. But the opulence invested in these carriers cannot be afforded by any African country. They have new long-range fuel-efficient aircraft, they have access to cheap fuel, they are able to provide better services at highly competitive fares and have state-of-the-art airports and aviation infrastructure.
It’s estimated that the ME3 gulf carriers in the past 10 years have been subsidised by their governments in the amount of $42 billion dollars.
This should inform African airlines that nationalism in the airline industry is a grossly opulent affair above their punching weight. A look at three of the top four leading African airlines, South Africa Airways, Kenya Airways and Rwanda Air are all bleeding from heavy debts and annual losses.
Lastly, since the US Airline Deregulation Act 1978 which has become a pillar in the history of economy policy — the experiment that broke the deregulation ground in all sectors, countries continue to deregulate their domestic airline markets through open skies agreement.
In Africa, we have the memorandum of implementation of the Yamoussoukro Decision - a multilateral open skies agreements among 44 countries.
Though few countries have ratified it, that is where the future of airlines industry lies.
The multilateral open skies will initiate unfettered airline access and flights within the continent across countries treated as domestic and not international flight. Basically, the open skies will reward the most efficient carriers while the least efficient lose market share.
So, with this proliferation of national carriers, it is expected that countries launching national airlines will be opposed to the Yamoussoukro Decision.
What that means for Africa’s air passengers and air freight shippers since both are governed by same regulatory environment, air travel will become expensive. Ticket prices always rise due to restrictions on international competition, forced connection flights through strict regulations increase prices, air traffic growth will shrink and air safety is also compromised.
Unless the national airlines choose to be low-cost carriers which national pride will not allow them when that is the most economically viable option for airlines to serve the continent, national carriers don’t a stand chance in the sky.