state of the airline industry - taag angola airlines
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THE AFRICAN AIRLINE INDUSTRY IN
THE EVOLVING MARKET PLACE
A Presentation to TAAG Angola Airlines
15 August, 2011
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Global Airline Industry in 2010
African Airlines Performance
Airline Cooperation in Africa
Airlines Main Challenges
Way Forward
Conclusion
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Industry profit of $15 billion 2010
2009 was a loss of 10 billion
African airlines profit in 2010 was $100 million
Globally fuel accounted for 26% of total airline operating
cost
Over 1200 new jets and turboprops were delivered in 2010
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200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Africa Asia Pacific Euroepe L/America Middle East N/America
97,375
1,230,788
996,991
197,521
332,018
1,025,961
Revenue Tonne-Kilometres per Region - IATASchedule Services - 2010
Domestic International Systemwide
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African achieved an increase of 6% in 2010 on the consistent year on year
positive growth The FIFA World Cup hosted by South Africa in 2010 largely accounted for
the 6% growth
Tourist arrival in Africa in 2010 was 48.8 million
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Africa
2%
L/America
5%
Middle East
9%
Euroepe
26%
N/America
26%
Asia Pacific
32%
Global Revenue Tonne-Kilometres Performed perRegion - IATA Schedule Services - 2010
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African airlines market share is small, 2.6%
Most airlines are small and under-capitalised
African sky is mostly dominated by European and Middle
East
New airlines from Asia, North America & Canada entering
African markets
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In the 1970s and 1980s Africa had 26 inter-continental airlines(including Air Afrique, owned by 11 States)
This has been reduced to about 9 airlines
Some may further disappear
In most of the francophone countries, Air France has a de factomonopoly
Focus must be on safety, cooperation, economic regulation andinternal market liberalisation
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KEY
Countries that didnot have longhaul operators
Countries withbudding airlines.Dominant carriersare foreign airlines
Countries that hadvibrant long-haulairlines sharingthe market withexternalcompetitors
African Airline Industry in the 1970s & 80s
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(10,000,000)
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10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
2005 2006 2007 2008 2009 2010
Total Passengers Carried by AfricanAirlines 2005 - 2010
Yealy GrowthSource: AFRAA/IATA
Passenger numbers have been
growing consistently except for2009 when there was a slightdrop due to the impact of theglobal financial crisis and itsimpact of tourists inflows
2010 passenger numbersincreased by 13.7% compared to2009
Total passengers carried byAfrican Airlines in 2010 was60,942 million
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African Airlines Performance - 2010
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There has consistently been over-capacity by African airlines on
both domestic and international
routes
This results in the low utilisationof aircraft and lower than industry
average load factors
2010 load factor was 69.1%
compared with global average of78.2%
African Airlines Performance - 2010
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The African scheduledpassenger, cargo and
charter airlines have a
fleet of 1,141
684 are western built jets
392 turbo propellers
65 aircraft from the former USSR
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Financial Performance
African airlines profit for 2010 was $100 million
KQ & ET made record profits in 2010
Loss expected in 2011 of USD100 million
Due to high fuel costs and political disturbances in North Africa
in 2011
Despite challenges, some airlines expected to be profitable in
2011
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Examples of successful experiences
KQ/KLM strategic allianceso far a great success
Balance through diverse ownership structure
KLM/AF - 26% Foreign institutional investors - 4.47% Foreign individual investors - 1.39% Kenyan government - 23% Kenyan institutional investors - 14.2% Kenyan individual investors - 30.94%
Conducive political and regulatory environment
KQ/Precision Air - 49/51% Ownership
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The Group Celestair Model
One holding company (AKFED) establishing and holding equity shares inseveral national carriers
Air Uganda 100% Air Burkina 79.4%
CAM51%
Technical Strategic partnerAn affiliated Company Meridian
Aircraft capacity provided through a common leasing company (Finaircraft)
Objective is to achieve synergy and economies of scale throughmembership in the groups own alliance
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The ASKY model
Private sector driven
Multi-national institutional/individual ownership
Technical/management partnership with Ethiopian Airline
Operations to started 2010
Operates flights to 19 domestic and regional destinations
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Some unsuccessful experiences
Air AfriqueMulti-national carrier (11 African States)
Air Senegal/Royal Air Maroc
South African Airways/Air Tanzania
Virgin Nigeria/Virgin Atlantic
British Airways/Regional Air
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Can African airlines survive the Global liberalisation andconsolidation?
Thriving African carriers under serious attack
Consolidation across borders and continents in progress
Non-African airlines are establishing subsidiaries and signingfranchise agreementsBA/Comair, Emirates/Senegal Airlines
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Small size and limited network
Lack of commercial cooperation
Ageing fleet
Safety and security perception
Brain-drain and poaching of
skilled human resources
High cost of operationsfuel,
taxes, charges, fees
Market access and traffic rights
constraints
Aggressive external
competition
EU unilateral regulations
Frequent changes of top
management
Corporate governance issues
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Brain Drain
A major threat to the survival and growth of many Africanairlines
AFRAA has consistently drawn the attention of African aviationstakeholders to this threat and called for action
AFRAA has focused training on safety and managerial skillsdevelopment of airlines
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Environmental Issues
Safety, security, the environment and profitability are the key
challenges confronting the industry Airlines encouraged to modernize their fleet to reduce emissions
AFRAA lobbying against the imposition of unilateral regulation
of aspects of the industry (EU ETS) by the EU
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Liberalise market and work together
Implement the Yamoussoukro Decision to stimulate more
flights across Africa
Liberalisation will speed up growth and prepare African
airlines internally for external competition
Establish commercial cooperation with other African airlines
and expand your market coverage
Some progress on liberalisation have been made in West Africa
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Management Stability
and Autonomy
Shield airlines management from
Government interference in day-to-day operations
Frequent changes of CEOs frustrateimplementation of plans
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Stringent Cost Management
Modernise fleet and adopt ICT to lower operating cost and
deliver competitive service
The emergence of Low Cost airlines (LCCs) should compel
Africans to adopt more rigorous cost management strategies
Lobby government to lower taxes on air travel. This will maketravel cheaper and stimulate more demand
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Adhere to Industry Best Safety Practices
Be IOSA registered
Observe all ICAO recommended safety practices
Provide support to Civil Aviation Authority in the discharge of
its safety oversight responsibilities
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Train and continuously retrain staff to achieve highproductivity
Actively participate in AFRAAand other industry programmes
to keep abreast with new developments
States should ratify Cape Town Convention and Protocols toreduce the cost of new fleet acquisition
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Africa is one of the fastest growing markets in the world
This has resulted in stiff competition and the influx of many foreign
airlines
The real opportunity for African airlines is in growing the intra-
African market
Cooperation among airlines will speed up market penetration, lower
market entry costs and stimulate demand
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Internal liberalisation should be embraced to speed up market
access
Need for stability in management and tenure
Embrace technology and modern business practices
States and regional organisations should take a unified positions
against the EU unilateral regulation of some aspects of theindustry
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