Business

African airlines push for consolidation to drive air transport sector

With the ravaging effects of COVID-19 on global aviation, partners and aviation experts in Africa have underscored the importance of leveraging the benefits of airline consolidation to drive air transport sustainability in Africa. They noted that closer cooperation and partnerships would help the continent to reap huge aviation benefits.

 

The experts spoke at a highlevel virtual meeting organised by the African Airlines Association (AFRAA), Lufthansa Consulting, and Kenya Airways in mid-September. A communique issued by AFRAA noted: “Air transport plays a fundamental role in Africa’s socio-economic development.

 

The sector is a catalyst for promoting tourism and fostering trade and regional development. However, Africa represents less than three per cent of global air traffic and over the past 15 years, the continent has had the lowest level of market consolidation compared to the other regions in the globe.”

 

The discussion at the event exposed the reasons for a few partnerships and limited airline consolidation, the challenges and benefits of consolidation, and measures for action by industry stakeholders to address the situation. AFRAA Secretary-General, Mr. Abdérahmane Berthé, in his remarks, stated: “The aviation sector is reeling from the impacts of Covid-19.

 

We need to devise new approaches to doing business in the face of increasing concerns on the sustainability of African airlines.

 

“A crucial element in the success of African airlines is consolidation and collaboration. The engagement of States, airlines and all the relevant stakeholders is necessary to effectively achieve the required outcomes on airline consolidation in Africa.”

 

Speaking during the workshop, Kenya Airways CEO, Allan Kilavuka, said: ”It is crucial to retrace and learn from the footprints of consolidation from different parts of the world as we reset Africa’s aviation towards our collective dream for flying to a better future.

 

Consolidation and collaboration are essential ingredients for the resilience and sustainable business operations of airlines.

 

“The ripple effect of strengthened collaboration amongst airlines will be an increase in the industry’s contribution to the sustainable development of Africa and therefore we must elevate the tenor of discourse and make the airline industry matter in and for Africa.” Head of Market Africa, Lufthansa Consulting, Ms. Catrin Drawer, stated: “We require to meet the challenges of the “New Normal”, a reset in our thinking and approach.

 

We require new business models, meaningful innovations in operations, adaptive management open to change, a growing true synergistic relationship between airlines and other relevant stakeholders. New challenges need new solutions now and in the future to bring both resilience, and sustained success.

 

“Thus, synergy and meaningful partnering, whether through existing contracts and alliances or new agreements, will be essential. We cannot bring back yesterday but we may together shape the future.”

 

Lufthansa consulting experts provided an in-depth analysis and background of the consolidation of airlines from a global to an African perspective.

 

The impacts of consolidation for African airlines, passengers, cargo, air transport growth and connectivity were discussed. Case studies were presented at C-level by Kenya Airways, Air Afrique, and Ethiopian Airlines to enrich the discussions with first-hand  experiences on the challenges, benefits of consolidation as well as the lessons learned.

 

The workshop delivers insightful recommendations, among which include the call for operators to consider various models of consolidation including equity partnerships between two airlines or across a group of investments, cooperation between two or more well-matched airlines, or the formation of a new common airline.

 

The concept of “Air Afrique” remains a valid consideration for Africa. It called for corporate governance as well as increased participation of Development Finance Institutions (DFI) to drive airline consolidation across Africa.

 

The experts on Regional Economic Communities (RECs) were asked to lend greater support to African airlines to drive consolidation on the continent.

 

The workshop also called for exploration of cargo opportunities for air cargo consolidation, government support as well as proper evaluation of airlines going into consolidation.

 

The experts also called on the industry stakeholders to “walk the talk” – translate ongoing discussions into action in the interest of delivering accelerated benefits to the aviation ecosystem.

 

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