AFRAA Executive Interview

Transcript

Richard Maslen:

Hi, I'm Richard Maslen and welcome to this latest session in the July 2021 edition of CAPA Live. Over the next 30 minutes or so we'll be focusing on Africa, the continent often described as being the last frontier of air travel development, but one that has seen bitterly slow progress with government intervention, visa restrictions, high taxation, poor infrastructure among the many problems that have inhibited growth.

The huge scale of the continent together with its poor ground infrastructure means that air travel is the best option for even short regional hops in Africa, let alone connecting major cities across the continent. But even before today's COVID-influenced world even flying from one side of Africa to the other could entail a lengthy connection often via Europe or the Middle East. In fact, even flying between neighbouring countries could entail a connection via a third that is further away. I'm delighted to be joined by Mr. Abderahmane Berthé, the Secretary General of the African Regional Airline Association (AFRAA). He brings to his position at Africa's airline trade association around 30 years experience in the airline industry, half of that as an airline CEO. Welcome to CAPA Live, Mr. Berthé.

Abderahmane Berthé:

Thank you Richard for having me in this CAPA Live.

Richard Maslen:

Now, it's been 10 years since we first met in Bamako, when you were CEO of Air Mali and Air Burkina, ahead of what was a strong decade for growth in global air travel, and, importantly, also development in Africa or a key decade in Africa. But here we find ourselves in the early 2020s at a challenging juncture for the industry. Just last month, Kamil Al-Awadhi, the IATA Regional Vice-President of Africa in the Middle East, revealed at a virtual press conference backed by the World Health Organisation, the airlines in Africa have lost an estimated 7.7 billion, less the restrictions put in place by governments to combat the spread of COVID have led to a drop in traffic. Seven million employees suffered as a result of this, with eight airline set to have gone bankrupt according to Mr. Al-Awadhi. So, the impact is massive, it's clear. It's really, really hard. So Mr. Berthé, can you perhaps give us an overview, where we are and how Africa has been hit by the COVID-19 pandemic?

Abderahmane Berthé:

Thank you, Richard. In fact, we are facing the most important crisis in the history of aviation globally, and also in Africa. As I was said by Mr. Kamil of IATA, the loss in 2020 was around seven and $10 billion in Africa. And we are still in the crisis. 2021 will be another difficult year at [inaudible 00:05:16] estimating up to $8.35 billion, the loss of revenues for 2021. If you look at the trends for this year, we can see, for example, in June that we have a drop of capacity of 30, 49%, and the drop of traffic is 59%. So, we expect at the end of this year to be around 60% of the level of profit we had before COVID-19. That is a positive move on cargo, since the COVID-19, you have seen that in 2020 cargo business revenues represented 46% of airlines revenues compared to only 20% of revenues in 2019. The demand of cargo is growing, and we are facing a really difficult situation.

Richard Maslen:

It is a real challenge, and particularly the World Health Organisation has highlighted the concern of how the pandemic could spread in Africa. Fortunately, I think we've not quite seen that, but because of the scale of continent, it's been very different what's happening in different areas of Africa. Perhaps you can give me a little overview of one of the best stories and one of the worst stories from Africa from a country perspective.

Abderahmane Berthé:

Yes, you are right. There are a 55 countries in the continent. When the COVID-19 pandemic started, countries reacted differently to the pandemic. If you take one country like Rwanda, they put in place at the beginning, some very strict protection measures and their success is so successful. And the rate of contamination in these countries was very low. In the other countries, they reacted differently. [inaudible 00:07:39] were less stringent, and we are seeing a surge of contamination in those countries. In Africa, the bad news is that two or three weeks ago, we are seeing a surge in the numbers of contamination. This is really worrying, and another thing is the rate of vaccination is still very, very low. It's below 1.5% of the African population. If you compare to other regions, for example, in Europe, to reaching 60% and above. Now, the W.H.O. have set some targets for Africa to reach 10% of vaccination by September, 40% by December, and 70% by mid-2022. It's a challenge. Government need to really speed up the rollout of vaccines across the continent. It's very, very [inaudible 00:08:43].

Richard Maslen:

We're seeing, obviously, in other parts of the world, where, as you mentioned, the vaccine rates really higher. Like in America, there is a return to normal, there's even a beginning of a return of corporate travel there. Here in Europe, it's a mixed picture, but among certain countries, it's a fair way ahead. I think the issue here is that there is this "no country left behind" policy. There is this belief that Africa will not be left behind, but every other country will be vaccinating their own first, that's natural. And for aviation on an intercontinental scale to work, everybody needs to be an equal. Do you feel there's going to be pressure on Africa for a long time until we can really deliver on these vaccine levels that is promised.

Abderahmane Berthé:

Yes, it's a very important, and under the African Union Commission, you have the Africa CDC which is following and managing the vaccination across the continent. It's a very important no country to be left behind because if we have this case, the contamination will still continue if any of the countries, which have a good rate of vaccination. Because there are interaction between countries on the continent. So, there are some task forces set up by the African Union Commission to organise the protection measures across the continent, and also to follow up on vaccinations on the continent. We are following as an association with this task force. We are a member of the task force also because it's very important to have a good level of vaccination to further recovery of the industry, and to bring confidence to passengers and the stakeholders also.

Richard Maslen:

You mentioned the economic cost has been significant on African airlines. Even before COVID hit, African airlines struggled with profitability anyway. It's been a challenge to make money, due to a variety of reasons. And we'll go on to speak about few of those a little bit later on, but what is the real cost? When we talk about, in terms of value, it's just a number, but in terms of losing airlines, losing jobs. Are we at a stage now that we will really see more African airlines fall to the side and collapse?

Abderahmane Berthé:

Yes, the costs for Africana airlines has been very important due to the COVID-19. You have seen seven African airlines going through bankruptcy, being put under [inaudible 00:11:53]. You are right. Before COVID-19, in 10 consecutive years, African airlines were losing... Not profitable, and visitation is today aggravated by COVID-19 of course. There are a lot of challenges faced by our industry. The good news is that even before the COVID-19, we have seen the decision-makers [inaudible 00:12:27], the African Union Commission, some flagship project to create a sustainability for our industry.

I will name the Single African Air Transport Market to the African Continental Free Trade Area, and also the Free Movement Protocol, which are aimed to really support the industry, and to create a conducive environment for the development of air transport in Africa. Despite the fact many airlines are losing money, we have to recognise that air transport is very important for African economies. It's the preferable means of transport on the continent because the ground transportation system is very weak on the continent. Even if airlines are not profitable, their contribution to the GDP, and, in terms of job creation, it's a very critical and important for the African continent.

Richard Maslen:

Yeah, the potential is enormous, and we often talk about the opportunity in Africa, and how it can deliver that. I think we can't talk without bringing up liberalisation. It's something that has been discussed in Africa for decades now. There's the Single Air Transport Market seemed to be getting a bit of traction behind it over the last couple of years. It seemed to be moving in the right direction and hoping to deliver what Yamoussoukro never was able to do for Africa. Perhaps COVID's arrival has sort of pushed it into the buffers, but can that be resurrected quickly? They talk about, in a crisis, being able to use that opportunity as a platform for further development. Will the situation we're in currently, actually be a good platform to push SAATM through, and actually finally deliver on what we've been talking about for decades?

Abderahmane Berthé:

The Single African Aircraft Market objectives was to speed up the implementation of the Yamoussoukro decision [inaudible 00:14:52]. The difference between SAATM and Yamoussoukro decision is that with SAATM, we have now an executing [inaudible 00:14:56] which is the African Civil Aviation Commission. We have also a framework of regulations to support the implementation of the SAATM. So far, we have a 35 states, African states, which have committed to SAATM, and 18 of them have signed a memorandum of implementation, meaning that they review their [inaudible 00:14:57] to make them in compliance with the Yamoussoukro decision. These moves are very, very important, and we know that some countries are still reluctant because they want to protect national carriers. We think that this is a very wrong because we know the benefits of liberalisation for the continent, and the move is not reversible. It may take some time. However, it's very important to move forward in SAATM.

Before the COVID-19, we have been stakeholders working for the implementation of the SAATM, and we have a [inaudible 00:16:23] action plan, including all the stakeholders of aviation sector in Africa. We had our annual meeting this year in March, for example, and I'm very confident that we will move forward the implementation of SAATM. SAATM, in fact, will improve the level of connectivity in the continent. As you said, in your introduction, connectivity is very, very low in Africa, and it's very important to open the market, and this will allow airlines to improve their network, and to put in place more cooperation and connectivity will be better.

Richard Maslen:

From your perspective, and maybe this is a bit of a challenging question, but is there a real appetite within the governments to actually deliver on what you're trying to achieve here? Or are they simply saying, "Oh, yes. We'd like to do that," but then they're never actually committed? And I'm sure there's some that one way, and some of the other, but you need everybody to sign up to this thing. Do you think you can get to that stage or are we sort of making a false belief here that we can actually do something when there's always going to be these barriers?

Abderahmane Berthé:

Yes. You are right now. Only 35 countries committed out of 55 countries. We need to start with the countries which are committed, meaning that there is an agreement at the political level, in these countries. Now at the regulatory level, the civil aviation authorities level, we need to push for the implementation of SAATM. And I'm confident that other countries have no choice to follow this move. If they don't, their carriers, in fact, will not have the benefits of SAATM when they are flying to other countries.

Richard Maslen:

Now, I guess we can look at how... Another major issue in Africa was their safety, and we could look at what progress has been made there by focusing on it heavily and showing that by bringing an effort together, we can make results. But air safety still remains a bit of an issue in Africa, despite that progress. How are you working, particularly, with airlines to just try and ensure that air safety remains a critical part of everyone's plan? Every airline, every stakeholder, every airport and navigation level, that we are still focused on that when there's so much else going on in the world, that's that's impacting our daily lives?

Abderahmane Berthé:

Safety is on top of our priorities. Not only airlines, all the stakeholders. As you said, also airports, service providers. We have seen during the recent years improvement on the safety level in Africa. This was due to some actions from the stakeholders, and the Abuja safety targets was set on 2012, and was revised in 2017s. The joint efforts of all stakeholders have lead to improvement of safety across the continent. Our tower 11, we are working with IATA, and the African Civil Aviation Commission to enhance the safety level in the airlines across the continent. And this project is funded by the African Development Bank. We have started, in fact, in April, and we hope that at the end of this process, we'll have more African airlines getting the certification, the IOSA or ISSA certification which are some safety targets well known in our industry. So we keep focused on safety because without safety, there will be no growth in the air transport industry. And also safety is part of the SAATM [inaudible 00:21:25] transaction plan.

Richard Maslen:

You mentioned a little bit earlier, I mentioned it in the introduction, about connectivity in Africa. This is one of the key things that we are, as an industry trying to provide answers, and to sort of really grow networks around the continent. There's some information that you've actually put out in your air transport reports, a couple of months ago, that among the countries across the African continent, 13 have direct flights to more than 20 other African countries, which is quite startling. The lack of connectivity that there is, and you have a great table in there that looks at connectivity between regions. While we will look within Northern Africa, you say that 69% of possible country links are achieved. When you look between Southern and Western Africa, it's just 3%.

And I think that highlights how big of an opportunity there is to sort of bring new point-to-point operations within Africa. We talk about it a lot, but how can we sustainably achieve that? What is the answer from your perspective, in being able to get airlines to serve more markets within the continent? Is it a fleet decision? Is it having the right aircraft? Is it government supporting them? Is it tourism supporting them? There's lots of factors there, but for what do you think are the key things to actually achieve in this?

Abderahmane Berthé:

Thank you for this very important question. I think really opening a new road for an airline is first a business decision. If there is no substantial profit between two points, no airlines will open a route, of course. That is why the three African Union flagship projects are complimentary, and should be implemented as soon as possible. The African Continental Free Air Trade Area [inaudible 00:23:39] very importantly because we are seeing that African countries are not trading enough between themselves. If they increase trading between countries this will, of course, come back to the level of connectivity.

Also, SAATM will allow more cooperation between African airlines. Cooperation meaning on some routes to put in place some interline or cost-share agreement in order to have more profitable routes. The Free Movement Protocol is something very important to open up African countries. Today, you are right. The level of connectivity is very low At AFRAA, we are putting in place routes intelligence project. The objectives of this project is to identify the opportunities for cooperation between our other airlines on some specific routes, and by the end of this year this tool will be ready. And it will be very, very important for our members, for these tools, to improve cooperation and connectivity across the continent.

Richard Maslen:

I think it's good to hear that you're on top of it, that you're putting together these things to support your membership, but there's lots of barriers there that are hard to break down that will impact everything that's happening. You mentioned an open market. Another fact that you mentioned in your report is on visa openness. That states that only 46% of Africans need a visa to travel to another African country that went up to 50% in 2019. So half of Africans still need a visa to travel to another country. You know, that's highly restrictive, but there's other factors. Taxation is a major problem. How, as an industry body, are you looking to try, and remove a lot of these ridiculous taxes on airport charges, on taxes on fuel that we still see in so many African countries?

Abderahmane Berthé:

Yes. Regarding the visa, there are some improvement. Still very, very slow opening regarding visa. The good news is that we have 32 states now which are authorising to get visa on arrival. This is a very good thing. In some regions, visa openness is more effective. For example, in the ECOWAS region it's effective. And taxation is a big concern for the industry. The level of taxes on the continent is a very, very, very high, and taxes and charges that represent almost 50% of the lower, most affordable base fares in Africa, in overall 25% of ticket cost.

This is very, very high. We cannot, as airlines, only make a decision under this challenge. It's a concern for all the industry. For this reason, AFRAA is staging a webinar, a lab in October. The purpose is to have all stakeholders together, and think out of the box, trying to see what can be the solutions for our industry to lower the level of taxes, and challenges. This will have an impact on transport to demand, of course, and it's not easy. However, we all agree that we need to find a solution to this very, very critical issue.

Richard Maslen:

I think with the taxes, it goes quite well with infrastructure as well. There's a great chart in your report.. And I urge everyone watching this to go on. It is on the site, you'll be able to download it there... That shows the actual average costs per airports across Africa, in charges. From the smallest to the highest, the variation is quite frightening, and the cost, you're looking at an index rise of over a thousand for the most expensive airports to fly into. It's frightening that those levels are so high that... How can airlines make money when the prohibitive costs are there to restrict them from operating their services? Is that one of the biggest issues you're facing still?

Abderahmane Berthé:

Yes, the charges is a big issue, and we have a different level of charges, different types of charges, depending on countries. We think it will be very important to maintain a dialogue with decision-makers in countries, and we call for the putting in place an economic regulatory body at every state's level. Doing so, we will ensure that the decisions on taxes and charges should be made after consultation with the users because taxes can kill the taxes. If there is a very high level of taxes, you may not have passengers travelling, and then maybe airlines will also stop operating into your country. It's a big concerns, and both taxes and charges will be part of the workshop we are organising in October.

Richard Maslen:

So, we're coming to the end of our 30 minutes, time flies when you're talking about aviation, doesn't it? And that quite literally. I think we just have to end talking about governments. I think governments have a major role to play in supporting the growth of air transport. We have a balance now with environmental issues as well, even more. How can airlines and governments build together to ensure that we have a strong, but sustainable commercial air transport market across Africa?

Abderahmane Berthé:

The role of government, of course, is very important because they are putting in place the regulations and regulations will impact the way we are doing our business. That's why it's very important to maintain a dialogue with the government. We don't want to see government just making some inefficient decision, which are impacting our business. To do so, we need also as an industry to be well organised in order to be an advocacy organisation, discussing with state. In this objectives, we have created the African Aviation Industry Group, which is including airlines, airports, navigational service providers, and the lab I was talking about in October will be hosted by AFRAA. And in fact, organised by the African Aviation Industry Group, and the recommendations, which will come up from this lab will serve as a message to government to support our industry and create conditions for the sustainability of aviation in Africa.

Richard Maslen:

Well, it sounds very positive Mr. Berthé, and I really appreciate your time. Maybe we will catch up later on in the year and we can see what results we have found from the webinar, what the feedback has been, and we can continue this discussion. Because, obviously, we could talk for hours about the opportunities you have in Africa, and the hurdles you have to face. It's a challenging time, especially more now we've with the environment we're in. But we are out of time, unfortunately, it's always a pleasure talking to you. I look forward to catching up again, hopefully face-to-face at some time in the future.

Abderahmane Berthé:

I hope so. Thank you very much.

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.