African airlines’ go-it-alone approach to aviation business is making it extremely difficult for them to compete against major international airlines like British Airways.
“African airlines can compete effectively against the big foreign airlines if they can harness economies of scale enjoyed by the bigger airlines, by joining forces in terms of joint ventures or commercial agreements like code-sharing,” writes Achma Asokan, President and CEO of AirlinePros Inc in the latest edition of Africa Tourism Monitor which is published by the African Development Bank.
AirlinePros is a distribution and representation firm for North American airlines and travel suppliers. As the most lucrative in the world, the North American market is responsible for over 25 percent of the worldwide tickets issue. By code-sharing, Asokan is referring to a system by which two or more airlines agree to offer a single ticket and to use the same flight number for connections to a place where only one of them goes.
Asokan says that each African airline that flies into another African country, which has an airline, should ideally code-share with the other airline. He contends that the benefits would be enormous in terms of cost sharing and the possibly of having a reciprocal code-share flight operated by the other airline as well as enable addition of frequencies on any and all routes to facilitate intra-Africa travel.
“One of the key success factors for intra-Africa travel and tourism is the need to match the aircraft capacity with actual demand and increase the frequencies between countries. For example, the demand can support two flights a day between Windhoek and Maun using a 30-40 seater aircraft ÔÇô one in the morning, which can be an Air Namibia flight and the one in the afternoon which can be an Air Botswana flight. Both Air Namibia and Air Botswana could code-share on the route and reduce costs for themselves and provide better connectivity, and service for the tourists and other clients,” Asokan says.
He adds that African airlines face very high lease costs for aircrafts arising from the high-risk profiles of the airlines and their respective countries and that often, airlines are forced to acquire aircraft which do not match the mission for which it is being bought, creating costs without the revenue. Asokan suggests that in order to spur the potential of African aviation and for intra-Africa travel overcome the many aircraft acquisition-related challenges faced by African airlines, African countries should create a joint African aircraft leasing company to.
Despite all the talk about integrating African economies, trade between African countries ÔÇô including those in the same regional economic communities – is severely limited. The oddity of the Air Botswana-Air Namibia example that Asokan gives is that, as the example of Cupidolls International Perfumes shows, trade ties between Botswana and Namibia are not deep enough. When the company opened a factory in Block 8, Gaborone, one very important consideration for it was the country’s central location in SADC. Botswana’s nearness to Namibia was particularly important because the latter is a lucrative market for Cupidolls perfumes. However, the company later found that its banking transactions had to be routed through South Africa and that rather than be sent straight to Namibia, its perfume orders had to go through South Africa. Ultimately, it closed down and its directors went back to Port Elizabeth, South Africa.