UNITED NATIONS
ECONOMIC AND SOCIAL COUNCIL
September 1999
ENGLISH Original: French
ECONOMIC COMMISSION FOR AFRICA
Conference of African ministers responsible for civil aviation
Conference of African ministers responsible for civil aviation
Meeting of Experts 9-12 November 1999
Yamoussoukro, Cote d'lvoire
Ministerial Conference 13 - 14 November 1999
Yamoussoukro, Cote d'lvoire
DEVELOPMENT OF AIR TRANSPORT SERVICES :
CHALLENGES AND PERSPECTIVES
DKVEI jOPMENT OF AIR TRANSPORT SERVICES:
C11ALLENGKS AM) PERSPECTIVES
I. INTRODUCTION
1. Air transport has undergone major regulatory and technical developments since the adoption of thel988 Yamoussoukro Declaration on the Establishment of a New African Air Transport Policy. The working group that was established in preparation of this Regional Conference of Ministers Responsible for Civil Aviation therefore considered that it was proper to draw the attention of senior officials responsible for civil aviation to matters on the major developments, the challenges and the perspectives both at the international and African level in the industry. The document has been confined to the priorities identified by the working group and this document mainly deals with these priorities. In addition, some of these priorities have been developed in view of the importance given by the working group to draw the attention of policy makers. Duplication in the work of institutions has been avoided as the report is based on the observations and recommendations of some organisations.
II. DEVELOPMENT OF THE INDUSTRY
2. The development of the industry as outlined by the International Civil Aviation Organisation (ICAO), the World Trade Organisation (WTO), United Nations Conference on Trade and Development (UNCTAD), the Association of African Airlines (AFRAA) could be summarised as follows:
1. General development
3. The civil aviation industry is one of the best in the world. Every year it produces a gross turnover of US S11401 billion throughout the world and has created 24 million jobs.
There is a relationship between the development of air transport and tourism .as each sector will promote the development of the other. During the last 40 years air transport services have developed faster than the world production. Since 1960 passenger traffic has grown by 9 per cent per annum and airfreight by 11 per cent per annum whereas at the same time the world's GDP has only increased by 3.5 per cent per annum.
1 Report of the UNCTAD Secretariat April 1999.
volume), goods traffic (28 per cent) and postal services, whose share is on the decline (2 per cent). The earnings indicate that passenger traffic is still very important accounting for 88 per cent of the total traffic against 11 per cent for freight and 1 per cent for postal services. One of the significant observations in the past and which should continue in the future in the three areas is the disparity in competition between the transporters from several developing countries and transporters from most of the developed countries.
5. For the past few years there has been a strong concentration of this civil aviation market in North America and Europe and a growing market share and growth rates of the Asia Pacific. According to the forecast of ICAO, the latter region in view of its flexible regulatory regime and its trade development will increase its market share fast as well as its growth rate during the present decade and the subsequent decade. Latin America, the Middle East and Africa will continue to progress slower than the other region.
6. Three quarters of the international passenger traffic is handled by transporters from the developed countries and a quarter by transporters from developing countries. In the same vein about 60 per cent of freight is transported by companies from developed countries and 40 per cent by companies from developing countries. Asia-Pacific is the most dynamic of all the
developing regions.
7. From 1985 to 1995 the total earnings from scheduled airline operations increased from an average of 7.5 per cent per annum that is $ US 166.2 to $ US 291.0 billion. The operational costs (expenses) increased at the same pace and went from $ US 156.0 to $ US 274.5 billion during the same period. According to the region the earnings and the output from operations (profit/losses) in 1996 stood respectively at $ US103.1 billion and $ US 6 2 billion in North America at $ US 82.4 and $ US 2.7 billion in Europe, to $ US 68 and $ US 3.2 billion in the Asia-Pacific region, to $ US 14.3 and $ US 0.3 billion in Latin America and in Caribbean, to $ US 8.1 and $ US -0.2 billion in the Middle East and to $ US 6.6 and $ US
0.1 billion in Africa.
8. The ICAO forecast for the period 1995 to 2005 have shown an increase in passenger traffic from $ US 373 to $ US 680 million with air freight on scheduled flights increasing from 13 to 24.4 million tons with the number of passenger per kilometre on schedule flights from 1 billion 241 million to 2 billion 395 million and number of tons of freight per kilometre on schedule flights from 70, 273 billion to 145,720 billion. The deceleration in the economic activity of the Asia-Pacific region has led to a drastic reduction in both internal and international traffic in the region as well as in the traffic flows between this region and the other regions this is why during the period 1995 to 2005 the growth forecast, (in billions of passengers/kilometres) was revised downwards by ICAO and changed from 1,260 to 1,081 and the average annual growth rate from 8.5 to 7 per cent for the Asia-Pacific region. For the whole world this forecast was changed from 3,807 to 3,629 and the average annual growth
rate from 5.5 to 5 per cent.
9. From 1988 to 1997 countries classified among the first 10 according to the number of passengers per kilometre in international traffic were the United States of America, United Kingdom, Japan, Germany, Netherlands, Singapore, France, the Republic of Korea, Australia and Canada. During the same period, some developing countries were among the first 30 in the world according to the number of passengers per kilometre. Thirteen of the 30 principal transporters were based in developing countries albeit non-African.
10. In 1998, according to the annual report of the ICAO council the total schedule traffic carried out by airlines from the 185 contracting states reached about 1,462 million passengers and about 26 million tonnes of freight.
11. At the level of the region about 36 per cent of the total volume of traffic (passenger/freight/postal services) were transported by airlines from North America.
European airlines transported 28 per cent, Asia-Pacific 26 per cent, Latin America and Caribbean 5 per cent, Middle East 3 per cent and African airlines 2 per cent. The transporters of the three countries, which have dominated the industry, were United States, Japan and the United Kingdom, which combined, transported 46 per cent of the total volume of regular passenger services as well as freight and postal services and transported 32 per cent of the international services. On airport operations, the preliminary estimates of ICAO for 1998
show that 252 of the largest airports in the world received about 992 million passengers and
recorded 11 million movements in air transport trade. None of these airports is located in Africa with 17 in North America, 5 in Europe and 3 in Asia,12. The earnings recorded in 1998 by schedule airlines in the contracting states of ICAO was estimated at $ US 298,500 million and their operational cost at $ US 282,000 millions or a profit estimated at 5.5 per cent from earnings.
13. During the decade 1989-1998 the number of aircraft operating commercial transport services increased about 60 per cent from 11,353 to 18,139 (excluding aircraft with a maximum of takeoff mass below 9T). In 1998, airlines ordered 1,463 engine propelled aircraft for a financial cost estimated at $ US 84 billion.
2. General development in Africa
14. For the 33 airlines which are members of the Association of African Airlines (AFRAA) with information available the development in the industry could be summarised as followed in the period 1987 to 1998:
See the annual report ICAO 1998
Number of passengers Revenue
Passenger/kilometre Revenue per kilometre Tonnage of freight Tonnage per kilometre available
24,754 35,666,545 4,326,840 405.2 8,125,276
II^H^HHIiiiiiilliB;
28,719 56,927,030
6,970,604 439.5 14,709,657 Source: AFRAA
15. During the same period the international traffic constituted the major market for airlines which were members of AFRAA accounting for 45.8 per cent of the passenger traffic and 72 per cent of revenue from passenger per kilometre. This international market was characterised notably by a stiff competition between the African and foreign airlines. The foreign airlines accounted for about 75 per cent of the international traffic. This situation should worsen in the future following the implementation of new policies and trade practices such as the code sharing, franchise, equitable participation etc.
16. The international traffic in Africa rose in 1987 from 9.7 million to 13 million in 1998 that is an average growth of 20 per cent. The revenue from passenger per kilometre in respect of airlines members of AFRAA rose during the same period from 24.5 billion RPK to 43 billion that is an increase of 41 per cent. Freight rose from 219 thousands tonnes to 278 thousands tonnes; an increase of 26.2 per cent. The performance by African airlines is hardly adequate to ensure the viability of any of these airlines.
17. Intra-African traffic develops slowly varying between positive and negative developments but the situation is changing. Following the establishment of certain liberalisation and flexible measures in the granting of traffic rights, several and new intra- African connections have been established. As a result the revenue passenger per kilometre in 1998 rose from 3.4 billion RPK to 7.5 billion; an increase of 51 per cent. The number of passengers on the intra-African routes rose from 2.52 to 4.1 million an increase of 30 per cent and freight rose from 39 to 91.1 tones.
18. The domestic passenger traffic has remained at 12 million passengers and the domestic
freight dropped considerably.
19. The information provided by the airlines shows that there has been a substantive
increase in the total revenue which rose from $ US 3.5 billion in 1987 to $ US 5.6 billion in
1997. However, this figure does not show the difference between the performance of the
individual airlines. In 1997 it was observed from the information made available by airlines
which were members of AFRAA that 16 airlines made a profit of $ US 269 million and 15
made a net profit $ US 201 million. During the same period 6 airlines made a net loss of $ US 78 million. In 1998, 33 airlines, which are members of AFRAA, employed in all 93,273 workers with maintenance engineers constituting 17.9 per cent, pilots 5 per cent, and cabin crew 9.8 per cent, marketing officers 27.9 per cent and other category of workers 39.1 per
cent.
3. Development of an economic regulatory framework
(a) General development
20. The Chicago Convention is the foundation for the organisation of world air transport services. The first article in the Convention is the principle that each state is completely sovereign and has exclusive rights over its air space. The Convention establishes similar national control over non-scheduled services (article 5) and authorises the states to limit cabotage to national transporters and forbids the granting of exclusive cabotage rights to a single partner (article 7). However, this principle does not necessarily imply a bilateral organisation of the traffic. Contrarily, the International Civil Aviation Conference that was held in Chicago in 1944 in its final act adopted two multilateral instruments that guaranteed
"air freedom" namely the agreement on the transit of international air services and the agreement on international air transport, the five air freedoms.
21. After the failure of a proposed multilateral agreement on trade rights in international civil aviation transportation, the agreement entitled "Bermuda" was signed in 1946 between the United States and the United Kingdom which served until 1978 as a model for the bilateral agreements concluded by states.
22. The classical type of bilateral agreement namely Bermuda 1 is based on detailed negotiations on three "pillars" - the air routes (namely traffic rights in the strict sense of the word), capacity and tariffs, as well as various provisions of lesser importance. During the first thirty years each of these provisions evolved with respect to the erosion of government control.
23. During the years, these bilateral practices led to the development of services on air routes according to the new types of flights authorised namely: the five freedom rights as approved by the ICAO and commonly known by the countries as:
♦ Sixth freedom : the right to a transporter from a country to perform a service between two other countries by going through the country where it is registered (combination of third and fourth freedoms);
♦ Seventh freedom: the right to a transporter from a country to operate services entirely out of its own country and perform a service between two other countries;
♦ Eighth freedom: the right to a transporter from a country to perform between two points located in the territory of another country (cabotage);
a service
♦ Ninth freedom.: the right to a transporter from a country to operate cabotage traffic
strictly within the territory of another country.(b) Specific developments in the world
24. In 1978, the United States deregulated its domestic market to ensure greater expansion of air services through the elimination of certain non-physical barriers. Since this period, liberalisation and regional and subregional agreements have made progress. In the 1980s!
liberalisation in Europe was established and was implemented in three phases over a period of ten years. The Yamoussoukro Declaration on a new African air transport policy was adopted in 1988 but its implementation has not kept pace with the timetable that was set for 1998. The Andean Pact, which was adopted in 1991, is presently operational. The multilateral agreement on the development of air services in the Caribbean Community, (CARICOM) was adopted in 1998 and it is operational. The Fartaleza Agreement was negotiated in 1996 by the countries of MERCOSUR and it has been implemented. The South East Asia Cooperation Agreement was approved in 1998 and it is in force. The African Economic Communities such as COMESA, CEMAC/UDEAC, and ECOWAS, AMU, SADC (SATCC-TU) and the signatories of the Banjul Agreement have outlined new policies on the regulation of intra- African and international air services. These policies are either being prepared or being studied with a view to defining their operational modalities.
25. All these initiatives and policies are aimed at providing users with safe and efficient air services at affordable cost in view of the market competition.
26. Through their policy of "Open Skies", the United States has succeeded in opening up foreign market in about 35 countries beginning with the Netherlands in 1992 and more recently with Bahrain. This development is likely to continue and similar negotiations are underway with some African countries.
27. The Organisation for Economic Cooperation and Development (OECD) is currently examining the possibilities of developing cargo services through the establishment of a
multilateral regime.
28. All the new policies and initiatives have some differences but they are based on a common denominator which is the need to adopt a pragmatic and efficient approach to develop
the civil aviation industry.
(c) Technical development
29. In parallel with the development of air service following the adoption of new civil
aviation policies, there has been a significant technological development in the industry
namely: (i) aircraft modernisation; (ii) adoption of norms on aircraft noise; (iii) development
and planning for the establishment of communications, flight, surveillance and management
systems on air traffic (CNS/ATM). With regards to the last point countries have made efforts
both individually and collectively. The examples are ASECNA, SATCC-TU, COMESA, the South Africa initiative etc. A world conference took place in May 1998 in Rio de Janeiro to discuss the series of measures to facilitate the speedy implementation of the systems CNS on financial, management and training cooperation. Through the regional planning groupings and the subregional arrangements considerable progress has been achieved in all regions of the world in CNS/ATM. ICAO is pursing this matter including the establishment of a financial arrangement as proposed by the Rio de Janeiro conference.
30. Finally the air transport industry has rapidly adapted to the development in information technology on the sale, marketing and access to markets. The imminent launch of an African satellite through RASCOM would assist African transporters to use new communication services at least cost.
(d) Facilitation
31. The practices recommended by ICAO in the Annex IX of the Chicago Convention have been followed more or less by the states. However, several developing countries have introduced policies designed to promote the rapid movement of persons and goods of their nationals. These new measures have promoted the transportation of passengers in certain cases by airlines registered in these countries, which has in effect distorted competition.
(e) General agreement on trade in services (GATS)
32. Like the other service sectors, air transport services since 1995 are under GATS.
However, air transport services are only partially covered. Its present field of operation is defined in the paragraphs 2 and 3 of the GATS annex on transport services and it is characterised by general exclusive traffic and "services directly linked to traffic rights".
However, in the provisions of the annex it is stipulated that the Trade Services Council will examine periodically and at least every five years the development in the sector and the implementation of this annex with a view to implementing the Agreement on a wider basis in the air transport sector. This review will be done in the year 2000. At the moment the agreement deals with measures on: (i) repair and maintenance services for aircraft; (ii) the
sale3 and marketing of air transport services; and (iii) the computer reservation system (CRS).
Kenya and Morocco are among the countries that have made commitments on repair and maintenance services; Kenya is among the countries, which have made commitments on CRS.
33. It should be noted that whereas air transport does not form part to a large extent of the GATS rules, it conforms nevertheless, to certain GATT rules according to articles 3 and 5.
Article 3 of the GATT rules states that the principle of national processing extends to the internal transportation of goods. In this case, the idea of transport means all the modes of transportation including air transport. Article 5 states the strict and detail areas on the traffic of transit goods, which includes air transport.
3 Sale and marketing cover "the possibility of an air transporter to sale and market freely his air transport services
including all aspects relating to marketing such as market studies, publicity and distribution.
(f) Business operation
34. The issues dealt with by the fourth ICAO World Conference held in 1994 have demonstrated that significant changes are talcing place in: the concept of ownership of airlines;
the designation of airlines; flexibility on the rules governing capacity control, establishment and approval of tariffs; attribution of flight slots; stopovers, utilisation of foreign personnel
and market access.
35. There has been an increasing use of franchise, which complements the development of regional airlines, and hub strategies since it enhances the less risks toward zones where direct operations would not be necessarily very viable. The objective of franchise is to channel regional traffic towards international and intercontinental flights. It resolves also the provisions pertaining to nationality in the bilateral agreements and in the restrictions on foreign participation in national airlines. There is also the development of alliances and practices such as code sharing. This latter point has given transporters preferential access to
protected traffic through international access point.36. Finally, privatisation is developing slowly in various forms in all the regions of the world. Privatisation has met with opposition in Africa but at the moment more than 10
airlines have been earmarked to be privatised.(g) The role of governments
37. In order to enable air transport to play its full role in globalisation and trade, nearly all the countries in the world including African countries have undertaken both individually and collectively far-reaching institutional and regulatory reforms on access to air service markets.
This has led to the establishment of autonomous civil aviation and airport management authorities as well as the development of infrastructures. Governments are increasingly aware of the need to change their policies involving the protection of national airlines and interference. These policies did not take really into account the interest of consumers of air services. The governments increasingly recognise that protectionism has reached its limits.
They acknowledge the need to review the concept of ownership of national airlines which were created with difficult twin objectives that could be combined namely: provide inter African and international links while participating in national physical integration and in economic and social development. In this regard, the airlines notably were obliged to provide
non profitable services to isolated regions and communities.38. These operational methods have demonstrated their limits and African governments are reviewing their role through their withdrawal from the management of airlines and infrastructures as well as the reduction and elimination of subsidies to these airlines and the liberalisation of the conditions on market access without making them completely marginal in
the international scene.
(h) Development of non-scheduled services
39. Most countries have flexible measures to regulate non-scheduled passenger and freight flights. Tourism has rapidly developed therefore in several countries. Some countries on the other hand conscious to protect their national airlines have strengthened their regulations to discourage non-scheduled passenger flights resulting in the drop of tourist arrivals.
(i) Air security and safety
40. Security and safety issues have been dealt with in the development of traffic following the adoption of liberalisation policies and flexibility in market access. A world-wide ICAO programme on the supervision of the management of security has been approved by the ICAO Council. This programme provides for compulsory and regular checks on security in all the states as well as providing for greater transparency in the dissemination of the outcome of these checks. The United States through its initiative called "Safe Skies" for Africa has decided in the first instance to assist eight African countries to improve the quality of their air security and safety at home. Moreover, in addition to north African countries, considerable efforts have been made by Ghana and Ethiopia and they have been classified in category I of countries.
m. CHALLENGES FACING AIR TRANSPORTATION
41. International civil aviation is facing challenges such as institutional structures, the management of infrastructure and equipment as well as the development of air services by the airlines.
!• Global challenges
42. The common world challenges include:
(a) The new role of governments in the civil aviation industry;
(b) The liberalisation of the economies of the states and globalisation;
(c) The emergence of regional and subregional economic integration groupings and market access;
(d) The strengthening of security and safety and fulfilling the concerns on the protection of the environment;
(e) Utilisation of technology and information services;
(f) The establishment of CNS/ATM.
(g) The mobilisation of resources for infrastructure development as well as the
development of communication equipment and services;(h) The implementation of new regulatory policies including the implementation of
rules on out of territory competition;(i) The spin off effects from GATS.
2. Specific challenges to African air transport services
43. Civil aviation in Africa at the moment is going through a revival following difficulties years due to the manner in which the states and the operators of air transport services and infrastructures did business. In the future, African air transport services will be confronted with several challenges because the continent has lagged behind for more than two decades.
These challenges among others include:
(a) The role of governments, privatisation and geopolitics
44. The manner in which air and civil aviation services are provided is undergoing major changes and will continue in this direction as indicated above throughout the world. African
countries will have to redefine their role which should be limited to (i) the regulation andimplementation and (ii) the management of security and safety. They should also avoid issuing licenses of convenience. Governments will have to implement pragmatic policies at the regional and subregional level in order to develop and safeguard the African civil aviation industry. In this regard, they should take into account globalisation and market competition.
Misgivings and excuses on the implementation of international rules as well as protectionist policies will only serve to increase the gap between Africa and the rest of the world in civil
aviation matters.
45. Governments should create the conditions for private sector participation in the civil aviation industry. In the emergent environment, privatisation and the establishment of cooperation with other airlines seems a pressing option with considerable potentials for several African governments. At a time when various options to revive African airlines have been proposed including a strategic partnership between airlines and other regional arrangements it is obvious that going it alone has less chance of success. Civil aviation has become too much of a burden for a single transporter. The small transporters or African countries individually can not take up the world challenge alone. In these circumstances, it is imperative that there should be a grouping of airlines and state owned airlines as well as an establishment of a worthy and viable enterprise. However, precautionary measures should be taken within the framework of state divestiture to prevent the African civil aviation industry from being
"colonised".
46. Parallel with the change in the role of the state, the African air transport industry is facing challenges from liberalisation and the establishment of world alliances. These changes are already been felt in Africa. Europe has completed its internal liberalisation and is making an effort to spread the concept of this liberalisation to its relationship with the third world.
The civil aviation initiative of the American government is aimed at Africa through the arrangements on code sharing and the adoption of an "Open skies" policy in the first instance.
Other regions of the world have also started the process of liberalisation with these developments. Africa is a hostage of past inertia and lack of political will as opposed to other regions of the world such as Europe, Latin America etc. The widely discussed intra-Africa liberalisation has still a long way to go before its implementation as well as the creation of a single air transport market and the adoption of a common approach in the face of external competition.
(b) Improving the performance of bodies responsible for the reeulation and development of air services and infrastructures (private sector involvement) 47. African civil aviation can not play its role without the existence of an autonomous civil aviation authority to carry out its functions independently and possessing the necessary technical, financial and human resources. The provision of safe, efficient and affordable services depend on the existence of strong, autonomous airlines which are managed on the basis of economic viability and free from any state interference. The infrastructures and equipment should meet the requirement of increased air traffic as envisaged by the international organisation. However, it has been noted that most African civil aviation bodies are going through difficult situation as far as their status are concerned as well as a lack of financial resources and inappropriate management. African countries should therefore use privatisation as a means of improving the performance of the services and infrastructure of air
transport services.
(c) Utilisation of services and communication technologies
48. The modern world and international trade services will continue to be dominated by
the utilisation of telecommunication system and services which unfortunately are still to be mastered or made available to all the potential African users. Indeed, certain regions for example are making trials on the use of electronic systems to reduce the loss of luggage.These systems are also used to improve ticket sales and marketing services in many regions and thereby reducing operational cost of the airlines. Likewise, there is a use of a modern telecommunication systems for issuance of tickets, passenger check-in and attendance to passengers as well as transmission of information, the interchangeability of passenger and airport data, the payment of bills, the management of air and trade agreement and distribution of services etc. African air transportation can not be developed without these services.
49. In the past, African civil aviation policies did not take wholly into account the interest of users. As a result of their monopoly and protectionist policies in the industry, African airlines did not pay the necessary attention to passengers and users of air services. With competition from globalisation, the alliances and other national measures taken by some states, African countries should give greater attention to the rights of passengers. The African governments and the providers of air services should resolve the questions of: the availability of information on flights, the regimes on responsibility, physical comfort, the appropriate transportation of luggage, over booking, denying passengers the rights to board aircraft, luggage entitlement etc. It will be necessary that appropriate policies should be adopted by African countries to prevent a situation of anarchy and arbitration in courts, which will have a negative effect on the civil aviation industry.
(e) Facilitation
50. Africa is lagging behind in airport facilitation. Inter-African and international trade is hampered by the slow nature of the administrative procedure, the lack of appropriate personnel and insufficient technical capacity, which are common features in facilitation at African airports.
(f) Participation in tourism development
51. The World Tourism Council has estimated that this industry has a world turnover of US 3,400 billion in 1995 that this figure will double in 2005 to reach $US 7,200 billion.
52. In 1998, Africa was one of the main tourist destinations in the world. In 1997, Africa recorded the highest growth rate in tourist arrivals in the world with 9.2 per cent as compared
to 1996.
Revised Estimates in 1997
World Africa America East Asia Pacific Europe Middle East South Asia
Tourist arrivals in thousands 1996
597,827 21,553 116,673 89,186
348,999 14,084 4,332
1997
612,835
119,056 90,163
360,774 14,759 4,546
Variations in percentage 97/96
3.0 P£
2.0 1.1
3.4 4.8 4.9
96/95
5.5
74 5.5 9.6
4.5 4.6 3.1
Earnings from tourism in millions of $ US
1996
433,863 S.334 112,854 81,352
219,670 7,739 3,914
1997
443.770
$,712 120,251
83,153
218,918 8,585 4,151
Variations in percentage 97/96
2.3 4.5 6.6 2.2 -0.3 10.9 6.1
96/95
8.1 14.8 9.7 10.1 6.2 8.8 11.1 Source: World Tourism Organization
53. Egypt alone was the destination in 1997 for about 3.7 million tourists and it earned
$US 3.9 billion that year. In 1990, Egypt was classified as the fifteenth tourism destination in the world. In 1997, Africa earned about $US 8,712 billion from about 23,537 tourists.
54. Tourism in Africa depends to a large extent on air transport, which is the most common form of transportation used by international tourists to visit Africa. It is inconceivable to develop tourism in Africa without an efficient, safe and affordable transport system. Indeed, the road system is inadequate and the land transport links both between states and between continents are not adequately developed. Despite the fact that ECA has initiated nearly 20 years ago the development of Trans-African highways, the investment requires to build these roads are quite high. The construction of these roads can only be carried out with the improvement of the economies of African countries or when they have paid off their debts.
Furthermore, financing the construction of these roads is facing a dilemma of ensuring maintenance of the present roads, which are in a poor state at the moment, as well as the reluctance of donors to finance the construction of few roads. In both cases and even though the roads did exist, modern tourism especially international tourism could only utilize aircraft as a means of travelling to Africa.
(g) Financing of infrastructures and civil aviation activities
55. Despite considerable progress made by African countries in the improvement of their communication system, considerable efforts still remain to be done to develop their airport infrastructures namely: the maintenance and expansion of building, runways, equipment and facilities for the storage of freight.
56. ICAO estimated the sum of $US 350 billion as investment for the development of airport infrastructures of the world to enable these airports meet the growing traffic needs in the next ten years. AFRAA forecasts that Africa would need by the year 2015, 707 aircraft to meet the growing traffic needs and for the renewal of its ageing fleet. African airlines will need 388 aircraft for fleet renewal and 176 more aircraft to meet the growing demand. The investment required will be $ US 38 billion with an additional sum of 5 billion to meet the cost of installations making a total of $ US 43 million. The governments and the airlines would therefore have to seek these funds from the private sector through the establishment of new resource mobilization policies. In this regard, encouragement should be given to the establishment of civil aviation funds and the strict use of these funds for the development of civil aviation activities. For example, IATA showed that in 1998 the member airlines of the Association at a worldwide level paid the sum of $ US 7.4 billion as landing fees and dues on the one hand and $ US 6.3 billion as flight dues on the other. These sums that have been collected by the countries and the African organizations in the form of dues and taxes could be paid into funds to develop the civil aviation industry.
(h) Development of human resources
57. The personnel that have been trained by the majority of states have attained the retirement age and/or should be retrained to better adapt to the effects of globalization and competition. Furthermore, during the course of the next 20 years it is estimated that African airlines would have trained 3,600 pilots and 12,000 technicians to meet the needs for the replacement of its personnel and its growth requirements. As Africa has limited training institutions, it is obvious that the present installation cannot cope adequately with the personnel training requirements. The governments should therefore rethink its training capacities for its skilled personnel and the establishment of the necessary institutions to meet the high demand and ensure the availability of the personnel.
(0 Cooperation between airlines and marketfragmentation
58. The fragmentation of the African air transport industry in small units was inherited at the dawn of independence and it is among the many issues, which should be given greater attention by the management of airlines and African governments in the dawn of the third millenium. Without much consolidation African airlines continue to be small, fragmented and, in most cases, are inefficient in view of their size and the lack of the required economies
of scale.
59. Comprising a fleet of about 540 aircraft, which is less than the fleet of American Airlines, African airlines are very small, compared to the world norms. The biggest African airlines are even smaller than any major American or European airline. The fragmentation of African airlines and the market will continue to prevent them to attain the required economies of scale to enable them become credible actors in international civil aviation.
60. It is foreseeable that a large number of private airlines will be established or will enter into competition with the national airlines on domestic and regional routes and sometimes even on intercontinental routes through the establishment of services to destinations that were abandoned by the existing national airlines.
61. It is also assumed that very few African airlines on their own can develop a major trans-continental network. The majority of them would be confined to remain as regional and as specialized transporters as a result of market forces and subregional groupings, which are
presently emerging.
62. A greater political will and as well as a more vigorous trade determination will be
required than in the past to enable African airlines work in partnership and operate joint
flights. The smallest regional airlines in the subregion will be encouraged to conclude trade
agreements and other such agreements with one or more of the international airlines.
0') Access to foreign markets, improvement of services and development of networks
63. Whereas the network of African airlines focuses their development on the international network with European destinations as the focus to the detriment of the regional network which is still weak, it is expected that other continents other than Europe such as the United States, the Middle East and Asia will be given greater attention.
64. Within the framework of the development of the intra African network, it is expected that the number of airlines as well as the number of flights will be increased overtime with a greater number of cities being served as well as a larger number of companies coming on the market through the establishment of more flexible policies on African market access.
(k) Viability/development of airlines
65 In the past African airlines were generally weak in competition and their operational costs were high and this trend might continue into the next millennium. Indeed, and assuming that the present structures and sizes are maintained it is very probable that most of the African airlines would not be competitive and would be unable to reduce their operational costs.
66. Individual African airlines are not large enough to enable them reduce their operational costs. Indeed, training costs are high and there are no savings on the purchase of aircraft, on spare parts and other supplies. Insurance and maintenance costs, which are done outside Africa, are high.
67. African airlines will only improve their competitivity through the establishment of quality service, a greater number of flights and convenient time-tables as well as through better management of products and earnings and a more competitive tariff structure.
(I) Growing competition
68. In addition to a long list of challenges facing African airlines, there is a very visible growing competition. There is growing foreign competition as well as competition among African airlines. There has been several new and private airlines thereby increasing the number of transporters competing on the same market.
69. The network Africa - Europe will be largely dominated by the major world airlines with a vast international network and possessing the commercial skills to gain the confidence of travellers. As a result, the market share of these foreign airlines will increase while that of African airlines will diminish.
70. It is foreseeable that the major transporters will lower their tariff compared to most African airlines and will therefore marginilize the small companies on the market.
71. The competition within the intra-African network will take a new dimension as the number of major foreign airlines penetrate the regional network through the establishment of
arrangements on code sharing, franchising and new commercial agreements.■72. As liberalization takes root and the expected economic growth and traffic is
consolidated, greater number of foreign airlines will operate in Africa.73. In order to adapt to this growth and to ensure a market share, which is on the increase,
transporters and African governments should undertake activities to enable their airlines to be well placed to derive benefit from this growth.IV. PERSPECTIVES
74. The development of trade in any given region is closely linked to the economic situation. It is therefore necessary before outlining the perspectives of air services development to summarize the economic performances of African countries. However, the perspectives will be seen from the issue of quality, improvement of air services and the impact
of a liberal policy on market access.(a) The state ofAfrican economies in 1998*
15. For the fourth consecutive year the Gross Domestic Product (GDP) of Africa was faster than population growth which was in sharp contrast with a decade and half in the decline of revenue per inhabitant. The growth in GDP of 3.3 per cent compared with a
growth of 2.9 per cent in 1997 was the highest throughout the world.76. This growth is a welcome success for Africa. Nevertheless, this growth is below the required level to make a significant impact on poverty. In order to reduce poverty by half in the next fifteen years, it will be necessary to attain a sustainable average growth rate of 7
percent per annum. This is a major challenge for African policy makers and their economicpartners.
77. This recent growth in the African economy is the more noticeable as one considers the growing decline in the world economy. There has been a slow down in the world economic growth from 4 per cent in 1997 to 2 per cent 1998. The recession in Asia that was triggered by the monetary crisis in East Asia spread throughout the world in three forms. Market economy shrunk in the emerging countries whereas the governments pursued restrictive fiscal and monetary policies to safeguard and protect their economies. Generally, export demands dropped. There was also pressure for reduction in the price of goods. These combined factors contributed to a reduction of world trade from 6 per cent in 1997 to 2 per cent in 1998.
ECA 1999 report
78, The five major economies of the continent (South Africa, Nigeria, Algeria, Egypt and Morocco) account for 37 per cent of the population in Africa and 59 per cent of GDP. On the other hand, the 11 oil exporting countries, Algeria, Egypt, Libya, Tunisia, Cote d'lvoire, Nigeria, Cameroon, Gabon, Republic of Congo, Angola and Equatorial Guinea account for 49 per cent of GDP and 36 per cent of the population.
79 The aggregated economic performance in Africa in 1998 (3.3 per cent of growth compared to 2.9 per cent in 1997) was not equally spread over the continent. Only North Africa and the Central African subregions recorded growth in 1998 whereas the growth rate in the East, West and Southern subregions declined. The oil exporting countries have maintained their growth rate as a group (3.7 per cent in 1998 against 3.6 the previous year) but the growth rate in Gabon and Angola fell by fifty per cent whereas the growth rate in the Republic of Congo and Algeria rose as a result mainly of the revival in agricultural activities and drop in the oil price. The non-oil exporting countries recorded a growth of 2.9 per cent against 2.3 per cent in 1997. It is encouraging that the thirty-three least developed countries recorded a GDP increase from 2.4 per cent in 1997 to 4.1 per cent in 1998. The increase in the five major economies stood at 2.2 per cent against 3.1 per cent. Only two countries (the Comoros and the Democratic Republic of Congo) recorded a negative growth rate in 1998 instead of four (the Comoros, the Democratic Republic of Congo, the Republic of Congo and Morocco) in 1997. Nevertheless, only three countries (Botswana, Republic of Congo and Equatorial Guinea) recorded a growth rate of 7 per cent or more in 1998, the average growth rate required to reduce poverty by half now and against the year 2015.
80. Agriculture still remains the dominant sector in Africa and its revival has contributed to the growth of GDP in 1998. Favourable climatic conditions and reforms have led to the improvement in the availability and distribution of modern resources as well as credit leading to an improvement in performance. However, the removal of subsidies and the reduction in the growth of public services following reforms have negatively affected the small producers in the agricultural sector. The constraint in the sector degenerated following the reduction in donor assistance in respect of rural development projects and investment in the rural social services. These developments have had a negative impact on the prospects for the development of food self sufficiency in African countries.
81. The industrial sector growth stood at 3.2 per cent in 1998; a reduction compared to 3.8 per cent in 1997. In addition to weak competitivity, due largely to a drop in productivity, the decline in investment which went from 2.5 per cent in 1997 to 2 per cent in 1998 was the major cause for the drop in the growth rate in the manufacturing sector.
82. The recession in the emerging markets were transmitted to Africa mainly through a reduction in the price of goods. All exports from Africa were affected with oil recording the lowest rate. But the fall in the price of petrol was beneficial to African countries, which imported oil.
83. There has been serious pressure on the balance of payment in 1998. The export revenue fell by 17 per cent for the first time during the 1990s, the trade balance was negative pushing the present deficit to about 16 billion dollars. This perennial imbalance in the services sector due mainly to payments of external debts as well as the cost of financial and transport services continues to exert pressure on the present balance in spite of major earnings
from the export of goods.
84. Credit flows recorded a drop in Africa from 4.5 billion US Dollars in 1997 to 3 billion US Dollars. This is a result of a drop in private flows and bilateral loans. For sub-Saharan countries net transfer dropped about 40 per cent. The relationship between debt and GDP grew slightly. The price of exports rose suddenly due to the drop in export products. Debt services stood at 35 billion dollars that is 31 per cent of exports of goods and services. The present initiative to reduce debt has not significantly reduced the debt burden. Among the 41 potentially eligible countries only one country benefited from the initiative in favour of Heavily Indebted and Poor Countries (HIPC). Uganda's debts was reduced by 20 per cent. It is expected that only four other countries namely, (Burkina Faso, Cote d'lvoire, Mali and Mozambique) will be given a debt reduction during the next three years.
85 As a percentage of GDP investment rose from 21 per cent in 1997 to 23 per cent mainly due to an increase of one per cent in domestic savings. The major factors that led to the change in domestic savings could be attributed to higher earnings and least consumption
particularly in the public sector.
86. Inflation fell from 15 per cent in 1997 to 12 per cent. The growth in agricultural production and the fall in the price of imports contributed to containing consumer prices. The drop in external trade led to an increase in public deficits due to a fall in revenue from
international taxes on trades.
87. The medium term perspectives have been promising in the last four years reflecting an increase in GDP growth rate. Nevertheless, climatic conditions and the external economic environment which are two determinant factors of future growth, are unpredictable.
W Development perspectives ofAfrican air transport services
88. Several reports have been prepared on this issue by ICAO as outlined in the circular
ref. 271-AT/112; 270-AT/111; and 273 and other specialized institutions such as IATA and
AFRAA. The latter two institutions forecast that traffic will grow at a very rapid pace in view
of the economic performances indicated earlier on. Indeed, it is estimated to be the period
1995-2015: (i) International traffic will increase by 5.5 per cent; (ii) the intra-African
passenger traffic will increase by 8.5 per cent; (iii) and domestic passenger traffic will
increase by 6.7 per cent. The freight performance is expected to be as follows: 3.2 per cent
increase in international freight; 9.5 per cent for intra-African freight trade; and 6.7 per cent
for domestic freight. This forecast seemed realistic but they could be only attained if the
economies of African countries continued to improve as presently demonstrated.
(c) Effects of liberalization on access to African markets
89. The African civil aviation Industry will derive positive benefits from new regulated policies as well as state divestiture in the management of civil aviation services and infrastructures. However, it is expected that new operators will enter the market, services will be improved, users will have greater choice, intra-African trade will be sustained through the introduction of additional capacities and the intra-African and international network will be developed (increase in the number of flights and the introduction of new air links).
Alliances and cooperation will be maintained between African airlines, which will lead to an improvement in the quality of services to the establishment of joint marketing programmes.
As a result, there will be several tariff structures on the most common air routes in Africa. A joint study ECA/ADB is presently on the way to quantify the impact of liberalization of traffic rights on the economy of air transport in Africa. The recommendations of this study will be presented during the subregional meetings, which will be held during the year 2000 by African subregional organizations.
(d) Development of infrastructures
89. As indicated earlier on, the liberalization of traffic rights and the economic recovery that has begun will lead to a significant increase in traffic. There will also be a significant increase in the movement of aircraft in some airports. This increase in the movement of aircraft and traffic will lead to an increase in the resources of airport authorities and other authorities responsible for the management of air traffic. The revenue accruing if re-invested in the civil aviation industry according to the wishes of the operators will contribute to the maintenance and construction of the infrastructures.
(e) Development of hubs
91. As observed in other regions, African and foreign airlines in an effort to improve the quality of their services and increase their revenue will develop hubs in Africa. As a result, some airports will be developed and the facilities in these airports will be improved.
(f) New operators and service providers
92. It is expected that a new liberal policy will lead to the birth of new African airlines and service providers. This trend is already under way in Tanzania, South Africa, Zambia, Nigeria and Kenya.
(g) General trade services
93. The future negotiations within the framework of WTO will focus on the inclusion of other air transport services and as a result greater liberalization of access to African markets.
This will result in greater competition and will promote alliances among African airlines or alliances with foreign partners.
(h) Improvement in security and safety
94 Through the ICAO programme and the American initiative entitled "Safe Skies for Africa" and the implementation of CNS/ATM systems, African countries will improve security and safety at least in the international airports handling more than one million
passengers per annum.
(i) Predominance of some airlines
95. In the liberalization as well as in the restructuring of both institutions and airlines in the industry, there has been the predominance of a limited number of airlines resulting in the disappearance of airlines that are not competitive.
V. CONCLUSIONS
