ECA/RCID/UNCTADAli/i
United Nations
Economic Commission for Africa
THE THIRD AND FINAL EVALUATION REPORT ON THE SECOND UNITED NATIONS TRANSPORT AND COMMUNICATIONS DECADE
IN AFRICA (UNTACDAII), 1991-2000
THE EVALUATION REPORT ON
AIR TRANSPORT SUB-SECTOR
September 2001
September 2001
TABLE OF CONTENTS
Introduction 2
Section 1: Summary of Current States of Air Transport.. 4
Traffic Development 1991-1999 5
Financial Performance 9
Commercial Developments 10
Economic regulation and Policy Issues * 13
Challenges., . ■ 15
Conclusion 17
Section 2:Review of implementation of Air Transport Strategies and Targets 19 Section 3: Status of Implementation and Financing of Air Transport Projects. ....25 Section 4: Problems and difficulties experienced during implementation of Projects,. ....28 Section 5: Assessment of Impact of UNTACDAII. 31 Section 6: Assessment of Implementation of Framework for Action 33
Section 7: Conclusions and Recommendations 36
Section 8; Proposals for Future Action 40
1. Air transport is the most important mode as a crucial facilitator of the integration of African economies, given the vast size of the continent
and the absence of other credible modes of transport. It plays a key role for
the development of national economies and for African commerce and trade.Mitch of the growing physical contact in Africa would not exist, or only on
a more limited scale, if it were not for air transport.2. The air transport component of the Second United Nations Transport and Communication Decade for Africa (UNTACDA II) seeks to establish an efficient and integrated air transport by addressing key issues namely integration of African airlines, restructuring of civil aviation, improvement of air navigation facilities and services and aviation safety
and security. The Decade is a continuation of the first Decade (1978 - 1988)
and it covers the period 1991 - 1999. A comprehensive programme was established for the air transport sub-sector.3. During the review of the second mid-term evaluation, the lll conference of African Ministers of Transport, Communication and Planning held in Cairo in 1997 directed that the final evaluation should be based on reports of member states, regional and sub-regional organisations on the situation in regard to the status of implementation of their projects and other activities undertaken in the implementation of the Framework for
4. In accordance with this decision, the Economic Commission for Africa (ECA) requested African countries, regional and sub-regional organisations to submit reports on the implementation of their respective UNTACDA II projects and the overall situation of the sub-sector.
5, Thirty-two countries and four regional organisations provided reports on the implementation of their approved projects as well as other activities carried out during the Decade period. The reports, by large, In
their coverage of air transport, are not comprehensive nor do they quantify
the activities undertaken. More over certain countries and regional organisations did not provide the required information or report. These missing links were subsequently bridge by data and information available at the ECA and independent research by the consultant.6. Statistical data and other information provided by states and organisations as well as the costs of projects and funds mobilised have not been independently verified and included as reported.
7, The evaluation of the air transport sub-sector was carried out entirely at the ECA headquarters on the basis of (a) the analysis of the reports of African country, sub-regional and regional organisations, (b) other documentation availed to the consultant by the ECA and (c) independent research by the consultant.
8. The report starts with a summary analysis of the current status of air transport and the extent to which the air transport targets approved in 1991 have been implemented against the UNTACDA II parameters adopted for the sub-sector. It looks at the status of implementation and financing of the approved air transport projects and other activities undertaken and the problems and difficulties experienced during the implementation process. It examines the impact of UNTACDA II and the implementation of the Framework for Action; it draws certain conclusions and recommendations and formulates a proposed course of action.
This section summarises the principal trends and developments in air transport and the impact of UNTACDA II on the overall situation of civil aviation in Africa during the Decade in terms of traffic, financial, commercial and 'regulatory developments. Tables in the Appendix provide information on the data presented in this section and elsewhere in the report as applicable. __
1,1. Heavily handicapped by the poor economic performance of the 1980's, political instability in several countries, persistent drought, population pressure and the technological gap have all contributed to the poor state and condition of air transport at the beginning of the Decade.
1.2. The 10 year-period, within which African countries
endeavoured to implement the air transport component of UNTACDA II, has witnessed a number of major trends and developments having impact on the air transport sub-sector.
.i u! "3*
I . I
transformation*
r> FfF.ec*&: Isbcru lisa lion; withdrawal i>f subsidies; break-up of monopolies.
>)- Changes in operating and regulatory framework {driving Jroai tlss Chicago Co-'iventi'in; ■=> Kffects: iibera'isuti^n ami pressure on African tc!,;n1rle*». !iidustr> more derep/iEisEetL dil.is.ioji ci" C3>sctpt Ci "flasf' carries*
1.3. The first major development of the Decade period is the economic reform programmes undertaken by African countries within the framework of structural adjustment and national economic and social transformation programmes. These reforms aimed, among other things, at the disengagement of the state from economic activities, liberalisation, the withdrawal of subsidies, the break-up of monopolies and increased inducement for private sector participation. As a spin-off, these reform programmes have brought about a number of positive and negative impact on the Decade programme. On the positive side, structural adjustment has accelerated the economic deregulation or liberalisation of the domestic air transport market in general. Although the degree of liberalisation varies from state to state, in general, the operating environment of the sub-sector has been transformed from a highly regulated to a liberalised industry in most African countries (although still some countries consider air transport
a strategic sector), bringing with it the dilution of the traditional
attachment to the concept of "flag" carriers1. A number of privately owned
airlines have been established to compete with the traditional national flag carriers in the provision of domestic scheduled services and at times, regional and international services.
1.4. On the negative side, structural adjustment has affected the timely implementation of air transport projects as a result of the shift in government policies and priorities resulting in inadequate budgetary allocations.
1.5. The second major development affecting the air transport sub- sector is the change in the traditional operating and regulatory framework deriving from the Chicago Convention of 1944. The regulatory landscape of international air transport has been changing very rapidly at many levels at the same time since domestic deregulation was introduced in the United States inl978. These changes aim at a more flexible approach to regulation of air transport. African countries are feeling this pressure. Europe has completed its internal liberalisation and is endeavouring to extend its liberalisation concepts to African countries. The US African Aviation Initiative is targeting Africa, initially through third country codesharing arrangements and subsequently through "open skies" bilateral agreements.
Other regions of the world are also liberalising in particular in South America and the Caribbean. The major global alliances have extended or are intending to extend codesharing and other innovative arrangements to increase their presence in Africa.
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1.6. Against this background, and on the basis of data reported by the African Airlines Association (AFRAA) for 38 airlines, the highlights of the developments of traffic in Africa over the 10-year period of the implementation of the UNTACDA II programme are shown in the box
Highlights of Traffic Developments 1999 over 1991
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1 This policy is reflected in the massive withdraw of government support and/or liquidation or curtailment of operations (i.e. Zambia. Airways, Uganda Airlines, Royal Swazi, Air Tchad, Lesotho Airways etc.)
1.7. The trends in the development of traffic for the period 1 1999 are shown in the Table 1 below.
Table 1: Sy Year
1991 1992 1993 1994 1995 1996 1997 1998 1999
item Traff Pass
(000) 25290 26681 24662 25450 26566 28028 28790 28719 30172 Annual growth %
c trends African
engers
change (0
-9.4 5,5 -7.6 3.2 4.4 5.5 2.7 -0.3 5.1 1.0 ■
Aidin Freij
30) 432 394 418 438 485 481 458 440 489
es: 1991 -1999
>ht-tonnes
change -4.0 -8.8 6.1 4.8 10.7 -0.8 -4.8 -3.9 11.1 1.2
Tonne-km performed
million 5295 5504 5437 5609 5911 6284 6755 6971 7555
change -2.8 4.0 -1.2 3,2 5.4 6.3 7.5 3.2 9.8 3.9
Avaiiabl
million 9405 11324 11130 11339 11709 12831 13961 14710 15504
i Tonne-km
change -7.3 20.4 -1.6 1.8 3.3 9,6 8.8 5.4 10.7 5.7 Source; AFRAA and ICAO
1.8. . The total traffic carried system wide by African airlines (passenger, cargo and mail in intercontinental, intra-African and domestic operations) amounted, at the start of the Second Decade in 1991, to about 25.3 million passengers and 432 thousands of tonnes of cargo. This represents an increase of 19 % and 14% respectively over the 1991 levels for a modest average annual growth of 1% for passengers and 1.1% for
freight.
1.9. On the other hand, revenue tonne-kilometres performed in 1999 increased to 7.6 billion from 5.3 billion 1991 or some 43 % over the 1991 level, the major increases occurring in the second half of the Decade.
1.10. Overall capacity offered in 1999 expressed in terms of available tonne kilometres likewise increased by some 64.9 % from the 1991 level of 9.4 billion to 15.5 billion, which is a faster growth than traffic. Hence load factors on total service show decline. The average weight load factor came down to 47% and passenger load factor to 63.6% in
1999.
1.11. During the same period, international passenger traffic grew to 13,2 million passengers. This market constituted the major market for African airlines accounting for over 45% of the passenger traffic and 72 % of the revenue passenger-km performed. Table 2 gives the evolution of international traffic for the period 1991 to 1999.
Table 2: Trends in International! Traffic 1991 - 1999
1991 1992 1993 1994 1995 1996 1997 1998
\..m ,.
Passengers millions
10.31 11.38 10.67 11.55 11.97 12.31 13.10 13.23 I ...
Change
10.38 -6.24 8.25 3.64 2.84 6.42 0.99
Freight-tonnes 000)
262 245 258 283 307 311 300 280
Change
-6.49 5.31 9.69 8.48 1.30 -3.54 -6.67
Tonne-kra performed mi!lions
3722 4008 4101 4242 4473 4665 5124 5290
Change
7.68 2.32 3.44 5.45 4.29 4.29 3.24
6430 8340
8490 8810 9440 10340 11000 2.1
Change
29.75 1.86 -0.08 3.85 7.12 9.55 6.34
1.12.
amounted freight, thousands over the 1 and 2.1%
millions ii growth of tonne
1991 level
In 1991 the international traffic carried by African airlines to about 10.3 million passengers and 262 thousand tonnes of In 1999, the traffic grew to 13.9 million passengers and 304 of freight, representing an increase of 35% and 16% respectively 991 level, or an annual average growth of 3.9% for passengers for freight. Tonne-km performed increased from 3722 to 7555 i 1999, an increase of 42% over 1991 or for an annual average 3.8%, while capacity offered expressed in terms of available increased by some 71% to 11,00 millions ATKs over the which represents an average annual growth of 7.3%.
1.13. The intra-Africa traffic continued to record Improvements in the number of passengers carried during the latter part of the Decade period. The trends in this development are shown in Table 3 below.
Tra^c Developments: 1991-1999 Freight-tonnes
Increase
%
Tpnne-km performed Millions
Available Toane-km
1991 1992 1993 1994 1995 1996 1997 1998 1999
».. >
1 ■!••..
Source
3097 2853 3099 3125 3015 3513 3628 4025 4300
AFRAA
-7.88 8.62 0.84 -3.52 16.52 3.27 10.94
6.83
62 61 63 62 68 75 85 90
99
-1.61 3.28 -1.59 9.68 10.29 13.33 5.88 9.89 '..1
738 620 639 629 657 750 759 852 960
-15.99 3.06 -1.56
4.45 14.16
1.20 12,25 12.68
1445 1430 1349 1375 1342 1621 1862 1931 2105
-1.04 -5.66 1.93 -2.40 20.79 14.87 3.71 9.01
1,14. In 1991 the passenger traffic carried within Africa by African airlines amounted to about 3.10 million passengers and 62 thousand tonnes of freight. In 1999, the traffic increased to 4.3 million passengers and 99 thousands of freight, representing an increase of 38.8% and 59.7 % respectively over 1991, or an average annual growth of 4,5% and 6.1%
respectively. Revenue tonne-Kms performed (RTK) increased from 738 to
960 in 1999, an increase of 30.1%, representing an average annual growth of 3.8%. Capacity offered expressed in terms of available tonne-kilometres increased by some 45,7% to 2105 million ATKs or 5.2% annually.
1.15. According to the Annual Report of the Council of the International Civil Aviation Organisation (ICAO), at the beginning of the Second Decade in 1991, African airlines carried less than 1.2% of the world traffic in terms of tonne-kilometres performed (passenger, cargo and mail).
1.16. According to the same report, Africa's share of the world traffic, in 1999, stood at 2 % in terms of tonne-kilometre performed passengers carried as shown in Table 4 below.
Table 4: Africa's
sgions
_____
\':n.
» I.! I!.!1 ■*
Middle East Percentage of world traffic Latin America and
Caribbean Percentage of world traffic Source: ICAO
Passengers Carried (thousands)
T557530"
M J 47- >
■- i|
39 230 2.5 95 630
6.1
Fassenger-km Passenger Tonne-km Weight-
2 787
79 070 2.8 134 530
69
67
368 800 r.i*
11470 3.1 16 560
4.5
60
54
1,17. During the Decade period, air transport has shown some recovery when compared to the "lost decade" of the 1980s, although this recovery is not evenly distributed among the different sub-regions.
Likewise, the prospects for the future appear promising. According to forecast by ICAO5 international passenger traffic in Africa is estimated to grew up to the year 2015 by 5.5%; intra-African passenger by 8.5% and domestic passengers by 6.7%. International freight is also estimated to grow by 3.2%; intra-African freight by 9.5% and domestic by 6.7%.
Table 5:Trafflc Forecast: Africa 1995- 2015 I. "i •"
Source: ICAO
1.18. While this forecast is predicated on the sustained performance of the African economies, many of the countries that submitted report, in particular the tourist destination countries and the major hubs in Africa, are optimistic in their own forecast anticipating substantial increases in the
inflow of traffic to their respective countries ranging from a low of 50% to as much as 100% within the next five to ten years.
1.19. The paucity of reliable financial data makes an assessment of the financial performance of the industry a difficult task. However from data published by AFRAA for an average of 18 airlines, a general indication of the trend in the financial performance of African airlines could be
gleaned from the table below.
Table-6 : Operating Revenues and Expenses AFRAA member
US$ Billion
tmg Expense USS Billion
Operating Result Amount
USS Billion
%of operating
revenue
US$ Millions
2.48 3.74 3.71 4.30 4.42 3.33 3.84 3.91 5,70
3.55 3.64 3.68 4.06 4.28 3.17 3.67 3.89 5.53
-1.07 0.10 0.03 0.24 0.14 0.16 0.17 -0.02 0.17
-2.7 2.7 0.8 5.6 3.2 4.8 4.4 -0.5
3.1
10.00 -32.00 33.00 -34.62 49.05 -44.74 144.00 28.84
170 Source: AFRAA Annual Reports
1.20. African airlines that provide data generated an estimated annual operating revenue of USS 2.48 billion in 1991 which more than doubled to US $ 5.7 billion in 1999. Operating expenses for the same airlines moved from 3.55 billion in 1991 to an estimated 5.53 billion in 1999. However, these results do not show the differences in the financial performance among individual airlines. Only very few airlines have shown consistent profits during the decade, while the vast majority have been struggling financially. For example in 1997, only six airlines showed net profits. Globally, the industry does not generate sufficient profit to finance its future growth.
1.21. In terms of expenses expressed as a percentage of revenues, the operating costs of African airlines are high when compared to the industry average, for example, in 1999 operating expenses as a ratio of operating revenues stood at 3% for Africa airlines compared to the industry average operating profit ratio of 4.1%. This is partly due to their size who, on an individual basis, cannot achieve lower operating cost. In particular, they (i) do not have enough personnel to justify in-house training facilities and as a result will have to pay higher training cost outside of the continent; (ii) have little saving possibilities on the purchase of spare parts and other supplies needed for their operations; and (iii) have high maintenance cost, high insurance and low employee productivity.
1.22. Revenue per tonne-kilometre performed showed a marked erosion from 89.3 US cents per revenue tonne-kilometre to 81.2 cents in 1999 or a decline in yield of 8 US cents per revenue tonne-kilometre.
Operating expenses expressed in terms of available tonne-kilometres (unit cost) increased from 41.2 cents in 1991 to 47.7 cents in 1998, or an increase of 15.8% over 1994. Unit costs are consistently higher than the industry average by as much as 8.6 US Cents per available seat-km produced or 18%
higher than the industry average. The renewal of fleet at a number of airlines during the Decade period does not seem to produce cost efficiency which probably is the result of the limited size of operations, lack of co operation among African airlines and monopolistic situation in other suppliers (fuel companies, insurance, handling and catering) compounded by the restrictive traffic rights regime contrary to the recommendations of the Yamoussoukro Declaration for greater integration and liberalisation of traffic rights.
Table 7
1994 1995 1996 1997 1998
Yield and Unit Cost AFRAA Yield/RTK
H 89.3
91.8 91.4 91.3 92.2
Cos*
| /ask.
41.2 45.1 42.5 42.5 47.7
Industry Yield/RTK Cost
69.4 71.6 69.8 67.9 65.1
/ASK 42A 42.6 42.4 41.5 39.1
Source: AFRAA
1.23. The table below shows the work force of AFRAA members for the most recent period as well as employee productivity. The level of employment has been constant at a little over 9G50GG employees ; the reduction in the number of employees observed in 1999 is the result of reduction of work force due to staff rationalisation at some airlines.
Table 8: Employoi Year
Number of Employees
Revenue Tonne-km per employee Available tonne-km per employee
cut and Pi 1994
92369 60724 122758
odsictivity 1995
92536 63878 126535
1996 92971 67591 138011
1997 93649 72131 149078
1998 93273 74438 157076
1999 86495 96 000 196 000
Industry
211 000 346 000 Source: AFRAA
1.24. Employee productivity has continued to show improvement over the Decade period. Productivity measured in terms of revenue tonne- km performed per employee in 1999 improved by some 29% over the 1998 level and available tonne-km produced likewise increased by 24% to 196 000 in 1999. However despite these improvements, employee productivity in Africa is lower than that of the industry average productivity by as much as one third, which means that you need three employees to do the job of one employee in the industry.
d •;i:.ifi*'i;-d
1.25. On the basis of several reports, it is estimated that there are over 75 airlines in Africa which are either government or privately owned of varying sizes, offering scheduled and non-scheduled air services. This number is anticipated to increase as the domestic market is further liberalised.
1.26. With very few exceptions, almost all African airlines, in 1991, were government owned and managed as an extension of the main stream public service, in most cases massively supported by government subsidies.
Since the start of the Decade, the process of restructuring, the removal of some physical and non-physical barriers, commercialisation and partial or full privatisation of the national airlines has been at the centre of the policies of African governments. As a result, a number of changes have occurred:
(a) An increasing number of privately owned airlines have been established to provide domestic and in some cases regional
services.
While a limited number of airlines have been privatised, other are preparing for privatisation. However, as a result of economic considerations or the financial state of the airlines concerned or local circumstances, the privatisation of several African airlines has to be deferred or postponed.
The Decade period has witnessed the liquidation, retrenchment or suspension of operation by some national airlines, while others have pulled out from long-haul services, in particular to Europe.
1.27. Out of 515 airline co-operative arrangements reported by Airline Business in it's July 1999 issue, there were 27 African airlines that have some form of co-operation agreements either among themselves or with non-African airlines. The table below gives a summary of these co operation arrangements. Details of the agreements are at Annex 2.
Equity Share Holding Joint Venture Pool Agreement Codesharing
Commercial Agreements Joint Purchasing
Source: Airline Business July 1999
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1.28. However the numbers of truly regional alliances in Africa have not developed to a level seen, for example, in South America. Outside co operative agreements of a purely technical nature, (such as training, maintenance, ground handling) and other routine agreements on commercial matters (such as general sale agency agreements, passenger handling, ticketing), the more sophisticated forms of co-operation have not taken root among African airlines. In those few cases where codesharing agreements have been reported, they are, for the most part, route specific and fall within the category of simple or "naked" codesharing. Under these circumstances, the co-operative arrangements are peripheral agreements that
do not allow the integration of operations into a coherent and
interconnected efficient route network, As a consequence thereof, they have not reached the degree of co-operation and integration envisaged under the Yamoussoukro Declaration. The objectives of integration and merger of airlines and operations did not materialise as expected.1.29. Poor intra-African network, scanty services and a greater focus on routes mostly to Europe characterised the route network of most African airlines at the start of the Decade. During the Decade period, a net improvement is observed in the intra-African route network in terms of greater frequencies and number of African cities served. Frequencies have been increased and new services started to new destinations in Africa, Europe, the Middle East, Far East and the USA. New entrants are linking the Eastern and Western Africa, Western and Southern Africa and to some extent the Central Africa sub-regions.
Airport assd Air Navigation Services
1.30. At the start of the Decade, most of the airports and air navigation infrastructure were in a poor state of maintenance and repair, inadequate and managed as an extension of the civil service. At the end of the Decade, a marked improvement has been observed as will be seen from the projects implemented during the Decade. Airports and infrastructure have been rehabilitated and upgraded. The 32 countries that submitted reports have established or are in the process of establishing autonomous bodies to take over the operation of these infrastructure components from African governments with private sector participation in some cases. In those instances where the private sector is involved, it has happened through long term concessions or leass type arrangements, rather than out right purchase or transfer of ownership.
1.31. However, despite the fact that airports and air traffic management services have been made autonomous, the benefits in terms of service delivery are not still visible. User charges, en-route navigation charges, embarkation fees, etc. are still very high at many airports in Africa without a compensating improvement in the quality and delivery of services which have not shown any significant improvement.
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1.32. Facilitation at many African airports are below acceptable international standards with slow and cumbersome procedures, inadequate staff and insufficient training which are common features at many African airports.
1.33. While a continent wide statistics are unhelpful in terms of providing a true picture of the aviation safety record of the different countries, there remains the unquestionable challenge that Africa needs to address in order to meet internationally accepted levels of aviation safety. Despite the effort deployed during the Decade to improve air safety, several problems still remain outstanding i.e. the capability of the civil aviation authorities to manage safety oversight.
1.34. Because of inadequate funding of civil aviation authorities and lack of trained inspectors and support staff, many African countries do not fully comply with ICAO standards.
1.35. The provision of intra-African air transport services has continued to be based primarily on a complex regime of protectionist bilateral air service agreements. The implementation of the Yamoussoukro Declaration and liberalisation of air transport have not progressed much during the Decade period.
1.36. Since the start of the Decade, two ministerial conferences were organised for air transport liberalisation in Africa; the first in Mauritius in 1994 which established guidelines on liberalisation of air services on an incremental and sub-regional basis.
1.37. The second important ministerial conference was held in November 1999 in Yamoussoukro, C6te d'lvoire which adopted a Decision relating to the Implementation of the Yamoussoukro Declaration concerning the Liberalisation of Access to Air Transport Markets in Africa (the Yamoussoukro Decision).
1.38. The Yamoussoukro Decision is placed under the framework of the Abuja treaty establishing the African Economic Community. It is the first Africa-wide legally binding arrangement for the liberalisation of scheduled and non-scheduled air transport services within Africa. It represents a comprehensive agreement of agreed concepts and rules for liberalisation of intra-African air services. With the approval of the Decision by the Assembly of Heads of State and Government of the African Economic Community in July 2000, it entered into force on 12 August 2000 among 44 African countries that are party to the Abuja Treaty.
12
1.39. The Decision, when implemented, will hopefully replace the current fragmented regulatory regime by a unified system that gives African airlines commercial opportunities on an equal basis ensuring that their activities are governed by a common body of aviation rules, without which Africa will remain fragmented with the consequences that travel within Africa will continue to become difficult, cumbersome and costly. The implementation of the Decision is perhaps the last chance for reform of the air transport sector in Africa.
1.40, At the wider sub-regional level or among states with a community of interest, arrangements for the liberalisation of African air transport have been or are being developed. Some of these initiatives include
(a) The Banjul Accord for an accelerated implementation of the Declaration among six African States (Cape Verde, Ghana, Guinea Bissau, Sierra Leone, Nigeria and the Gambia) was concluded in April 1997. It covers a wide range of co operation relating to airline operations, infrastructure, traffic rights, aviation safety and security.
(b) The agreement reached by the Arab Council on Civil Aviation in November 1998 to liberalise intra-Arab air services over a
period of five years gradually ending restrictions on 3rds 4th and 5th freedom traffic rights for carriers of its member states. The
plan will achieve total liberalisation by the year 2005.
(c) The agreement of the Member states of CEMAC adopted in March 1999 defining the conditions and modalities for the operation of intra-community air services with full third and fourth freedom traffic rights and 40% of the traffic of the
preceding year as 5th freedom rights and no capacity restriction
and complete liberalisation of non-scheduled services,
(d) The Decision of the 21 states from the Common Market for Eastern and Southern Africa (COMESA) reached in May 1999 to phase-in liberalisation of scheduled and non-scheduled air services within the sub-region. The first phase that ended in October 2000 allowed free movement of intra-COMESA air cargo and non-scheduled passenger services between any city pair with no capacity restrictions and multiple airline designation. Full liberalisation was targeted for October 2000.
(e) The Memorandum of Understanding signed by the West and Central Africa sub-regions in November 1999, reaffirming their commitment to fully liberalise scheduled and non - scheduled air transport services within the West and Central Africa (WCA) as laid out in the Decision of the Conference of African
13
Ministers responsible for civil aviation and approved by the OAU summit.
1.41. Some of these sub-regional initiatives described above aim at greater flexibility of rules that go beyond the existing bilateral regulatory framework. They involve the adoption of regional regulation of air traffic, either complementing or superseding the bilateral structure. These initiatives seem to indicate a trend towards sub-regionalization of air transport policy, mostly undertaken as part of the construction of common markets or economic integration processes which imply close economic integration between member countries of a sub-region.
1.42. These initiatives are still at different stages of development and have not, as yet, been fully implemented. A number of issues for effective implementation of liberalisation process are still outstanding. Sub-regional workshops and seminars are being organised to build a broad-based consensus among all stakeholders at the national, sub-regional and continental level (governments, airlines, consumers, etc.) to internalise the concepts of the Decision in national policies.
1.43. At the bilateral level, a number of African countries have signed or amended bilateral agreements to introduce a more open and liberalised regime: lifting restrictions on traffic rights, capacity, frequency and tariffs. These countries include Kenya, Ethiopia, Zimbabwe, Uganda, Tanzania, Angola.
1.44. Several African countries have also signed or initialled open skies' agreement with the United States (Morocco, Nigeria, Ghana, Senegal, Tanzania, Namibia, Burkina Faso, Gambia, and Benin). Other countries are reported to be negotiating with the United States (Ethiopia, Kenya etc.).These open skies agreements are understood to allow for a transitional period within which the African countries will continue with their reforms in civil aviation and work towards a fully liberalised regime by the end of the transition period. The agreements will ultimately eliminate all restrictions and allow codeshare for US carriers. Some of these agreements also expand the coverage to include provisions on inter-modal transport involving the selling of services to passengers and shippers on a combined air and surface transport.
1.45. From the foregoing review of the current state of the African air transport industry, many of the structural problems and difficulties of the industry have not been totally solved, in particular in respect to airline operations and improvement of the quality and delivery of services. Many of the airlines in Africa and in particular those operating international services would have difficulty in maintaining their current form and shape in the coming years.
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1.46. The fragmentation of the African air space into small units stands out as a major challenge that will require greater focus by African governments and airline management. Without some degree of consolidation, African airlines will continue to be small, fragmented and for the most past inefficient lacking the necessary size and economies of scale to be competitive and reduces operating costs. As a result, it will be difficult, if not impossible, for African airlines to have substantial transcontinental routes. At best, most African airlines will be reduced to regional and niche operators by market forces. Even then, only those airlines that will be able to provide higher standard of service, better frequency and convenient scheduling, better yield and revenue management and competitive fare structure will increase their chances of remaining in the business.
1.47. The formation of global alliances outside Africa introduces a new dimension in the competitive position of African airlines. These alliances will have the potential to eliminate competition; permit the allocation of markets; limit capacity under an agreement between partners;
and raise fares by common agreement or lower fares to levels below the cost of most African airlines, thus eliminating smaller African airlines from the market.
1.48. Additionally, strong foreign competition and competition among African airlines will intensify as a result of these global alliances increasing their regional penetration through codesharing, franchising and other innovative commercial agreements. The long-haul routes, in particular the Africa-Europe market will largely be dominated by these alliances that have world-wide reputation, extensive route networks and powerful marketing tools. As a result the market share of foreign competitors will increase while that of African airline will shrink.
1.49. It is also expected that more privately owned airlines would be established competing with the national airlines on the domestic and regional route and at times on the intercontinental route. Foreign carriers, in the long run, will perform more and more long-haul international services to and from Africa. This would lead to loss of jobs and revenue as well as heavy reliance by such countries on foreign carriers, something that could be damaging to the interest of both those countries and their airlines.
1.50. As the liberalisation of the economy takes strong foothold and the forecasted growth in the economy and traffic materialises, more foreign airlines will operate directly or indirectly into Africa through codeshare, franchising and other innovative marketing arrangements.
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1.51. Airport facilities play an important role in how a country Is perceived by the travelling public and other carriers. Any anticipated improvements in the operations of air services must be accompanied by a similar upgrading of the infrastructure, facilitation, safety and improvements in the delivery and quality of services. Without these matching improvements, any gains in commercialisation, restructuring or privatisation will have little or no impact.
1.52. To be effective, these autonomous entities being established must be truly independent and must be empowered to retain all user charges levied and be authorised to plough back the funds to airport developments, improvements of air traffic services (ATS) and infrastructure and the training of ATS staff. In the long run African governments must commit themselves to the regional implementation of CNS/ATM. African States must reaffirm their safety oversight responsibilities and comply with internationally agreed standards, using to the fullest extent possible the ICAO Safety Oversight program.
1.53. The African aviation industry will face major problems of securing funds for its growth, upgrading and maintenance of infrastructure and improvement of the quality and delivery of service. The airlines, in particular, will not generate sufficient funds from their operation. Grants and injection of capital from owner governments are drying up. The airlines have to rely solely on external borrowing. For this to happen, the airlines have to improve their balance sheet and African governments must create a conducive environment for greater private sector participation.
1.54. Several forecasts, including ICAO and aircraft manufacturers' have different growth index for Africa. From these forecasts, Africa will need some 700 aircraft to accommodate traffic growth and to replace ageing fleet up to the year 2015. The investment requirement will be of the order of US$ 38 billion plus an additional USS 5 billion for other facilities or a total of USS 43 billion.
1.55. In addition, it is projected by AFRAA that African airlines will in the next 15 years, have to train 3600 pilots and 12,000 technicians to accommodate attrition and growth. Looking at the available training institution in the continent, it is obvious that existing facilities will not be able to cope with the high number of staff to be trained. Governments have to start thinking in term of being able to produce the skilled manpower requirements and putting up the necessary facilities to cope with this increased demand for training.
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1.56. Although the air transport industry in Africa will be influenced by many external factors - growth in the regional economy, international
trade, tourism, balance of payment, levels of profitability and political stability, a comprehensive strategy will be required for the continued and
sustained development of African civil aviation.1.57. First, African policy makers need to be aware of the.challenges
of change. Awareness of the challenges would mean that the problem of size and fragmentation of air space has to be improved, hence the need to
implement as soon as possible the Yamoussoukro Decision. The advantages of larger groupings and collaborative approaches are apparent even if one does not wish to consider the challenges of economic globalisation. The "goit alone" option is not the way for the future. Extensive Co-operation and
joint use of facilities at continental and sub-regional level are the only way forward. Traffic rights within Africa must be liberalised for African carriers and African governments must start thinking in terms of a single aviation market. Infrastructure and aviation safety must be improved.1.58. Secondly, African airlines and government must have the will and commitment to change and establish a binding institutional framework for policy formulation and implementation - moving from the rhetoric of the
past to affirmative actions.
1.59. Thirdly, the delivery and quality of services by airports and the airlines have to be improved significantly.
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This section will review briefly the extent to which the strategies for the air transport sub-sector approved in 1991 have been implemented vis-a-vis the performance indicators of UNTACDA II program on the following basis: (a) Key Indicators and Program Impact; (b) Major Focal projects (c) Key issues and (d) future course of actions beyond the Decade period.
2.1. The long-term objective of the air transport sub-sector is the integration of African airlines, restructuring of civil aviation, improvement of air navigation facilities and services and the promotion of better facilities. The areas of main concentration are:
(a:
(b)
(c)
Implementation of the Yamoussoukro Declaration on the new African air transport policy in its main elements (information exchange; technical and commercial co-operation; traffic rights, computer reservation systems; fleet renewal;
restructuring of civil aviation and airport authorities; joint operation and joint use of facilities; improvement of management etc.)
implementation of the ICAO Air Navigation plan, improvement of air safety and security and ratification of international conventions pertaining to civil aviation;
undertaking of studies for the development of air services, and establishment of viable air transport enterprises and
Strengthening of national and regional metreological services with a view of securing timely forecast and dissemination of metreological information to ensure flight safety.
2.2. In order to facilitate the evaluation of the progress made in the implementation of the long-term objectives of the air transport sub-sector, the following indicators and "quantified" targets were approved covering
six major areas:
(a) Implementation., of the Yamoussoukro_Declaration: By the end of the Decade Phases I, II and III of the Yamoussoukro
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Declaration should be have been implemented according to the set timetable, namely Phase I: two years; Phase II: three years and Phase III; three years, with the understanding that it will not be necessary to go through all the three phases;
(b) Airline Operations and Management: By the end of the Decade (i) the operating cost would have been reduced to be as close as possible to the world average and not exceed 10% of that average; (ii) the number of economically viable airlines would have increased; (iii) the African network would have improved by increasing the number of flights between two cities, reducing flight time, co-ordinating and rationalising schedules; and (iv) replacement of aircraft through financing mechanism currently existing or to be established would have started;
(c) Airports and Air Space Management: increasing the number of autonomous airports and joint air space management authorities; improving air traffic services, thereby increasing the efficiency of the crew and the security of passenger;
ensuring an effective level of implementation of the ICAO air navigation plan for Africa and the Indian Ocean region (AFI);
improvement of airport infrastructure, by reducing the number of accidents/incidents due to the inadequacies of airport infrastructure, facilities and services;
(d) Training: improving and strengthening African civil aviation training centres;
(e) Facilitation: improvement of facilitation and preparation of regulation that take into account the needs of the consumer; and (f) Safety and Security: Improvement of air transport safety and
security by reducing acts of unlawful interference.
2.3, Measured against the above performance indicators and taking into account the scope and extent of projects completed, the air transport sub-sector has succeeded in meeting most of the targets set at the start of the Decade.
2.4. In terms of the number of projects completed during the 10 year period (more than 50% of the projects completed), and the important additional projects executed, the performance of the air transport sub-sector has more than satisfied the targets set, with the exception perhaps of increase in the number of viable airlines, joint air space management, facilitation, integration of airlines and consumer protection. All of the elements of the strategies and objectives of the sub sector relating to safety and security and the implementation of the ICAO Air Navigation Plan are covered in the projects executed or under execution.
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2.5. The projects completed relate to rehabilitation, maintenance and expansion of airport infrastructure and services, navigation aids, safety and security, thus covering most of the main areas of concentration of the
air transport strategy.
2.6. The major focal projects of the Decade included the following.
2.7. (a) Implementation of the Yamoussoukro Declaration^ In respect to the implementation of the Yamoussoukro Declaration, some progress has been achieved in certain areas of Phases I and II namely some commercial and technical co-operation, joint purchase of goods and services (i.e. fuel tyre), schedule co-ordination, training under the auspices of AFRAA. The adoption of the Decision on the implementation of the Yamoussoukro Declaration in November 1999 relating the liberalisation of access to air transport markets in Africa and its endorsement by the Assembly of Heads of State and Government in July 2000 as well as the various sub-regional initiatives could be considered as important measures for the attainment of the objectives of the sub-sector.
2.8. (b) Airline Operations and Management: In respect to the reduction of the operating costs of African airlines, some improvements are observed, although operating costs have not been reduced to be as close as possible to the world average and not exceed 10% of that average.
2.9. The measures taken to rationalise staff, the abandonment of unprofitable routes, better yield management, cost control and shedding of non-core activities; better management information system may have contributed to the lowering of unit costs. However the high costs of procurement of goods and services (insurance, spare parts, maintenance, fuel and other supplies) have inhibited the cost approaching the world average. As shown in the preceding Section, the unit cost of African airlines is higher by some 15% of the industry average unit cost.
2.10. The intra-African route network has shown some degree of improvement. For example, an EGA study conducted at 16 African airports showed that frequencies between 1992 and 1998 increased by 22.7%. These improvements are the result of better schedules co-ordination through such fora as AFRAA and ECOWAS (both of which have a schedule co-ordination committee), increase of frequencies and the commencement of new services to African destination, the target of improving the African network could be considered as having been met substantially.
2.11. The Decade period has also witnessed the considerable efforts deployed by African airlines in the renewal of their fleet. As of October 2000, the fleet of AFRAA members comprised of 411 aircraft. Out of this 292 units were jet, 76 turboprops and 43 light aircraft. The B737 at 110 units continues to be the most preferred aircraft in Africa. 12 aircraft were delivered during the year and 35 aircraft were reported due to be pending delivery.
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2.12. (c) Airports, Infrastructure and Air Space .Management:
UNTACDA II programme has an appreciable contribution in the improvement of airports, infrastructure and air navigation as a result of the increase in the number of autonomous airport entities and the increased the level of implementation of the ICAO air navigation plan for Africa and the Indian Ocean region (AFI) plan.
2.13. The increasing number of autonomous airport authorities, although emanating from pressures under structural adjustment, could be regarded as a positive development towards the achievement of the Decade objectives. Improvements of air navigation services through the implementation of the ICAO air navigation plan and improvement of safety and security appear significant at the level of projects completed. A substantial portion of projects executed at the end of the Decade, relate to the improvement of airport infrastructure, facilities and services. Viewed globally, the air transport sub-sector has performed satisfactorily.
2.14. In addition to the projects completed, a number of sensitisation seminars and workshops were organised by ICAO and ASECNA to create awareness among African countries of future air navigation systems and the implementation of the AFI plan.
2.15. (d) Safety and Security: At the level of safety and security, the implementation of the ICAO AVSEC mechanism has been completed. The ASECNA projects and the activities undertaken by states contribute to the attainment of this objective. The improvement of aviation safety and security, increased metreological centres and training appear significant at the level of projects executed or in the process of execution within the framework of UNTACDA II. However, in respect to safety, two major areas of concern still remain, namely the need to improve (a) the laxity observed in effectively enforcing safety oversight responsibilities by some African countries in accordance with the ICAO recommended standards in terms of airworthiness certification and personnel licensing and (b) the deficiencies in the management of air traffic services in certain parts of Africa.
2.16. Other Activities: In addition to projects included in the Decade Programme, various other activities outside the approved projects were undertaken by the reporting countries and organisations within the framework of the objectives and strategies of UNTACDA II. These include the construction of new airports and terminal buildings, upgrading and modernisation of existing airport infrastructure and opening of airports to international traffic.
2.17. Taking globally all of the above elements together, the air transport sub-sector could be considered has having met most of the targets set in 1991 laying a good foundation for its future growth.
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2.18. The air transport sub-sector is characterised by a dynamic and constantly changing environment which requires a greater degree of preparedness, adaptability and flexibility. Any policy response to the key issues must be examined from the perspective of the general operating environment. Accordingly it will be necessary as a basis for future actions that greater focus and attention should concentrate after the Decade period and beyond on the following key issues:
the speedy implementation of the Yamoussoukro Decision. The implementation of the Yamoussoukro Decision and the extent to which all stakeholders (governments, airlines, civil aviation authorities, airport management consumers etc.) will be committed to positive and affirmative actions to move forward in air transport liberalisation is a major key issue. The establishment of co-operative arrangements in particular merging of operations and improvement of the quality and delivery of services remains another key issue for a long time
to come.
Human, resources development, harmonisation of civil aviation legislation, adherence to international conventions relating to civil aviation, competition policies and institutions to manage the implementation of the liberalisation process, consumer protection are still key issues to which the industry has not started responding in a manner adequate to find a permanent solution. This particularly so in. the critical areas of human resources development and the need to formulate adequate and appropriate guidelines for to regulate competition issues and the protection of the rights of passengers.
Human resources development requires a concerted action to ensure a continuous flow of trained manpower in the various speciality areas of civil aviation and the optimum use of the training facilities and capabilities existing within the continent.
(3) Infrastructure. Safety and Security. Safety and security, air navigation infrastructure, search and rescue and fire fighting services are major problems that require planning, implementation and training. The deficiencies in the air navigation system in some parts of the AFI region are another major issue. Decisive strategies have to be taken for the improvement of the air navigation system, safety and security.
With regard to the financial, institutional and legal aspects of the implementation of the ICAO CNS/ATM systems, the position of the African countries at the world-wide conference on CNS/ATM held in Rio advocating the establishment of a special fund through levy on passengers to finance its implementation should be aggressively pursued. The adoption
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of regional mechanism will be the starting point for acquisition and installation of satellite based air navigation systems to be operated and managed on a co-operative basis. The initiatives of ASECNA, COMESA and SADC to associate the private sector are to be encouraged.
The restructuring of airports, civil aviation administrations and airlines require deepening of the basis of their management in ail countries so that they will be operated on a commercial basis which does not appear to be the case in all countries, including whenever possible the participation of the private sector. Secondly the beginning of the restructuring and commercialisation of these institutions have not yielded any qualitative improvement. Airport charges and en-route air navigation charges are still very high in Africa.
The co-operation of airlines to achieve economies of scale in maintenance, purchasing, operations and the sale and marketing of their products is not adequate and needs further improvement and action. The encouragement of African governments in intra-African co-operative marketing arrangements will be needed in terms of developing appropriate policies on codesharing, franchising, lease of aircraft, safety net safeguard measures and competition matters.
2.19. In view of the key issues identified, further actions will be required beyond the Decade period placing greater focus on the following:
(a) the speedy implementation of the Yamoussoukro Decision and removal of existing barriers to liberalisation;
(b) restructuring of airlines, airport authorities and air space management and integration of air space;
(c) intensify action for increased safety and security;
(d) manpower development;
(e) technology and
consumer protection and competition policies
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This part of the report will examine the degree of implementation of air transport projects and their level of execution and completion. The assessment is based primarily
the reports submitted by countries, regional and sub-
on p
regional organisations and/or collected by the ECA. It will also review the contribution to the overall development of the air transport sub-sector and the economy. The report covers the following: (a) analysis of projects; (b) assessment of completion
and financing ofprojects; and (c) other projects completed
3.1. The air transport component of the Second United Nations Transport and Communication Decade (UNTACDA II) comprises of 77 approved projects. The first group of 67 projects was approved at the extraordinary session of the Conference of African Ministers of Transport, Communication and Planning held in Addis Ababa in 1991. Ten additional projects were approved, in!993, bringing the total approved projects to 77 representing in excess of 14% of the overall transport projects.
3.2. A total of 36 reports received from thirty-two countries and four (4) organisations on the status of implementation of their approved projects as well as other activities carried out during the period within the framework of the objectives and strategies of UNCTADA II were analysed.
No information was received from some countries and organisations. .
3.3. The distribution of the approved projects included 45 national projects emanating from 20 countries, and 32 projects initiated by 8 regional organisations as shown in Table 10 below. A significant feature to note is that 32 projects representing 41.6% of the approved projects at the sub-sector were initiated by regional and sub-regional organisations, thus placing greater focus on regional integration as the strategy of the sub-
sector.
72,57
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3.4. The funding required for the sub-sector was estimated at US$
372.15 millions. Table 11 below shows the regional distribution of the approved projects.
T.M-! if l.i. .iii*" :»»h ■■r-i| ..-in 1 :i '.ill ;. *i! Pisiii*.;1 l'\ Mi'i-r«u:*'.
'.'-.'i.i,: \v~ !■".»»;! • S li-, Mi(-i>j ill'U'i-/: '• i* I'll1 :i;> i Jp
1 mi. n* "* ' S ^s I1'*1
\ .
u.
3.5. From the above table, it is noted that a greater portion of the air transport projects emanated from the Eastern/Southern sub-region with 27 projects while the Western sub-region has only 2 projects.
3.6. Since the adoption of UNTACDA II air transport programme, all parties involved (African governments, regional and sub-regional organisations as well as development partners) have deployed considerable efforts for the implementation of the projects. For purposes of this analysis, the projects are classified into the following three categories: (a) projects completed and/or fully funded, (b) projects with no funding, and (c) abandoned or with no information.
3.7, Due to lack of information from certain countries organisations, projects completed and fully financed in 1997 are taken as reported in the mid-term evaluation report. On a regional basis the level of execution and financing of the projects by region are shown in Table 12 below.
rit»-' i ii
^ '
., -i .■..■■-. ; 2 " 6 13
I,,, i ■' ; i "*_■
3.8. Globally, 42 projects out of the 77 approved projects have been completed. As regards the level of funding, national projects received US$208.92 millions, while regional projects mobilised US$ 59.3 millions.
It can be deduced from this that national projects attracted more funding than the sub-regional and regional projects. Projects for which no funding was secured amounted to 16 projects, representing about 20.9 % of the
26
approved projects. 13 project, or 16.9 % of the approved projects were either abandoned or no information was available.
3.9. The projects completed relate to rehabilitation, maintenance and expansion of airport infrastructure and service, navigation aids, safety and security, training, studies and data bank, thus covering most of the main areas of concentration of the strategies of the air transport sub-sector.
3.10. In addition to projects included in the Decade Programme,
various other activities outside the approved projects were undertaken by
the reporting countries and organisations within the framework of the objectives and strategies of UNTACDA II, This may perhaps be the result that no new projects were included in the Programme after 1993.3.11. Of particular importance to be noted is the efforts made by States to finance from their own internal sources. The main projects financed outside the approved projects included the construction of new airports and terminal buildings, upgrading and modernisation of existing airport infrastructure and opening of airports to international traffic. The total investment for these projects amounted to in excess US$100 millions
mostly from internal sources.
3.12. Additionally, from the overall assessment of the level of execution and financing of projects, it can be concluded that even if not all of the 77 projects have been executed, significant efforts were made to mobilise funds from internal and external sources.
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In this part of the report the problems and difficulties encountered in the air transport sub- sector during implementation of projects will be examined on the basis of the reports made by countries, regional and sub-regional organisations.
4.1. Seen from the perspective of the magnitude of the task, the scope and dimension of the Decade programme, covering a continent as vast and as diverse as Africa, it is, perhaps, not surprising that some difficulties and problems would be encountered in the process of its implementation.
4.2. These difficulties and problems experienced in the implementation of the Decade programme fall into three broad categories (a) financial constraints and difficulties; (b) institutional and organisational weaknesses and (c) political situation. Although these difficulties and problems are of a general nature affecting the whole Decade programme the degree and extent of their applicability to the air transport sub-sector has not be uniform.
4.3. The first and foremost difficulty experienced during the implementation of projects were the financial and budgetary constraints.
These constraints embraced a broad range of areas ranging from internal budgetary limitations to the more general difficulty of mobilising external funding. The lack of adequate mobilisation of financial resources both at the national, regional and sub-regional levels affected the execution of some projects.
(a) Inadequate budgetary allocation by member states resulting
from the prevailing economic situation of African countries, and the burden of external indebtedness have handicapped the execution of projects; in come cases budgetary limitations has not enabled to cater to recurrent expenditure for maintenance of completed projects and to provide counter part financing.
Protracted and cumbersome procedures for loan negotiations and the delays in the selection process of contractors have been reported as contributing to the delay in the execution of projects;
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