The Consolidation of Air transport in the continent will lead to profitability for the troubled airlines in Africa, This is according to the stakeholders of the airline industry.
The sector is a catalyst for promoting tourism and fostering trade and regional development. However, Africa represents less than 3% of global air traffic and over the past 15 years, the continent has had the lowest level of market consolidation compared to the other regions in the globe.
The African Airlines Association (AFRAA), Lufthansa Consulting and Kenya Airways staged a high level workshop on 14th September 2021 on African airlines consolidation to discuss the reasons for few partnerships and limited airline consolidation, the challenges and benefits of consolidation and measures for action by industry stakeholders to address the situation.
Speaking during the workshop, Kenya Airways CEO Allan Kilavuka said: ”It is crucial to retrace and learn from the footprints of consolidation from different parts of the world as we reset Africa’s aviation towards our collective dream for flying to a better future. Consolidation and collaboration are essential ingredients for resilience and sustainable business operations of airlines. The ripple effect of strengthened collaboration amongst airlines will be an increase in the industry’s contribution to the sustainable development of Africa and therefore we must elevate the tenor of discourse and make the airline industry matter in and for Africa”.
Ms. Catrin Drawer – Head of Market Africa, Lufthansa Consulting stated: “We require to meet the challenges of the “New Normal”, a reset in our thinking and approach.We require new business models, meaningful innovations in operations, adaptive management open to change, a growing true synergistic relationship between airlines and other relevant stakeholders.
New challenges need new solutions now and in future to bring both resilience, and sustained success. Thus, synergy and meaningful partnering, whether through existing contracts and alliances or new agreements, will be essential. We cannot bring back yesterday but we may together shape the future.“
Lufthansa consulting experts provided an in-depth analysis and background of consolidation of airlines from a global to an African perspective. The impacts of consolidation for African airlines, passengers, cargo, air transport growth and connectivity were discussed. Case studies were presented at C-level by Kenya Airways, Air Afrique and Ethiopian Airlines to enrich the discussions with first-hand experiences on the challenges, benefits of consolidation as well as the lessons learnt.
The forum articulated the following recommendations for action by the industry:
- Consideration of various models of consolidation including equity partnerships between two airlines or across a group of investments, cooperation between two or more well-matched airlines, or the formation of a new common airline. The concept of “Air Afrique” remains a valid consideration for Africa.
- Implementation of appropriate corporate governance structure is necessary for consolidation. Political interference in the airline management is to be avoided.
- Call to Development Finance Institutions (DFIs) to finance the feasibility study of consolidation models.
- Call for uniform implementation of harmonized regulations and the establishment of an enabling working relationship between regulators, airlines and Regional Economic Communities (RECs).
- Enhancement of cooperation among African airlines (alliance of airlines, pooling resources, code sharing and interlining).
- Call for support and commitment from Governments for airline consolidation in Africa.
- Urge airlines to carry out careful evaluation of potential consolidation/partnerships based on factual data.
- Exploration of cargo opportunities for air cargo consolidation.
- Call for government and private sector collaboration to achieve concrete steps in airline consolidation.
- “Walk the Talk” – translate ongoing discussions into action in the interest of delivering accelerated benefits to the aviation ecosystem
The important workshop brought together over 200 participants comprising airline CEOs, C-level representatives from airports, CAAs and other African air transport decision makers as well as the media.