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AFRICAN AVIATION c SEMINAR AVIATION IN TRANSITION CHALLENGES & OPPORTUNITIES OF LIBERALISATION 22 nd – 23 rd March, 2003 - Montreal, Canada PRIOR TO THE 5 TH ICAO WORLDWIDE AIR TRANSPORT CONFERENCE Presentation by Nick Fadugba CEO, African Aviation Services Limited Publisher, AFRICAN AVIATION Magazine AFRICAN AVIATION c

SEMINAR AVIATION IN TRANSITION CHALLENGES & OPPORTUNITIES OF LIBERALISATION

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c. AFRICAN AVIATION. SEMINAR AVIATION IN TRANSITION CHALLENGES & OPPORTUNITIES OF LIBERALISATION 22 nd – 23 rd March, 2003 - Montreal, Canada PRIOR TO THE 5 TH ICAO WORLDWIDE AIR TRANSPORT CONFERENCE Presentation by Nick Fadugba CEO, African Aviation Services Limited - PowerPoint PPT Presentation

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AFRICAN AVIATIONc

SEMINARAVIATION IN TRANSITION

CHALLENGES & OPPORTUNITIES OF LIBERALISATION

22nd – 23rd March, 2003 - Montreal, Canada

PRIOR TO THE 5TH ICAO WORLDWIDE AIR TRANSPORT CONFERENCE

Presentation by

Nick FadugbaCEO, African Aviation Services Limited

Publisher, AFRICAN AVIATION Magazine

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AFRICAN AVIATION SERVICES LTD

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Company Profile

1. Aviation Publishing

2. Aviation Conferences

3. Aviation Consultancy

With A Special Emphasis On:

* Aviation Finance* Aircraft Leasing & Maintenance* Aviation Safety & Security

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MAXIM

‘Aviation Can Be A Vital Catalyst For Africa’s Economic & Social

Development’

- Company raison d'etre

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Air Transport Liberalisation

• The Underlying Theme of the 5th ICAO Worldwide

Air Transport Conference is Not WHETHER to

Liberalise but HOW to

Liberalisation is said to be Inevitable

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Africa’s Share of Global Air Traffic

• Today, African Airlines have only an approximately

2% Market Share of Global Air Traffic

• If International Air Transport is further Liberalised

Will Africa’s Global Market Share be

Increased or be Reduced?

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Challenges & Opportunities of Liberalisation

• Further Air Transport Liberalisation could provide

several benefits, such as enhanced air travel, economic

trade and tourism

But the Key Challenges are: How Air Transport Liberalisation

can be Structured and Implemented so as to ensure

that African airlines are not disadvantaged and

put out business and their staff put out of work?

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Africa: Socio-Economic Environment

• Large & Growing Population

• Mainly Small & Weak National Economies

• Low Per Capita Income

• Little Disposable Income for Air Travel & Tourism, etc.

• Political Instability & Conflicts in Several Countries

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Key Challenges Facing Regulators in Africa• Implementing & Monitoring the

1999 Yamoussoukro Decision on

Air Transport Liberalisation in Africa

• Providing Effective Aviation Safety

Oversight

• Ensuring Equitable Economic

Regulations

• Harmonising Civil Aviation Regulations

• Enhancing Aviation Security

• Funding Modern Aviation Facilities &

• Expanding Aviation Training &

Education

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Air Transport Liberalisation in Africa

• Is Any Progress Being Made?

• Yes, Slowly but Steadily.

• Thanks to the Efforts of Organisations Like:

• The UN Economic Commission for Africa ( ECA)

• The AU, The African Civil Aviation Commission

(AFCAC)

• ICAO, COMESA, SADC, ECOWAS & AFRAA, etc

• Notably, Some African Governments Have Been

More Supportive Than Others

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Obstacles & Dilemmas

• Some African Governments Are Reluctant

to Cede Control to Truly Autonomous

National Civil Aviation Authorities

• Who Will Benefit Most From Liberalisation

in Africa - African Airlines or Foreign

Carriers?

• Can A Developing Country Promote

‘Open Skies’ & Still Protect its Own Airline

Industry?

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African Position on Liberalisation

• It Must Be Consistent With the

Yamoussoukro

Decision of 1999

• Foreign Investment – National Legislation

Should Determine the Level of Such

Investment

• Market Access Should Continue to Be

Based

on Bilateral and Multilateral Agreements

• Must Be F air Competition & Safeguards

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African Position on Airline Franchising• African Governments Should Require Prior

Authorisation & Verification of Any Franchise

Agreement

• Franchising Between African Carriers Should

Be Authorised Subject To The Airlines Meeting

the Designation & Eligibility Criteria of The

Yamoussoukro Decision

• Third Party Franchising Should Not Be

Supported As it Adversely Impacts

Competitive Position of African Carriers

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High Operating & Capital Costs

• Insurance - High Premiums

• Aviation Fuel - Up to 50% Higher

• Lease Rates - 15%-30% Higher

• Air Navigation - Most Expensive

• Handling Fees - Very Expensive

• Maintenance - Little Co-operation

Source: The World Bank

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Internal Pressures

• Mainly Small Domestic Air Traffic Markets

• Low Load F actors

• Higher Operating Costs than Other Regions

• Government-Regulated Air Fares

• Political Interference in Airline Decision-Making

• Management Instability & Lack of Continuity

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External Pressures

• Air Transport Liberalisation & Globalisation

• Increasing Competition from Larger Foreign

Carriers

• World Bank/IMF Strictures on Government

Subsidies to National Flag-Carriers

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External Pressures (2)

• African Market is Dominated by European Airlines - BA, Lufthansa, Air France, KLM, etc • Asian Airlines Are Now Showing Greater Interest in Africa - Especially South Africa

• Threat By European Charter Airlines - Countries at Risk: Egypt, Namibia, Kenya, South Africa, Mauritius, Tunisia, Morocco, etc

• North American Airlines Have Minimal Presence in Africa - Previous Attempts by USAfrica Airways & World Airways Failed

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Cape Town Convention

•Gives Aircraft Lessors and Lenders the ability to

repossess their assets worldwide in the event of

default

• Provides Aircraft Collateral Assurance

• 60 Day Repossession / With Support of

Governments

• Should Expand The Sources of Asset-based

Finance

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Airline Industry – Key Regulatory Issues

• Airline Ownership & Control – Local or Foreign?• Airline Market Access – Free for All?• Airline Product Distribution• Fair Competition Versus Protectionism• The Provision of Essential Air Transport Services

Vital

To National Economic Development

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Airline Growth Strategies

• Strategic Investment By Foreign Airline Partner –

Kenya Airways / KLM

• Airline Franchising –

BA/Comair, South Africa; BA/Regional Air, Kenya

• Low-Cost Carriers – Kulula.com, South Africa

• Joint Ventures – Royal Air Maroc/Air Senegal

International

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Summary

• Africa Has Made Some Headway in

Implementing Air

Transport Liberalisation, But Still Has Much To

Achieve

• Air Transport Liberalisation in Africa Must

Directly Benefit The African Aviation Industry

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SEMINARAVIATION IN TRANSITION

CHALLENGES & OPPORTUNITIES OF LIBERALISATION

22nd – 23rd March, 2003 - Montreal, Canada

PRIOR TO THE 5TH ICAO WORLDWIDE AIR TRANSPORT CONFERENCE

Presentation byNick Fadugba

Email: [email protected]

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