SAATM is the way forward
Reliable regulatory frameworks vital for private sector financing of African airports, says Emmanuel Chaves, President of Airport Council International (ACI) Africa.
The airports and aviation industry have remarkably recovered and this trend is expected to continue in 2023 and 2024, in what ways would you say African airports and travelers have benefitted from this recovery?
Allow me to shed light first of all on the potential recovery of our industry as we are not there yet. It is true that, with the removal of travel restrictions and quarantine requirements for vaccinated travellers in 2022, there has been an upsurge in demand across many markets, including in Africa, as evidenced by the air traffic figures.
As the Covid-19 pandemic shaped many near-term policy decisions over the last three years, the global economy unfortunately continues to face a number of challenges in 2023. From the never-ending conflict in Ukraine to a looming economic slowdown in many major economies, including in Africa, the risks are, sadly, more than ever present to disrupt the current encouraging pace of the recovery from the pandemic, with the greatest economic threat being that of the significant increase in inflation.
As aviation is very much linked to such macroeconomic factors, the impact of prices and disposable income remain important determinants of air transport demand. Thus, uncertainty regarding a swift recovery of the aviation industry remains omnipresent, especially in the near term.
With a continued reliance on international travel, Africa continues to be vulnerable to external shocks. The domestic traffic in Africa will recover to the 2019 level as from this year whereas for the international traffic to reach the level of 2019, we need to wait until 2024.
What is the potential of private sector development and management of African airports, given the urgent need to transform the Africa’s airports industry and economy?
The private sector involvement in African airports remains very low, with the distribution of passenger traffic held by privately managed or owned airports standing currently at 11%, compared to Asia-Pacific at 47%, Latin America at 66% and Europe at 75%, and with the world averaging 43%. The global airport operators, currently having a stake in the management or ownership of African airports, are Egis, TAV, ADP, VINCI, Limak and Summa. And, there are potential African airports privatisation presently under way in Nigeria, Angola, Rwanda, Cameroon and Burkina Faso.
The potential to increase private sector participation in the financing of airport operations and development exists. What is required to enable private sector participation on the continent are reliable regulatory frameworks, a move toward well-crafted economic incentives, and a move from single till regimes to dual and hybrid tills, which induces cost efficiencies and innovations on the commercial side of the airport business to reduce the over-reliance on aeronautical revenues.
At ACI Africa, we do not prescribe any specific ownership or management model of airports as each case is unique and has to be examined on its merits and derived benefits for both parties, i.e. the government and the private operator.
“Coming out of the pandemic, as airports look to ensure long-term financial sustainability through the diversification of their revenue streams, cargo has effectively become an important area to be explored.”
Would you say infrastructure has remarkably improved among African airports, and what is ACI Africa doing to encourage infrastructure improvement at Africa’s airports?
African airports do not have the choice if they are to improve their safety and security, the quality of services offered to passengers, to attract more airlines and hence boost air traffic, and be financially viable and sustainable going forward.
There are, however, a number of crucial elements related to the development of airport infrastructure in Africa that needs to be taken into consideration. First of all, the operating costs of airports are largely fixed, due to investments in infrastructure but also due to the associated operating costs, including those relating to safety and security, which vary little with the volume of traffic. Secondly, the cost of operating airports in Africa is high and this is often linked with the need to pre-finance investment projects. Airports with very low traffic therefore face unfavorable credit and financing conditions vis-à-vis funding agencies. Thirdly, airport infrastructure is a key component of air connectivity and naturally, increasing traffic allows airports to invest in adequate airport infrastructure to meet capacity demands.
Unfortunately, Africa has a poor track record in liberalising air transport, which significantly hinders connectivity and competition. Air transport liberalisation benefits airports of all sizes, as a more liberalised environment allows airlines to fly to secondary airports and capture untapped markets.
Africa has renewed efforts to create easy access for African airlines to markets around the continent under the Single African Air Transport Market (SAATM), while promoting easy movement of goods through the African Continental Free Trade Area (AfCFTA); what is the role of African airports and ACI-Africa in this evolution, especially in terms of ensuring affordable cost of freight?
I believe that the SAATM and the AfCFTA are indissociable flagship projects of the African Union. In fact, the AfCFTA cannot be effective without the SAATM as the latter rests on the elimination of the non-physical barriers to the development of the air transport sector, the creation of a safe and reliable air transport industry, and the liberalisation of the aviation market in Africa, amongst others. These are equally the sine qua non conditions for the successful implementation of the AfCFTA.
At ACI Africa, we are totally convinced that the SAATM is the way forward if Africa wants a full reform of its air transport industry and to unite its fragmented air transport market, in order to bring about the air liberalization revolution, and enhance the air connectivity, we have all been craving for. We are, however, conscious that the SAATM is a very complex project in its implementation and operationalisation, as evidenced by the lack of the indefectible commitment from some of the African states. And yet, we all know that if we are to enjoy the full freedom of our African skies, we need the commitment of one and all.
Let me now turn to ACI Africa’s contribution and support in the operationalisation of the SAATM and the AfCFTA. I had presided the 69th board meeting of ACI Africa on 27 February 2023 and I can confirm that, with the support of all my board members and my secretariat, ACI Africa is more than ever determined to support the vision and mission of all African airports towards enhancing safety, security, best industry practices, decarbonisation, digital transformation and sustainability.
Moreover, ACI Africa has crafted its strategic orientation for the coming three years, premising on the development of a robust and sustainable air transport industry for Africa with the SAATM project as the backbone. ACI Africa will offer its full support and join efforts with all key institutions and organisations on the continent towards making the SAATM a reality for the overall prosperity of Africa.
Turning to the issue of ACI Africa and African airports ensuring affordable costs of freight, I have to explain first the sensitive topic of charges and taxes in Africa. Let me be very clear that charges are not a threat to aviation growth, but an objective and legitimate necessity to cover airport costs, like in any other industry.
But, where I agree with you is that we must focus our efforts on the removal of unreasonable and unjustifiable taxation, in lieu of airport charges, imposed on aviation by certain states rather than repeating, time and again, the rhetoric that the cost of travel is expensive in Africa and that airports are the culprit and that they must reduce the airport charges to decrease the air fares, the cost of freight, etc.
ACI Africa strongly advocates that all airport charges must be set in consultation with airlines, as per the ICAO regulatory framework, which means that airports must listen very carefully and take into full consideration the airlines’ inputs when determining their investment plans, operational needs, and consequently their charges.
“At ACI Africa, we are totally convinced that the SAATM is the way forward if Africa wants a full reform of its air transport industry and to unite its fragmented air transport market, in order to bring about the air liberalization revolution, and enhance the air connectivity, we have all been craving for.”
Africa’s air cargo has contributed less than 2% of global air cargo figures over the past decade despite the potential to double or triple Africa’s contribution; do you think Africa can double this figure over the next 5 years and what should be the role of African airports in this regard?
My wish is that Africa can double its current air cargo figures over the next 5 years. The present forecast of ACI Africa for the air cargo sector in Africa unfortunately does not project such a robust growth despite the AfCFTA constituting the largest free trade area in the world in terms of participating countries.
Coming out of the pandemic, as airports look to ensure long-term financial sustainability through the diversification of their revenue streams, cargo has effectively become an important area to be explored. In light of the recent developments, many airports are now asking how they can capitalise on cargo’s resilience. The answer is not straightforward, and it will probably depend on many factors. Some of these factors are not even within the airport’s control which makes the process even more complex. There is, however, one consideration that applies to most airports, i.e. developing cargo takes time and effort.
On the positive side, with the newfound importance for air cargo, there is willingness from aviation stakeholders to invest in or contribute to its development. The development of a clear, well-thought-out cargo strategy, including a cargo master plan, is essential to growing this segment of airport’s portfolios.