State of the Airline Industry - TAAG Angola Airlines

8/2/2019 State of the Airline Industry - TAAG Angola Airlines

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THE AFRICAN AIRLINE INDUSTRY IN

THE EVOLVING MARKET PLACE

A Presentation to TAAG Angola Airlines

15 August, 2011


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Global Airline Industry in 2010

African Airlines Performance

Airline Cooperation in Africa

Airlines Main Challenges

Way Forward

Conclusion


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Industry profit of $15 billion 2010

2009 was a loss of 10 billion

African airlines profit in 2010 was $100 million

Globally fuel accounted for 26% of total airline operating

cost

Over 1200 new jets and turboprops were delivered in 2010


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-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Africa Asia Pacific Euroepe L/America Middle East N/America

97,375

1,230,788

996,991

197,521

332,018

1,025,961

Revenue Tonne-Kilometres per Region - IATASchedule Services - 2010

Domestic International Systemwide


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African achieved an increase of 6% in 2010 on the consistent year on year

positive growth The FIFA World Cup hosted by South Africa in 2010 largely accounted for

the 6% growth

Tourist arrival in Africa in 2010 was 48.8 million


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Africa

2%

L/America

5%

Middle East

9%

Euroepe

26%

N/America

26%

Asia Pacific

32%

Global Revenue Tonne-Kilometres Performed perRegion - IATA Schedule Services - 2010


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African airlines market share is small, 2.6%

Most airlines are small and under-capitalised

African sky is mostly dominated by European and Middle

East

New airlines from Asia, North America & Canada entering

African markets


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In the 1970s and 1980s Africa had 26 inter-continental airlines(including Air Afrique, owned by 11 States)

This has been reduced to about 9 airlines

Some may further disappear

In most of the francophone countries, Air France has a de factomonopoly

Focus must be on safety, cooperation, economic regulation andinternal market liberalisation


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KEY

Countries that didnot have longhaul operators

Countries withbudding airlines.Dominant carriersare foreign airlines

Countries that hadvibrant long-haulairlines sharingthe market withexternalcompetitors

African Airline Industry in the 1970s & 80s


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(10,000,000)

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

2005 2006 2007 2008 2009 2010

Total Passengers Carried by AfricanAirlines 2005 - 2010

Yealy GrowthSource: AFRAA/IATA

Passenger numbers have been

growing consistently except for2009 when there was a slightdrop due to the impact of theglobal financial crisis and itsimpact of tourists inflows

2010 passenger numbersincreased by 13.7% compared to2009

Total passengers carried byAfrican Airlines in 2010 was60,942 million


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African Airlines Performance - 2010


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There has consistently been over-capacity by African airlines on

both domestic and international

routes

This results in the low utilisationof aircraft and lower than industry

average load factors

2010 load factor was 69.1%

compared with global average of78.2%

African Airlines Performance - 2010


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The African scheduledpassenger, cargo and

charter airlines have a

fleet of 1,141

684 are western built jets

392 turbo propellers

65 aircraft from the former USSR


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Financial Performance

African airlines profit for 2010 was $100 million

KQ & ET made record profits in 2010

Loss expected in 2011 of USD100 million

Due to high fuel costs and political disturbances in North Africa

in 2011

Despite challenges, some airlines expected to be profitable in

2011


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Examples of successful experiences

KQ/KLM strategic allianceso far a great success

Balance through diverse ownership structure

KLM/AF - 26% Foreign institutional investors - 4.47% Foreign individual investors - 1.39% Kenyan government - 23% Kenyan institutional investors - 14.2% Kenyan individual investors - 30.94%

Conducive political and regulatory environment

KQ/Precision Air - 49/51% Ownership


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The Group Celestair Model

One holding company (AKFED) establishing and holding equity shares inseveral national carriers

Air Uganda 100% Air Burkina 79.4%

CAM51%

Technical Strategic partnerAn affiliated Company Meridian

Aircraft capacity provided through a common leasing company (Finaircraft)

Objective is to achieve synergy and economies of scale throughmembership in the groups own alliance


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The ASKY model

Private sector driven

Multi-national institutional/individual ownership

Technical/management partnership with Ethiopian Airline

Operations to started 2010

Operates flights to 19 domestic and regional destinations


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Some unsuccessful experiences

Air AfriqueMulti-national carrier (11 African States)

Air Senegal/Royal Air Maroc

South African Airways/Air Tanzania

Virgin Nigeria/Virgin Atlantic

British Airways/Regional Air


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Can African airlines survive the Global liberalisation andconsolidation?

Thriving African carriers under serious attack

Consolidation across borders and continents in progress

Non-African airlines are establishing subsidiaries and signingfranchise agreementsBA/Comair, Emirates/Senegal Airlines


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Small size and limited network

Lack of commercial cooperation

Ageing fleet

Safety and security perception

Brain-drain and poaching of

skilled human resources

High cost of operationsfuel,

taxes, charges, fees

Market access and traffic rights

constraints

Aggressive external

competition

EU unilateral regulations

Frequent changes of top

management

Corporate governance issues


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Brain Drain

A major threat to the survival and growth of many Africanairlines

AFRAA has consistently drawn the attention of African aviationstakeholders to this threat and called for action

AFRAA has focused training on safety and managerial skillsdevelopment of airlines


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Environmental Issues

Safety, security, the environment and profitability are the key

challenges confronting the industry Airlines encouraged to modernize their fleet to reduce emissions

AFRAA lobbying against the imposition of unilateral regulation

of aspects of the industry (EU ETS) by the EU


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Liberalise market and work together

Implement the Yamoussoukro Decision to stimulate more

flights across Africa

Liberalisation will speed up growth and prepare African

airlines internally for external competition

Establish commercial cooperation with other African airlines

and expand your market coverage

Some progress on liberalisation have been made in West Africa


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Management Stability

and Autonomy

Shield airlines management from

Government interference in day-to-day operations

Frequent changes of CEOs frustrateimplementation of plans


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Stringent Cost Management

Modernise fleet and adopt ICT to lower operating cost and

deliver competitive service

The emergence of Low Cost airlines (LCCs) should compel

Africans to adopt more rigorous cost management strategies

Lobby government to lower taxes on air travel. This will maketravel cheaper and stimulate more demand


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Adhere to Industry Best Safety Practices

Be IOSA registered

Observe all ICAO recommended safety practices

Provide support to Civil Aviation Authority in the discharge of

its safety oversight responsibilities


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Train and continuously retrain staff to achieve highproductivity

Actively participate in AFRAAand other industry programmes

to keep abreast with new developments

States should ratify Cape Town Convention and Protocols toreduce the cost of new fleet acquisition


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Africa is one of the fastest growing markets in the world

This has resulted in stiff competition and the influx of many foreign

airlines

The real opportunity for African airlines is in growing the intra-

African market

Cooperation among airlines will speed up market penetration, lower

market entry costs and stimulate demand


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Internal liberalisation should be embraced to speed up market

access

Need for stability in management and tenure

Embrace technology and modern business practices

States and regional organisations should take a unified positions

against the EU unilateral regulation of some aspects of theindustry


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State of the Airline Industry - TAAG Angola Airlines

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