Fadugba to African Airlines:Embrace Mergers

Former secretary general of the Africa Airline Association (AFRAA) and chief executive officer of African Aviation Services Limited (AAS), Mr Nick Fadugba, has advised African airlines to embrace mergers and acquisitions to enhance their chances of survival and also benefit from economies of scale.

He gave this advice while delivering a paper entitled, “Challenges and Opportunities Facing African Airlines” at the Airport Council International (ACI) conference held in Abuja recently.

The advice, according to him, became necessary in view of the fact that African airlines are undercapitalised and are too small and weak to meet the challenges of today’s competitive air transport industry, adding that though air traffic on the continent is growing, the share enjoyed by African airlines is not growing as that of foreign carriers.

Fadugba said, “To benefit from economies of scale and enhance their chances of survival, African airlines have to come together and work together through code-shares, win-win joint ventures mergers and acquisitions so as to form stronger carriers that can grow and prosper”.

 To buttress his point, he cited the United States, where according to him, Delta airlines has acquired North West Airlines; United Airlines acquired Continental Airlines; while in Europe Air France acquired KLM Royal Dutch Airlines and British Airways has merged with Iberia airlines of Spain.

Airline consolidation, the chief executive officer of African Aviation Services Limited (AAS), said is a global reality, which Africa must face up to now or suffer the consequences, adding that more airlines will fail in Africa in the next five years if urgent steps were not taken towards airline cooperation and consolidation.

“I humbly submit to you that without a strong, viable and profitable Africa aviation industry that facilitates business, trade, tourism and social interaction on the African continent and beyond, it will be difficult to create wealth, eradicate poverty and promote sustainable economic development in Africa”

On air safety, the former AFRAA boss stressed that it must be a priority in Africa aviation sector, calling on airline operators in Africa and governments in making this achievable.

He listed the challenges facing the African airports to include safety, security, new technology, funding, passenger facilitation, modernisation, manpower development and debt collection, adding that he is very confidence that practical solutions can be found to these challenges.

In his words, “Airports have a vital role to play in every country as a national gateways and engines of economic growth; rightly or wrongly, airports are often viewed by their users as monopolies with limited competition, high charges, strong revenues and strong margins. But this not always the case”.

 He argued that whether airport’s revenues and costs are based on the Single Till or Dual Till policy, what is certain is that every airport has to strive to improve its Work Load Unit (WLU) through enhanced operational and economic performance. 
Fadugba commended African airlines such as Ethiopian Airlines, Egypt Air, South African Airways and Kenya Airlines for the efforts put in place as they grow in aircraft fleet size, aircraft utilisation, route network, traffic load, revenues and overall viability.
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