AFRAA Africa Wings Magazine: African Aviation Outlook

African Airlines Association, AFRAA, has radically improved its communication strategy in the last few months through the revamping of the organization's website to make it even more navigable and user friendly. The previous website was full of blank pages and broken links giving users a horrendous experience when finding information on African aviation.

The organization has also incorporated social media in communications, and offers better experience through digital magazines instead of the old horrendous PDFs. You can follow the AFRAA CEO Elijah Chingosho on Twitter at @chingosho or follow AFRAA on @AfricanAirlines.

Highlights from the Africa Wings Magazine:

Foreign Dependence
Intra-African Trade is a mere 10% total exports compared to trade within the Association of South East Asian Nations(ASEAN) 60%, or North American Free Trade Agreement(NAFTA) which accounts for 56% of total exports. This lack of economic diversification explains the high volatility of African trade and consequently the poor Intra Africa air transport development.

The resilience of Africa in 2011 will be heavily tested with the increase in food prices. Volatile fuel costs, instability in North Africa and the Middle East and the sovereign debt crisis in the developed countries creates risks for a renewed downturn. The limited integration of African economies into the global economy proved a blessing in disguise in helping the African economies weather the storm of the global recession of the last three years. Most countries in Africa now have a stronger a macroeconomic position. 

In Africa the boom-bust cycle of private financial inflows was less marked due to high share Sub Saharan Africa of FDI over other more volatile forms of private capital.
Growing Population and Middle Class 
Africa has a population of 1.05 billion and by 2050, 25% of the global population will be African. By 2050, the Population of Sub Saharan Africa will be 3.4 billion with Nigeria becoming the world's third most popular nation with a population of 433 million. Africa's middle class is also growing as first as its population. In the last 10 years, six of the 10 fastest growing economies in the world were in Africa according to the Economist. In the next five years DR Congo, Ethiopia, Ghana, Mozambique, Nigeria, Tanzania and Zambia will grow at an average of 7.2% annually.

Africa has become an emerging market with a relatively high return on investments. By 2030, Africa will have a 300 million strong middle class tat will spend $2.2 trillion per year, amounting to about 3% of global consumption according to the African Development Bank.
Doing Business in Africa: Africa's wealth
Africa has 90% of World's platinum, 50% of the world's gold, 70% of the world's cotton, and 30% of te world's diamond reserves according to the African Business Magazine. Chinese companies are doing business with every of Africa's 54 countries. Trade between China and Africa will almost triple to $300 billion by 2015 according to stats from Standard Bank South Africa. Companies from India and Brazil are increasingly pursuing commercial interests in Africa. The EU nations are also increasingly renegotiating contracts in Africa as their traditional dominance of the African business slips away to new competitors. 

Implications for Air Transport
The above developments bode well for the African aviation industry. With large middle class and poorly developed road and rail infrastructure, African aviation will increasingly play a big role in socioeconomic development and regional integration. Africans are turning more and more to air travel as disposable income improve and speed becomes of essence amongst the business community and Africa's growing entrepreneurs.As a result, Africa's air transport will sustain a 6.1% growth in 2011 and keep the growth rate or above the historical trend through 2030.

Direct Foreign Investment,  growing urbanization and rising incomes will continue to spur higher domestic demand for consumer goods and air transport. Intra Africa air travel, which is currently 20% of the total air travel is set to grow significantly to support the fast expanding regional trade which is just 10% at the moment. Regional trade blocs SADC, EAC, COMESA, ECOWAS are working harder to eliminate trade barriers and increase cross border trade, investments and move goods and people.

As China and India continue to be major trading partners of African countries, traffic between Africa and Asia will continue to grow. Projections are that travel between Africa and Asia will grow t 8.1% annually over the next 20 years to 2030. The Africa-Asia Travel market will be the fast intercontinental air travel growth region and therefore African carriers would need to focus resources in developing their Asian networks before the Asian carriers their operations Westwards into Africa.
Competition: Foreign Carriers Control 82% of African market
The huge untapped African aviation market has not escaped the attention of foreign carriers who are looking for growth markets to deploy their extra capacity. Many foreign carriers are strategically positioning themselves in various markets in Africa to take advantage of anticipated traffic boom and exploit the weakness of African carriers. During the financial crisis of 2008/2009, many non-African operators  deployed their excess capacity on African routes. In 2010 as in earlier years, non African carriers commanded the biggest market share of 82% of all intercontinental traffic to/from Africa as compared to 18% by African airlines. The market share of African airlines in the last three years has dropped from 20% to the current 18%.

On Intra African routes, the competitive landscape is radically different with EgyptAir, Ethiopian Airlines, Kenya Airways, Royal Air Maroc and South African Airways being the dominant players. Well-timed connecting flights  between East and West Africa are improving passenger travel time and inconvenience. Though flights availability is improving, West and Central Africa remain the regions with least number of direct flights between cities. The absence of an effective hub airport in the region accounts for this.

Commercial Partnerships and alliances
One way African carriers can be more competitive on intercontinental routes is for them to establish stronger intra-Africa networks that feed passengers to gateway(hub) cities and facilitate better connections. Already some patterns are beginning to form in this regard. Ethiopian Airlines is a strategic partner of ASKY. It also provides technical support to Air Nigeria and other airlines. Over 90 Commercial partnership arrangements currently exist among AFRAA member airlines.

On the global scale, South African Airways, Ethiopian Airlines, EgyptAir are now members of global airline alliance Star Alliance, Kenya Airways is a member of Sky Team while South Africa's Comair is a member of OneWorld alliance.

In 2010, there were 48.8 million International Tourist arrivals in Africa with North Africa receiving an estimated 18.7 million tourists and Sub Saharan Africa receiving 30.2 million tourists. Africa achieved 6.5% growth in tourism, with the FIFA World Cup in South Africa no doubt playing a crucial role.

Next: Serialization on African Airline Performance from the AFRAA report. You can read the full AFRAA report below:

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