Your Excellencies
Chairperson of the Airlines Association of Southern Africa (AASA)
Distinguished Guests
Colleagues and friends,
Good morning and thank you for inviting me to your annual general assembly. It’s wonderful to meet here, at this spectacular location and in person.
In fact, resilience is what has allowed us to be here today. It’s the mantra to repeat as we move away from a crisis that shocked and disrupted our lives. We know our industry is resilient; and we also know that we can do much more together to make it even more resilient.
Before I provide an overview of where the air transport industry is in its post-pandemic recovery, I’d like to ask you all to join me in a round of applause to congratulate South Africa on its re-election to the ICAO Council and on your respected Director of Civil Aviation, Ms Poppy Khoza, being appointed to preside over ICAO’s assembly earlier this month.
Ms Khoza, your election and appointment were timeous and momentous, and we look to you, the South African government and fellow African States through AFCAC and the Regional Economic Communities (RECs), to use this golden opportunity to be a champion for sustainability. Thank you.
Economic Overview
Last year, airlines worldwide lost a combined $42 billion. IATA’s current outlook sees the global loss reduced to $9.7 billion for 2022 and a return to industry-wide profit in 2023. Africa is on track to follow by the end of 2024.
Demand for air cargo, which is a useful barometer of trade, has slowed worldwide, having contracted by 8.3% in August compared with the same month last year. However, Africa remains a bright spot, with demand up by 1% during the month.
Looking at the passenger market, worldwide we saw a 67.7% rise in traffic during August, bringing us to 73.7% of 2019 pre-pandemic levels.
OAG’s sub-regional breakdown for Africa of airline capacity indicates that:
If we part this out, the OAG data indicates a 35.7% deficit in domestic passenger capacity and a 27.7% shortfall in the international market versus same week in 2019.
This is not a reflection of tepid demand. Far from it. Airlines in the region are experiencing unprecedented load factors and most are operating at maximum capacity.
However, the current state of the industry in Africa is indicative of some key regional challenges. With this in mind, I am going to address the following priorities:
Connectivity, market access and regulatory reform
If we zoom in on Southern Africa lagging behind in the recovery, we can easily spot issues of market access and connectivity. What the numbers describe is the impact of several carriers’ exits from the market and the harmful distorting effects of an out-dated regulatory framework of bilateral air service agreements between governments, that restrict expansion and market access. They do so by designating points of entry, setting capacity caps and limiting the number of flights airlines, designated by the respective countries, may operate.
Today, in Southern Africa’s case, with the exception of Angola, the absence of local inter-continental operators from routes they have been designated, is causing particular pain as it has left many markets under-served. By choking capacity in this way, commercial opportunities are being squandered and slowing the recovery of lucrative long-haul foreign tourism and trade. In turn, this is delaying the delivery of socio-economic benefits and attainment of many of the UN Sustainable Development Goals in the region.
The solution is not necessarily to start or prop up unviable airlines. It is to review and overhaul the regulatory regime and replace it with one that is fit for purpose.
And in terms of intra-African connectivity, since 1988 we have spoken about the virtues and benefits of the Single Africa Air Transport Market in its current and former guises (Yamoussoukro Declaration and Decision). You all know the script, so I won’t repeat it in this forum. We cannot afford to spend another 30 years convening talk-shops about it. It is now time for governments to demonstrate their courage and commitment by implementing it.
Crucially, a regulatory overhaul will create an enabling environment to nurture a robust, vibrant air transport eco-system. This will result in more revenue for governments to invest in suitable education and skills development, so that increased numbers of young Africans are sustainably employable in aviation. In turn, this will be a magnet for investment, which will advance sustainable transformation and enhance the attractiveness and competitiveness of the industry in the region.
Planning and preparedness
The relaxation of COVID-related travel restrictions has meant there are plenty of people who want to fly. As travel restrictions have been lifted, we have made repeated calls for governments and every player in the air transport value chain, to ensure they are adequately resourced and appropriately equipped to cope with the inevitable resurgence in air travel. During the northern summer season, we saw challenges in Europe, the US and Australia due to a shortage of staff because airports did not plan well for the return in demand. These should have served as warnings and lessons for those destinations still expecting to experience the surge.
Similarly, it was alarming that very recently we found ourselves on the brink of a calamity when fuel stocks at Cape Town International Airport – one of Africa’s most important gateway airports – ran so low that airlines were first rationed and then told to refuel elsewhere.
Frankly, it is unacceptable that fuel suppliers should have exposed airlines and their customers through their poor planning and inadequate fuel provisioning. We cannot express it in simpler terms – we require far better planning and coordination. We call on the Government and fuel suppliers to move with urgency and put in place a robust resilience plan to ensure sufficient stocks of aviation fuel are always available for airlines, more so, as we approach the peak season.
Another challenge we are facing is with visa processes where, in many instances, it now takes months just to secure an appointment to submit an application, and then more weeks for the visas to be issued. We call on governments to address this travel barrier, especially as mature and proven digital solutions are available to make the process frictionless, robust, affordable and efficient.
Taxes, charges and rising costs
While it is tempting for some actors in the value chain to try and make up for lost revenues during the COVID pandemic, now is not the right time to be raising charges, increasing levies, hiking carbon taxes or introducing new taxes on air transport, trade or tourism. We are mutually co-dependent on each other. Every increase deters increasingly cost-sensitive customers, resulting in fewer travellers and even less revenue, not just for airlines, but for all stakeholders across the value chain including airports, ground handlers, suppliers and air navigation services. Ultimately, they set back economic growth and curtail opportunities to create and support jobs and livelihoods.
This is especially important against a backdrop of high oil prices. Although oil prices have retreated from mid-year peaks, by the end of September, the average price of jet fuel so far this year has been US$141.7 a barrel. This means airlines will collectively pay an extra US$131 billion for fuel this year compared with 2021. Most disconcerting is the widening gap, or crack, between the price of crude and jet fuel. Historically this has held at about US$20 a barrel, but since February it has opened up to around US$45, which suggests jet fuel production and supply is being held back.
The message here is simple: governments’ adherence to ICAO’s policies on charges and infrastructure through a process of consultation with airlines and industry is paramount to ensuring fairness and a cost-effective operational environment.
And here I want to draw out the example set by South Africa where the Government, through the regulatory process, brings together aviation stakeholders for open and transparent consultations when setting aeronautical user charges, both for ATNS and ACSA. We encourage more Governments in the Africa region to follow this example on how to engage users for an effective consultation by implementing robust economic regulations on aviation, with an independent arbitrator.
Sustainability
There should be no doubt that climate change is real and represents our biggest and most fundamental challenge.
We applaud the unanimous adoption of a Long-Term Aspirational Goal to achieve net zero CO2 emissions by 2050, at the ICAO assembly. This is a significant moment for all of us as it compels governments and the aviation industry to rapidly implement far stronger, deeper and greater decarbonisation initiatives, including increasing production of Sustainable Aviation Fuels.
We estimate that 65% of the mitigation needed for net zero emissions in 2050 will come from SAF. While the industry purchased all one hundred million litres of SAF available in 2021, the supply remains limited and the price far higher than conventional jet fuel.
We call on governments to urgently launch incentives for the rapid development and expansion of production and use of sustainable aviation fuels. This means looking to other feedstocks instead of fossil fuels from which to produce sustainable aviation fuels. I believe there is big opportunity for South Africa as one of the most bio-diverse countries in the world, to play a central role in the production of SAF.
The Assembly also reinforced its commitment to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and increased its ambition by agreeing to stabilize emissions of international aviation at 85% of the 2019 level. In agreeing this, many governments emphasized CORSIA’s role as the only economic measure applied to manage the carbon footprint of international aviation.
But we need to hold governments accountable for their CORSIA commitments. Too many states are introducing aviation carbon taxes that could undermine CORSIA. We are concerned about a proposed increase in carbon tax in South Africa. The lower CORSIA baseline will already place a significantly greater cost burden on airlines. So, it is more critical than ever that governments do not chip away at the cement which bonds CORSIA as the only economic measure to manage the carbon footprint of international aviation.
Safety
When it comes to Safety there is no room for compromise. While no African domiciled operators on the IATA Operational Safety Audit (IOSA) register have suffered hull losses since 2020, incidents across Africa by regional and global operators continue to be experienced. Regrettably the region’s accident rate remains the highest.
This should serve as sharp reminders that we need to work together towards:
Closing
In closing, I want to recap on these main calls for action:
Proper planning and the provision of adequate staff and appropriate resources are crucial. We cannot allow for the industry, tourism or the economy to be tripped up by poor preparation.
Aviation and tourism are not to be treated as easy targets for collecting taxes and charges without reinvesting in improved infrastructure, training or service delivery. Some of the most expensive airports in Africa are also ones with the lowest service levels and infrastructure. This disparity between cost and quality is unacceptable.
Connectivity is precious. The pandemic demonstrated that everybody suffers when aviation stops. It also dispelled the myth that flying only benefits the rich. A financially viable air transport sector, in a fit-for-purpose and enabling regulatory environment supports jobs, promotes transformation and will be a driving force for Africa’s economic recovery and future growth.
And finally, Safety is paramount and the focus on this must be unwavering.
We call on Africa’s governments and industry to work closely with each other to drive a harmonized agenda for air transport. In doing so, we will unlock even greater economic prosperity throughout the region.
Thank you.
