Distinguished colleagues, ladies and gentlemen, all protocols observed. Good morning. It’s a pleasure to address the 50th Annual General Assembly (AGA) meeting of the African Airline Association (AFRAA). Thank you Abderahmane for the kind invitation. And a special thank you to Abdelhamid Addou, Chairman and CEO of Royal Air Maroc for the superb hospitality.
Morocco is a great place for the AFRAA AGA. It is one of the fastest growing economies in Africa. The government has understood the power of aviation to catalyze economic activity. And they set policies that enhance competition and foster the growth of connectivity.
As a result, tourism is a major source of jobs and growth. And Morocco has taken on a regional leadership role, with West-African countries relying on its growing hubs in Casablanca and Marrakesh. Other countries on the continent should be inspired by this successful model.
Cooperation with AFRAA
AFRAA and IATA are partners in supporting a safe, secure and sustainable air transport sector that contributes to Africa's economic growth and development. Indeed we recently strengthened our cooperation with an agreement to reinforce the importance of the implementation of global standards by African governments.
There are already two examples where our cooperation is at the top of the agenda.
The first is safety. The Abuja Declaration committed Africa’s governments to achieve world-class safety. With no jet hull losses for two years running and two years free of any fatalities on any aircraft type it is clear that progress is being made. There is, of course, still more to do. We are asking governments to drive additional improvements with two concrete actions:
1. First, recognize IOSA in safety oversight. Egypt recently renewed its commitment to this. And we have made progress with Rwanda and Zimbabwe as well. We need more governments to follow their good example. With IOSA carriers outperforming those not on the registry by nearly three times, we have a convincing argument.
2. The second is adoption of ICAO Standards and Recommended practices (SARPs). Only 24 African states comply with at least 60% of ICAO SARPS. Quite simply, that is not good enough for an industry that depends on global standards for safety. To support greater implementation we are encouraging governments across the continent to allocate resources, ensure the independence of safety oversight bodies and cooperate regionally where pooled resources can improve both speed and efficiency.
The other area of cooperation that I must highlight is on environmental sustainability. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) begins on January 1, 2019. From then, all airlines must begin reporting their emissions. If you need help in getting ready for this, please call on the IATA and AFRAA teams who are working together to support your needs.
In parallel, we are working to increase government participation. Encouragingly, nine governments in this region – Burkina Faso, Botswana, Gabon, Equatorial Guinea, Kenya, Namibia, Nigeria, Zambia and the latest, Cameroon – are committed to join CORSIA from the voluntary period. And globally, the 75 pioneering CORSIA states cover about 84% of aviation activity. That’s good, but we want to push that as close to 100% as possible. And our partner for doing that in Africa is AFRAA.
Agenda for Africa
Looking even more broadly than safety and sustainability, how can we maximize aviation’s ability to catalyze Africa’s growth and development?
Already aviation is a considerable force, supporting $55.8 billion of economic activity and 6.2 million jobs in Africa. That’s impressive. But we are only scratching the surface of what aviation can contribute to building Africa’s future. To enable aviation to be an even bigger driver of prosperity across the continent, we must work with governments:
- To improve competitiveness,
- To develop effective infrastructure,
- To modernize the regulatory framework with a focus on global standards, and
- To ensure a well-trained and diverse workforce.
Let’s begin with competitiveness. The global airline industry is currently enjoying rather good times. We are expecting 2018 to be our 4th year of generating profits that exceed the cost of capital. It is still, however, a tough business with lots of volatility—including in the price of fuel.
The global average profit per passenger is $7.80. But airlines in Africa, on average, lose $1.55 for every passenger carried. This disparity has many causes. To begin with, Africa is an expensive place for airlines to do business.
- Jet fuel costs are 35% higher than the rest of the world.
- User charges reflect 11.4% of airlines operating costs in Africa – four times that of North America and double industry average.
- And taxes and fees are among the highest in the world.
There is no shortage of examples illustrating the heavy burden that governments extract from aviation:
- In Niger $80 from each ticket is paid to the government in fees, taxes and charges,
- Cameroon recently added a $37 development tax per passenger,
- DR Congo charges every arriving passenger $15 to promote tourism—rather counter-productive if you think of it,
- And Ethiopia’s $24 departure tax undermines the hub’s competitiveness.
There is some good news however. In May, Equatorial Guinea removed its 15% VAT on tickets. Still, too many African governments view aviation as a luxury rather than a necessity. We must change that perception. The value of aviation for governments is not in the tax receipts that can be squeezed from it. It is in the economic growth and job creation that aviation supports.
Another important element of competitiveness for airlines is the ability to reliably repatriate earnings—in line with international treaty obligations.
So having 10 African countries blocking a total $670 million of airline funds is a big concern. Many of these countries are facing severe economic challenges. But blocking airline funds puts connectivity at risk. And that invites even broader economic problems.
It is in everybody’s interest that airlines are paid on-time, at fair exchange rates and in full. And when problems are on the horizon, urgent dialogue is the first step, with creative and proactive mitigation plans following closely behind.
IATA has had success in Nigeria and Egypt where government actions completely cleared the backlog of funds. We urge other Governments to follow suit, particularly in Zimbabwe and Angola.
Now I’d like to comment on infrastructure requirements which are:
- Sufficient runways, terminals and airspace capacity to meet demand,
- Technical and commercial service quality aligned with airline needs, and
This is simply said, but not easily achieved.
In Africa we have problems in two extremes:
- At one end, when infrastructure is built, too often we see unnecessary and unfit infrastructure with a hefty price tag. Luanda’s new airport is shaping up to be a case in point. It is probably bigger than what is needed. There are gross cost overruns and delays. The strategy to avoid this is dialogue from the earliest stages of any infrastructure project.
- The other extreme is where critical capacity is missing. Ghana, Senegal and South Africa have taken a collaborative approach to infrastructure that is producing positive results for all stakeholders. But there remain critical bottlenecks in Addis Ababa, Dar Es Salaam, Lagos and Abuja. If planes cannot land, the economic benefits that they bring will fly elsewhere.
Even after governments have consulted to build infrastructure that everybody agrees is needed, we can still face challenges in how it is funded. The last IATA AGM passed a resolution that:
- Recognized airline disappointments with airport privatization,
- Called on governments to be cautious on future privatizations, and
- Urged broad and rigorous consultation to make the right decisions.
We are putting the resolution into practice in Nigeria where the government is considering a private-public partnership in the future development of airports in Lagos and Abuja. IATA is consulting directly with the government on this important project. This includes developing economic regulation to make it a success for all stakeholders and provide the connectivity that Nigeria needs to develop.
We hope that the result of this work will be a model for others to follow because it is clear that Africa needs more infrastructure investment. And it is important that we find the right funding and regulatory models.
Speaking of regulation, we continue our work to achieve the universal adoption of two important global standards:
- The Montreal Convention 1999 (MC 99) establishes a modern approach to liability and is a key enabler of our efforts to modernize air cargo by facilitating the use of electronic air waybills. Ghana, Niger, Tunisia and Uganda have recently ratified. We urge the 19 African states yet to ratify—to do so soon.
- The second is the Montreal Protocol 2014 (MP 14) which provides an international legal framework for dealing with and deterring unruly passenger incidents. African states were instrumental in its creation. And 8 of the 15 states adopting it so far are from the continent. But we still need to get 22 states to ratify to bring this treaty in to force.
There is also a completely “made in Africa” policy initiative which we are wholeheartedly supporting. That’s the African Union Single Africa Air Transport Market (SAATM) project.
You don’t need me to tell you how difficult it is to get around this continent. Distances that should take a few hours can take days simply because the connectivity does not exist. This inefficiency has an economic cost. The low density of the African intra-continental network makes it impossible to realize the potential benefits of a connected African economy.
SAATM—if implemented—gives Africa the potential for economic transformation.
Twenty-seven states have signed on to SAATM. Now they need to follow promises with action. History has shown that opening markets leads to rapid advances in connectivity. We can be confident that the results of 27 states implementing SAATM will make a powerful case for the remaining 28 to come on board quickly.
To help, IATA worked with the AU, AFCAC and AFRAA to create a guidance booklet on SAATM implementation. This will be launched later today. The aim is to help all stakeholders work together to take the best advantage of SAATM to boost African development on the wings of aviation.
Regulation affects almost every aspect of aviation, so a favorable regulatory environment is critical to the sustainability of the industry, particularly here in Africa. We urge Governments to embrace the ICAO Good Regulatory Practices Guidelines designed to improve the regulatory process and to reduce unnecessary or excessive burdens on the industry.
The last point that I would like to address is the human talent that we will need to realize the potential for Africa’s future aviation industry. If we can tackle the issues discussed today—and I am sure that we can—then the number of passengers could quadruple over the next two decades.
Achieving that would require skilled aviation professionals in far greater numbers than we have today. And we all know that finding and retaining the right talent is a challenge even today.
IATA has long been active in this area. Over 2,400 African aviation professionals are trained each year either directly by IATA or via the International Airline Training Fund. So we are a good partner for governments seeking to develop policies to build their training pipeline to support growth.
A particular focus for us at this time is engaging more women in the workforce. Africa can be proud of its leadership in this area with women at the helm of four airlines. On October 31st this year, the first “IATA Women in Aviation Diploma Program” was launched in Johannesburg with 22 female airline executives. And we are currently partnering with Korn Ferry and other aviation organizations in a global study that will help the industry better understand what best practices lead to diversity in the workplace at all levels of seniority.
With these and other initiatives, we can be confident that Africa will have a well-trained and diverse workforce to power the industry forward.
The Business of Freedom
The last thought that I want to leave you with is a reminder of why we are here. Aviation is the business of freedom. The opportunities aviation creates to improve people’s lives are tremendous – especially in Africa. And it is no wonder that aviation is an enabler for so many of the UN’s Sustainable Development Goals.
It is important that the industry is able to drive growth and connectivity in Africa by working in lock-step with government to achieve:
- Competitive cost structures that enable growth,
- Effective infrastructure that can accommodate growth,
- Harmonized regulatory framework that opens markets and promotes growth, and
- A well-skilled diverse workforce that can drive growth.