Across the world the aviation industry is, to coin a phrase, soaring, especially in regions like Southeast Asia, where booming domestic markets and regional partnerships like ASEAN (the Association of Southeast Asian Nations) are driving production, employment, and overall output, supported by a regulatory and market framework that supports growth and competition.
In China, there could be a further boost, thanks to recent stimulus measures by the government and central bank that should lift consumer and business demand for travel. This comes in the wake of government initiatives, designed to foster growth in the aviation sector, such as "Made in China 2025," which has played a significant role in supporting state-owned enterprises like COMAC (Commercial Aircraft Corporation of China).
In Southeast Asia, the ASEAN Single Aviation Market (ASAM) has been a game-changer. By promoting competition and allowing airlines to expand operations across borders, ASAM has attracted foreign investment and created the impetus for market growth.
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Moreover, governments in Southeast Asia have heavily invested in modernising and expanding their airport infrastructure. This not only boosts tourism but also enhances economic growth by facilitating trade and business travel. Deregulation of the airline industry in the different markets has further spurred competition, leading to lower fares and increased demand for air travel.
A key factor contributing to this growth is the expanding middle class in the region. As disposable incomes rise, both domestic and international travel become more accessible, especially during the holiday seasons. Countries like Indonesia and Vietnam are prime examples of how this trend is shaping the aviation landscape.
Low-cost carriers (LCCs) have made flying accessible for a larger population, increasing both flight frequency and the number of routes. This has fostered regional connectivity and made air travel a viable option for many.
Success for airlines has been achieved by strategically expanding their route networks and growing their margins by keeping costs down through efficient aircraft utilisation, high passenger load factors, and streamlined fleet and maintenance operations. This translates into competitive fares, and in this way broadens the customer base, to allow profitability to be maintained through economic cycles.
The African contrast
Regional contribution to industry annual total revenue growth (see graph)
In stark contrast, Africa continues to have to deal with policies that unfortunately stifle potential in the aviation sector. African airlines face significant challenges, such as high operational costs, insufficient resources and restrictive government policies, that have held the industry back for some time.
This has led to a history of low seat capacity, low load factor and high fares which in turn leads to low interconnectivity. It’s therefore little surprise that most African airlines struggle to achieve the critical scale needed to thrive.
Without addressing these fundamental challenges, the African aviation sector will struggle to reach its full potential.
Graph sources: IATA Sustainability and Economics using data from IATA Information and Data - Monthly Statistics
Emulating success
Africa can change this narrative, by emulating the successes of Southeast Asia. To thrive in this competitive environment, there are tactics and implementable strategies that can be adopted.
The first is adopting regulatory reform. The implementation and wider adoption of the Single African Air Transport Market (“SAATM”) would facilitate wider freedom for air transport in Africa and remove several regulatory boundaries. The SAATM would have the added benefit of reducing costs associated with intra-African travel and create opportunities for African airlines to reach critical scale in line with the benefits that ASAM has brought to ASEAN.
The second is to focus on domestic and regional operations by entering into alliances that aid market expansion. Asian airlines have benefited from a strong focus on domestic and intra-Asian operations. In these markets, brand identity is highest and competition from international airlines is limited.
A focus on shorter haul routes allows airlines to operate a more homogenous fleet which has cost savings around maintenance, pilots and crew costs. The benefits of enhanced intra-African travel will lead to improved trade and tourism within Africa, which will facilitate GDP growth and job creation, leading to an expansion of the middle class in Africa. This growing middle class will furthermore provide an additional passenger pool for future growth.
African airlines can then partner with global airlines to provide connectivity into longer haul intercontinental routes via codeshare and interline agreements before growing into long haul operations of their own.
The third is a focus on operational efficiency: airlines that can optimise their operations and reduce costs are able to obtain higher load factors, essentially selling more of their available seats and are more likely to succeed even in challenging economic climates. Driving down costs has been key for the success of Asian airlines.
Tapping into Africa’s demographic opportunities
In summary, the potential of Africa’s aviation industry remains untapped. However, by emulating some of Southeast Asia’s successes, supported by well-implemented government initiatives and a growing middle class, African aviation can soar.
The contrasts between the two regions highlights the importance of sound management and strategic partnerships, alongside government policies and regulation that encourage competition and growth. Africa’s demographics highlight that it has immense potential for economic growth. A competitive aviation sector will help sustain and support that growth.
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