Airspace Africa met Jonathan Norman, head of aviation business development at AviaPro consulting, to discuss the latest trends in the aviation and travel sector and particularly Africa.
Here is our interview:
The price of fuel has been a major talking point but despite the pressures, aviation and travel seem to be resilient and set on a recovery. What is your feeling going into H2 2022?
Despite the huge price spike on air tickets, passengers worldwide are feeling the need to travel after a long period of lockdown due to Covid-19; pricing isn’t a deterrent like it usually is. Furthermore, the global population has a financial buffer zone on credit lines due to the covid19 lockdown; most people have a credit surplus available to use for travel expenses.
This being said, that credit surplus is running low and people are returning to their normal consumption habits. I expect a decrease in ticket reservations for Q4 2022 and Q1 2023. Also, pre-Covid-19 business travel numbers will not be easily attained given that alternate meeting options are now available to business people. With the emergence of premium economy activity, , there will be a movement in market share away from business class to premium economy. 2. The accelerated rebound of travel has brought new pressure. Capacity constraints at airports are creating bottlenecks and frustrating travellers. Please explain this and what is the immediate solution.
The current capacity constraints are logical and respond to common business and supply chain practices. Imagine you have your own company and suddenly your sales are totally halted for 18 months? What would be your first steps? Wouldn’t your primary actions be performed in regards on lowering your fixed costs and payroll?
That being said, 18 months later business slowly comes back but with a major risk of shutting down again… How much do you increase your fixed budget and payroll?
Airports are slowly coming back from the most financially stressed period in their history and building back their teams is not an immediate task. Airports need to train their personnel with special skills, they need to give them security clearances. They alsoneed to compete after Covid-19 with new employment methods that allow hybrid and remote positions which usually pay way more than standard airport wages. It’s very difficult for airports to grow at the same rhythm asairlines, they respond to different business objectives and their commitment to their owners and the communities they serve are much different than airlines. They cannot go out of business, and they do not have unlimited funding from their governments.
Airlines on the other hand have a wide variety of funding options, and some count on the blessing of their own states to find quick soft loans. It is impossible to compare their funding speed against that of airports which need to rely almost entirely on public bonds or allocations from federal budgets.
I think all stakeholders need to discuss capacity in a coherent way, recognizing the abnormalities of the current aviation era we find ourselves in, and look for solutions available within realistic frameworks. No one aviation stakeholder can perform without the support of the other, so it is really about being logical in requests made from the airlines side and being comprehensive and effective on the airport performance side.
How do you see Africa’s airport infrastructure evolving to meet current and future demands
Africa has a golden opportunity to improve its aeronautical system in the next 10 years in a way that will attract global leisure travel to several new markets. The major efforts in this regard need to come from countries and governments in order to establish a standardized policy towards air travel around the continent.
Areas to focus on are pricing structure, aeronautical training, and political frameworks in order to provide lessors and OEM’s with required financial guarantees and allow the acquisition of aircrafts and equipment at more competitive interest rates than is currently the case.
I see three key areas on the business side that need to be further developed: .
- Establishment of a reliable and stable air carrier in South Africa to regain connectivity to the Sub-Saharan region and lost business. This should be done via private equity and not government subsidized public companies.
- Development of basic training centres around the continent to establish a constant flow of qualified employees to the industry, and provision of an accessible inter-African immigration policy which allows any African citizen to work in any African country without an extended waiting period (it is crucial to have academic validation throughout the continent, AFRAA could play a big role here.)
- The Northern African region is one of the most promising in the globe due to their proximity to Europe. Airlines such as Royal Air Maroc, and EgyptAir can learn from Ethiopian Airlines’ operating model and performance to establish their own models for further developing connectivity throughout the continent.
In your opinion, what will be the main drivers for Africa’s growth in the sector for the short, medium and long term
For the short-term, regional air service needs to expand, airlines need to focus on a radius of 1000 miles from their operating base and guarantee reliable connections. International long-haul should not be a priority for African carriers.
For the medium-term, develop an applicable political and regulatory framework to allow low- cost airlines to perform multi states operations and provide the ability to establish focus cities along the continent without having to do heavy adjustment to their financial departments (develop clear taxations and regulatory bills). Low cost airlines provide service to intro and low income passengers, and this is the main African passenger profile. Look at aviation as a tool to assist people and further develop business, not a luxury for the wealthy ones.
In the long-term, Africa needs a major and RATIONAL update of their infrastructure, especially on the airport side of the business. Governments need to develop precise plans for airports and include intermodal connectivity to cities. Africa needs to open to the world in an intelligent way and look for IT integration and key asset development to precisely address their cities’ needs. Most countries in Africa do not need a Hub airport with 30 gates or more… reliable small and focused city-type airports with less than 10 gates would be ideal for most markets.