IATA: Aviation is the Key to Unlocking Economic Devt

Senior executives of the International Air Transport Association Africa and Middle East, Hussein Dabbas, Brian Pearce, Raphael Kuuchi and Samson Fatokun met with journalists in Abuja recently and unveiled the world body’s plan for air transportation in Africa. Chinedu Eze brings the excerpts:

Aviation as Pillar for Economic Development

Dabbas:

I am very happy to be here in Abuja. We have been working for several months to establish and start this Aviation Day here in Nigeria to look at major developments that are required for the aviation industry to prosper.

As you know, aviation is considered a major pillar in all economic activities around the world. It contributes about three and half percent of the countries worldwide and when countries adopt aviation as pillar of economic activities, the prosperity can go up to 15 to 20 percent of the GDP. We believe that Africa has tremendous potential to be aviation hub of the world. The growth we are witnessing in Africa as presented by Brian is a huge increase over the years and this can be sustained if the governments really present the proper support to the airlines.
I don’t mean here by financial support, but I mean infrastructure support, the regulatory support that should be given to the industry for it to succeed.
Africa is an emerging economy that is growing at very fast pace and it requires the proper support for it to flourish.

We see that many countries in Africa are doing a great job in that area; yet others are using aviation as a cash cow in terms of high taxes and high charges to the passengers. We still believe that the charges and taxes in Africa are one of the highest in the world on average. In Dakar, Senegal the average taxes and charges are about $140 per passenger. In Lagos it is about $60 and these are above the world average of about $37.

So we are advocating with governments to make sure that the taxes and charges that are imposed reflect the level of service that is provided to the passenger and to the airlines and to make sure that when such charges are imposed they are done in a very transparent manner; in a very consultative manner. They should make sure that all the stakeholders are involved in that decision-making.
We are seeing unfortunately also in some countries in Africa and around the world that when some countries want to improve or build new airport or facilities they will start charging taxes before that facility. This is completely against the International Civil Aviation Organisation (ICAO) and IATA rules. The facility should be provided first before the passengers and airlines are asked to cover the cost.

Diversification of Nigeria’s Economy

Pearce:

My presentation was really on looking at Nigeria’s current problem, which is still being dependent on commodities; oil in the case of Nigeria and other commodities more widely. We see the dependency of that commodity on the foreign exchange, which Nigeria is suffering from today. The focus today should be on how to diversify the economy. And air transport is a critical enabler; a critical way of helping to diversify the economy; of helping the Nigerian business to develop. The key thing is to enhance the connections between the cities here in Nigeria and elsewhere in Africa and also overseas. That helps businesses do business.

Today if you want to do business between Lagos and Algiers, you may not get direct flight from Lagos to Algiers but connecting them will be good for the continent’s economy. Africa has got fantastic potential for air transport. With fantastic natural resources, Africa has to develop its air transport; government should see air transport as enabler for economic development.

That is the key; not seeing airports as a place to tax foreign tourists. We should be getting the charges cut down and you encourage business travel, tourism to create new businesses and new activities. Here today government is looking at how to improve air transport in Nigeria and that is very optimistic.

Open Sky for Africa

Kuuchi:

The whole issue of the study we did in 21 African countries is actually intended to address the issue of open sly for Africa. This is because we want to bring to the attention of, not just the operators, but to state governments for them to know that opening up the market has significant benefits, not just for the aviation sector but the entire economy and that was the essence of that.

So we are using that study as a tool to advocate to states to open up their markets. It is true that some markets are resistance from some operators. An operator is just like any business entity in the country; he is not a policy maker. It is only when the policy maker comes to resist the operator from flying into the market will the idea of opening up the market will be frustrated. But since we have decided to open up the market, then just an operator putting up resistance will not go far and we are very positive that all we want to see is that the 21 or 22 countries that have so far signed the AU solemn declaration, we want to see some traction by way of implementation. We want to see these countries opening up their markets to each other. Once this is done, a country that has not signed this declaration will sooner or later realise that traffic is breaking away from their markets into the markets of the countries that have signed the declaration. Then they will quickly sign that declaration because they don’t want to lose that business.

High Taxes on Airlines, Passengers

Dabbas:

There is no such parameter about how much a country should charge, but what we see is that people travelling by other means of transport are charges about 10 percent of what they charge passengers travelling by air and that varies from one country to another.

We at IATA are not against charging taxes or any kind of taxes as exchange of service but what we see here in Africa is that government goes to the extreme in terms of charges. If you look at fuel alone, the cost of picking fuel in Africa is 20 percent higher than the world average and there is no reason for such high rate. In some countries even though the price of oil has come down from $120, $130 per barrel; yet there is little, if any refection of the crash in price, in the price of aviation fuel. What we always say in IATA is that there is ICAO resolution, rules and regulations where it basically gives guidance and guidelines for countries as to what and how they can charge.

At the end of the day the member countries can do whatever they want. Neither ICAO nor IATA can tell them what to do.
But what we are telling the countries is that the more taxes and charges the less the passengers that will be attracted to come and fly. So you can charge $1000 per passenger; that is your right, but will people be willing to pay to come to your country? What we are saying also is, please, please be transparent. You do consultation with the stakeholders and explain why you should charge certain amount on the passengers. So when you are providing a good service then you can charge for it. Sometimes we see that these taxes and charges are done for things that have no relevance or related to aviation. It is a way of raising money for the budget of the country, all what you are doing is basically killing the goose that lays the golden eggs.

People will stop coming here if it is so expensive to come via Lagos, for example, Abuja or Dakar.
If you make your airports more attractive and make travel easy in your country the more you will benefit; if you are talking of reducing charges from $60 to $40, passengers will use the balance to shop, buy souvenirs and other things and this adds to the country’s GDP. Government should not be looking at the money it has accumulated from airport charges; rather, it should have long-term vision and see how many people will be attracted if the country is attractive competitively and commercially.

Liberalisation

Kuuchi:

On the subject of liberalisation you talked about the Yamoussoukro Declaration (YD). The YD was a very good air transport liberalisationprogramme for the African continent. I think the main limitation is that the expectation from African heads of state was that, one; all the countries in Africa will agree to open up their market. So they did not envisage element of gradual liberalisation or phased liberalisation, depending on sub-regions or countries that chose to do so.

Unfortunately nothing happened after 30 years, as you said, but last year the Africa heads of state once again came up with solemn declaration, an indication that they realised that there is fundamentally something not workable about the YD; even though it is a good programme. They have not written it off; the YD is going to be implemented.

This time around they have agreed that countries that are ready and willing to open up their markets immediately signed the solemn declaration and that is why today we are 22. The next phase is for African Civil Aviation Commission (AFCAC) to come up with the process so that, if for instance, an airline in Nigeria want to operate to one of the countries that has signed up to open up its market, what should they do? Do you need notification to the country’s civil aviation? So you need to follow certain steps? That is what AFCAC is working on now. I know the initial effort has been reviewed once and it is going to go through a second phase of review, after which it will then go to the AU for adoption.

Then it will be circulated to all the countries that have signed for effective implementation. As to what will happen, come 2017, AU says by end of 2017 Africa will have a single sky. I am not privy to what will happen if at the end of 2017 the countries still continue to apply restrictions. I don’t know what the AU will do. But what I do know is that there will be implementation among countries that have signed the solemn declaration. We hope that other countries that have not signed would be inclined to sign after it has taken off.

When EU implemented open sky in Europe, travel exploded. That is the same thing that will happen in Africa. Neighbours will see services and traffic exploding and would want to join.

Safety and Infrastructure

Dabbas:

Safety is number one for us. There has been huge progress made on safety in Africa but I think there is need to be more improvement. This is required by governments, civil aviation authorities and bodies that control civil aviation to be more forceful to ensure the adequacy of airlines in meeting their certification process. We at IATA we have IATA Operational Safety Audit (IOSA) and we have 30 members and Allied Air joined us last week or so. We are happy to see that governments are pushing for airlines to meet IOSA certification, according to Abuja Declaration; that AOCs must be given to airlines that passed IOSA audit. We are doing our own share but it depends on governments to enforce the rules themselves.

We have seen countries around the world that did not allow airlines to fly but we will continue to strive to ensure these nations comply. It is important to know that aviation remains the safest means of transport but we must continue to be careful because one accident is always more than we can handle. That is why we work very hard to make sure that safety issues remain the number one priority.

IATA Support for Nigeria

Fatokun:

To break it down to the Nigerian scene, IATA has been supporting the strengthening of safety in Nigeria. We have taken some airlines, most of the domestic airlines through the IOSA preparatory programme, where each one of them had workshops, funded entirely by IATA and these include First Nation, Medview Airline, Allied Air and Air Peace presently. They have all gone through IOSA preparatory programme and this is a programme that was offered by IATA to help them and it goes straight into helping them to do well at IOSA audit and also improve their level of safety.

IATA did not stop only on the operators, five of the Nigerian Civil Aviation Authority (NCAA) safety inspectors when through series of training organised by IATA so that the regulator should be strengthened in terms of safety oversight. That is what IATA has done in the market; since the past two years we have been rolling that programme to improve safety in Nigeria.

We did not only stop at safety, we also improved on security. The main focus today us safety and security. We have had series of workshops that we engaged the Nigerian Airspace Management Agency () NAMA, the Federal Airports Authority of Nigeria (FAAN) and the operators on improving security in Nigeria and there were about four workshops that we organised in the past two years. So IATA has really invested in improving safety in Nigeria through the operators and the agencies.

Nigeria and Open Sky Africa

Fatokun:

One, we have to understand the position of the Nigeria government and the position of government is that it is for the liberalization of the African market. Nigeria is a signatory to the 22 countries that want liberalised African airspace. So the position of government is that Nigeria is for liberalisation. For those who oppose liberalisation it will be good to show the other side to them. For example, four Nigerian airlines are operating to Ghana and each one records two flights a day. If Ghana is opposed to liberalisation, the Nigerian airlines will not have opportunity to fly to that country. So it is give and take. If you restrict your airspace then the other country will restrict its own.

We have the highest domestic carriers in Africa besides South Africa, so we will be the country that will lose. So that is the perspective. But I think our airlines should think how would they be able to take advantage of the opening of the sky? So they should find out where they fit so that they would be in a better position and take a more viable decision that to oppose the train that has already left the station.

I think governments need to look at the bigger picture and that is the growth of the economy. That is what the airlines can do to make the economy grow and prosper. The role of government is not to protect the airline from providing service to the people. The government role is to provide the infrastructure and to provide services to the travelling public in Nigeria and into and out of Nigeria. I think the interest of the people is far more important than the interest of the company. Many countries around the world that have open skies agreement have flourishing airlines. This is because they have good business space and they have good business plan and they have good management and they are able to survive. Open skies makes airlines richer and they flourish more; not on the other way round.
It is unfortunate that we see in Africa, and many parts of the world, that it is not the government that is against liberalisation; it is the weak airlines. They are afraid of competition; they are afraid of having somebody taking their business away because they are not able to sustain themselves in the market.

Small and Big Markets

Kuuchi:

If Africa opens its market to each other the ability of airlines to enjoy fifth freedom right will solve the problem of small airlines. This is because if you can mop up traffic from one country to into another you will be able to increase the load factor on flights across countries in Africa, but today you may not.
Liberalisation cannot be discussed by operators because bilateral is owned by states and not operators. If Ghana and Nigeria have bilateral agreement that only one airline should operate from one country to another. If you want to unlock that agreement so that more airlines from one country can fly to the other and vice versa, you have to go back to government and ask government to relax the bilateral. So instead of restrictive bilateral let us have open market. That is why we are talking to government today. The essence is to get government to liberalise this market. Having said that, we are also working with airlines, trying to encourage airlines to try and cooperate through all the modules of cooperation in the aviation sector to make them more efficient and to increase their load factor.

Airlines’ Trapped Funds

Fatokun:

On the blocked funds, we are engaging government at all levels. We are working with the Central Bank of Nigeria, the Ministry of Aviation as well as the office of the Vice President.

We have had meetings with the Vice-President about a month ago and the outcome was quite encouraging. Government is giving aviation the highest possible attention as this matter deserves. As you know, the blocked funds is not just the concern of non-Nigerian carriers, it also affects the Nigerian carriers; particularly their ability to bring in spare parts, their ability to send their aircraft for maintenance because it requires foreign currencies. We are addressing this issue and government is listening to us, so we are confident that government will come up with the right support to the airlines.

There are several countries that have blocked fund issues, starting with Venezuela, which has about $3.5 billion and Nigeria has $575 million as at end of March 2016. Egypt has over $216 million; Sudan also has a couple of hundreds and Angola has also a lot of money in the blocked fund. Now, we are dealing with the governments but it is an on-going process. The biggest blocked funds in Africa are in Nigeria. That is important to know.

IATA and ACI at the global level signed an MOU in 2014 to enable the two associations work closely in infrastructure development and in addressing issues on security and safety as well as taxes and charges at various airports in Africa. Since then we have been working very closely. It will interest you to know that IATA now has a division, which is called airport, passenger, cargo security and this division works hand in hand with ACI in all areas of infrastructure development.