Events: AFRAA Aviation Supplies and Stakeholders Convention

About the Convention

The Aviation Suppliers and Stakeholders Convention (ASASC) 2012 is being organised by the African Airlines Association (AFRAA) in collaboration with its member airlines and industry partners. It aims at bringing together airline and airport operators and solution/service providers with the view to foster dialogue, build sustainable networks in supply chain management, create a competitive environment for business and improve the aviation business support base in the continent and globally.

 Objectives

The Convention aims to provide a forum to:

• Develop aviation business support base on the continent
• Develop synergy among sector players in the industry(airlines, airports, CAAs) through interaction, identifying and proposing joint solutions to industry challenges.
• Facilitate interaction among aviation organizations & industry suppliers
• Discuss emerging technologies
• Share industry knowledge, information and experience
• Create a competitive environment & choice to aviation companies in Africa.

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AFRAA Africa Wings Magazine: African Aviation Outlook

African Airlines Association, AFRAA, has radically improved its communication strategy in the last few months through the revamping of the organization's website to make it even more navigable and user friendly. The previous website was full of blank pages and broken links giving users a horrendous experience when finding information on African aviation.

The organization has also incorporated social media in communications, and offers better experience through digital magazines instead of the old horrendous PDFs. You can follow the AFRAA CEO Elijah Chingosho on Twitter at @chingosho or follow AFRAA on @AfricanAirlines.

Highlights from the Africa Wings Magazine:

Foreign Dependence

Intra-African Trade is a mere 10% total exports compared to trade within the Association of South East Asian Nations(ASEAN) 60%, or North American Free Trade Agreement(NAFTA) which accounts for 56% of total exports. This lack of economic diversification explains the high volatility of African trade and consequently the poor Intra Africa air transport development.

The resilience of Africa in 2011 will be heavily tested with the increase in food prices. Volatile fuel costs, instability in North Africa and the Middle East and the sovereign debt crisis in the developed countries creates risks for a renewed downturn. The limited integration of African economies into the global economy proved a blessing in disguise in helping the African economies weather the storm of the global recession of the last three years. Most countries in Africa now have a stronger a macroeconomic position. 


In Africa the boom-bust cycle of private financial inflows was less marked due to high share Sub Saharan Africa of FDI over other more volatile forms of private capital.
 

Growing Population and Middle Class 

Africa has a population of 1.05 billion and by 2050, 25% of the global population will be African. By 2050, the Population of Sub Saharan Africa will be 3.4 billion with Nigeria becoming the world's third most popular nation with a population of 433 million. Africa's middle class is also growing as first as its population. In the last 10 years, six of the 10 fastest growing economies in the world were in Africa according to the Economist. In the next five years DR Congo, Ethiopia, Ghana, Mozambique, Nigeria, Tanzania and Zambia will grow at an average of 7.2% annually.


Africa has become an emerging market with a relatively high return on investments. By 2030, Africa will have a 300 million strong middle class tat will spend $2.2 trillion per year, amounting to about 3% of global consumption according to the African Development Bank.
 
Doing Business in Africa: Africa's wealth
Africa has 90% of World's platinum, 50% of the world's gold, 70% of the world's cotton, and 30% of te world's diamond reserves according to the African Business Magazine. Chinese companies are doing business with every of Africa's 54 countries. Trade between China and Africa will almost triple to $300 billion by 2015 according to stats from Standard Bank South Africa. Companies from India and Brazil are increasingly pursuing commercial interests in Africa. The EU nations are also increasingly renegotiating contracts in Africa as their traditional dominance of the African business slips away to new competitors. 

Implications for Air Transport

The above developments bode well for the African aviation industry. With large middle class and poorly developed road and rail infrastructure, African aviation will increasingly play a big role in socioeconomic development and regional integration. Africans are turning more and more to air travel as disposable income improve and speed becomes of essence amongst the business community and Africa's growing entrepreneurs.As a result, Africa's air transport will sustain a 6.1% growth in 2011 and keep the growth rate or above the historical trend through 2030.

Direct Foreign Investment,  growing urbanization and rising incomes will continue to spur higher domestic demand for consumer goods and air transport. Intra Africa air travel, which is currently 20% of the total air travel is set to grow significantly to support the fast expanding regional trade which is just 10% at the moment. Regional trade blocs SADC, EAC, COMESA, ECOWAS are working harder to eliminate trade barriers and increase cross border trade, investments and move goods and people.

As China and India continue to be major trading partners of African countries, traffic between Africa and Asia will continue to grow. Projections are that travel between Africa and Asia will grow t 8.1% annually over the next 20 years to 2030. The Africa-Asia Travel market will be the fast intercontinental air travel growth region and therefore African carriers would need to focus resources in developing their Asian networks before the Asian carriers their operations Westwards into Africa.
 
Competition: Foreign Carriers Control 82% of African market
The huge untapped African aviation market has not escaped the attention of foreign carriers who are looking for growth markets to deploy their extra capacity. Many foreign carriers are strategically positioning themselves in various markets in Africa to take advantage of anticipated traffic boom and exploit the weakness of African carriers. During the financial crisis of 2008/2009, many non-African operators  deployed their excess capacity on African routes. In 2010 as in earlier years, non African carriers commanded the biggest market share of 82% of all intercontinental traffic to/from Africa as compared to 18% by African airlines. The market share of African airlines in the last three years has dropped from 20% to the current 18%.

On Intra African routes, the competitive landscape is radically different with EgyptAir, Ethiopian Airlines, Kenya Airways, Royal Air Maroc and South African Airways being the dominant players. Well-timed connecting flights  between East and West Africa are improving passenger travel time and inconvenience. Though flights availability is improving, West and Central Africa remain the regions with least number of direct flights between cities. The absence of an effective hub airport in the region accounts for this.

Commercial Partnerships and alliances

One way African carriers can be more competitive on intercontinental routes is for them to establish stronger intra-Africa networks that feed passengers to gateway(hub) cities and facilitate better connections. Already some patterns are beginning to form in this regard. Ethiopian Airlines is a strategic partner of ASKY. It also provides technical support to Air Nigeria and other airlines. Over 90 Commercial partnership arrangements currently exist among AFRAA member airlines.

On the global scale, South African Airways, Ethiopian Airlines, EgyptAir are now members of global airline alliance Star Alliance, Kenya Airways is a member of Sky Team while South Africa's Comair is a member of OneWorld alliance.

Tourism

In 2010, there were 48.8 million International Tourist arrivals in Africa with North Africa receiving an estimated 18.7 million tourists and Sub Saharan Africa receiving 30.2 million tourists. Africa achieved 6.5% growth in tourism, with the FIFA World Cup in South Africa no doubt playing a crucial role.

Next: Serialization on African Airline Performance from the AFRAA report. You can read the full AFRAA report below:

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African Airlines Association Opposes European Emissions Trading System(ETS)

As predicted by former IATA chief Giovanni Bisignani, it seems Europe's stubborn, unilateral inclusion of foreign airlines into its Emissions Trading System will fail eventually or worse still, spark a trade war. The EU ETS naturally creates a trade imbalance as other countries are not imposing carbon taxes on EU airlines. AFRAA has now joined the EU and China to oppose the the EU ETS, perhaps this crisis can force governments to work harder on the ICAO process to come up with harmonized global framework that does not leave people behind. Europe's unilateral move will however draw significant push back from world powers and at the end, it's the passengers who will pay the highest price. If the airlines' lobbying will not get the EU and other governments to behave, then they will simply pass on the costs to travelers.

Under EU Emissions Trading System,  EU and foreign airlines will purchase carbon credits in the EU to offset their greenhouse emissions in the region. Initially covering power stations, combustion plants, oil refineries and iron and steel works, as well as factories making cement, glass, lime, bricks, ceramics, pulp, paper and board. Aviation was later included.

Although several key African airlines have complied with the EU Emission Trading Scheme, and at a very substantial cost, the African Airlines Association (AFRAA) has now taken up the matter once again with a public statement issued from the association’s office in Nairobi, opposing the launch of it and demanding wider consultations between the European Union and affected countries around the world.


This happened after Chinese airlines have vowed not to comply and American airlines have taken the matter to court, paving the way for a potentially crippling trade war between the EU on one side and America and Far Eastern countries on the other side of the divide, with independent analysts and observers estimating that the damage to Europe’s trading position in the world could take a serious hit.

The uncompromising stand by the EU Commission, now also hiding behind a ruling by the European Court, that they have the right to impose such unilateral schemes, had also not helped as the wisdom of the move continues to be challenged from around the world.

There is, in particular, emerging talk of "punishing" the EU as a trade block by increasing trade between the opponents of the scheme and, in particular, sidelining European attempts to get rich mineral and mining concessions in Africa by giving access to such resources to North American and Asian competitors.

Said a regular source from Nairobi a few days ago: "… so, of course, we have to comply, because otherwise we can risk huge fines or even have an aircraft detained. But we support the initiative of AFRAA and have for a while said the EU should engage in further talks and not slap the rest of the world with unilateral taxes."
At the same time, the EU’s aviation black list has also come under fire and scrutiny again, as, in particular, African airlines have been banned from the EU’s air space. Here, the same source said; "… but, of course, we are aware of safety issues in countries like Sudan or Congo, which have the worst record in Africa, if not the world. But then look at Russia, they had lots of crashes, too, and there is no blanket ban for them like we Africans are suffering. But then Russia has muscle, has influence, has oil and gas, and the EU will not dare treat them in such an openly contemptuous manner as they treat us.

"As aviators, we all agree with the need to improve safe operations, adhere to maintenance requirements and train crews in line with international ICAO standards, but we often feel the EU has a hidden agenda and no amount of denials has changed that, in fact, some of their denials read like a confirmation of our suspicions."

Additional information from eTurbo News
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African Airlines Association Launches Joint Fuel Purchase Project

The African Airlines Association (AFRAA) launched a joint fuel purchase programme for nine (9) of its member airlines on Wednesday 11 January 2012 following the conclusion of evaluation of tender bids received from a number of fuel companies. The process which began last year with the setting up of an AFRAA Joint Fuel Steering Committee chaired by Eng. Chris Oanda of Kenya Airways and with Mr. Yemane Fitwi of Ethiopian Airlines as his deputy, sent out tenders to Jet A1 fuel suppliers serving various airports worldwide.
Received bids were analyzed by a technical team comprised of participating airlines and the AFRAA Secretariat and two rounds of negotiations held with all suppliers in a process described by the Chairman as “transparent and above board.”

Launching the Joint Fuel Purchase programme, the Group Finance Director of Kenya Airways, Mr. Alex Mbugua noted that the total volume of fuel to be procured by the 9 airlines across their networks through this joint initiative will be approximately 700 million litres valued at around US$1.5 billion. He said this initial phase of the project involves only 9 of AFRAA’s 32 member airlines and is confident that subsequent tenders will involve more airlines and more volumes.

Though the negotiations were done jointly, contracting will be done by individual airlines with the successful fuel companies at the various locations. The contracts implementation dates will vary, with some airlines starting to purchase fuel under the negotiated terms in February 2012, according to the Chairman. All contracts will however end in December 2012 and replaced by new contracts for a full calendar year in 2013 (and subsequent years) following another bidding, evaluation, negotiation and awarding process to be carried out during the course of this year.



The airlines participating in the current Joint Fuel Purchase Project are: Air Malawi, Air Namibia, Air Seychelles, Ethiopian Airlines, Kenya Airways, LAM Mozambique Airlines, Precision Air, Rwandair and TAAG Angola Airlines.

The Secretary General of AFRAA, Dr. Elijah Chingosho applauded the role played by the CEOs of the participating airlines in the success of this project. He said, “The joint fuel purchase project was endorsed at the highest level in each airline by the CEOs who individually signed a joint MoU and Letters of Commitment to work together.” The Committee’s operations are guided by a legal framework and anchored on the principles of transparency, fairness and quality service delivery, according to the Secretary General.

The Project is aimed at attaining better and stable unit price of fuel for the participating airlines, assuring quality of the product and supply reliability whilst the relevant fuel suppliers will benefit from higher fuel volumes purchased by airlines. Other areas of focus by the Committee include addressing the incidents of high taxes, charges and fees levied on fuel, especially in African airports and lobbying stakeholders for the elimination of monopoly fuel suppliers at some airports. Though it was not disclosed what savings airlines expect to make under this project, all participating airlines are confident of significant savings making the project very worthwhile. This marks a turning point in the Association’s quest to add value to its members.

Cost of fuel remains a major component of the operating expense of every airline, accounting for between 40-50% of total direct operating costs. In addition to the cost, the unpredictable nature of fuel price makes it difficult for airlines to budget the cost of their operations. 

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