At ICAO Conference, Africa’s Airport Infrastructure, Taxation Take Centre Stage
At the just-concluded ICAO World Aviation Forum organised by the International Civil Aviation Organisation in collaboration with the federal government, industry experts identified poor airport infrastructure, high taxation of airlines and non-liberalisat
For the first time, the International Civil Aviation Organisation (ICAO) held the ICAO World Aviation Forum (IWAF) outside Montreal, Canada, the headquarters of the global body and the choice was Abuja, the Federal Capital Territory of Nigeria. The event, which was themed “Financing the Development of Aviation Infrastructure,” brought in industry stakeholders from all over the world to Nigeria’s capital where they brainstormed and came up with key solutions to solving the problem of air transport in Nigeria and the rest of Africa.
The key issues raised at the conference included the urgent need to expand airport infrastructure because of the rapid growth of air travellers in the continent, sourcing fund to build these necessary facilities and how to expand the African travel market, which many of the experts believe has huge potential and how to empower African airlines to curb the dominance of European and Middle East airlines that give back little in return for the huge profit they make from their African destinations.
Funding
The Minister of State, Aviation, Senator Hadi Sirika, who played host at the conference, said in his address that according to the Nigeria Integrated infrastructure Master Plan (NIIMP), $775billion was required to develop Nigeria’s transportation infrastructure over the next 30 years. Also the African Development Bank (AfDB) estimated $35 billion per year from 2010-2020 was needed to fund airport facilities.
Sirika noted that to develop airport infrastructure there was need for funding from the private sector and urged international financiers and funding agencies to put their money into Nigeria’s airport infrastructure.
“I strongly believe that Nigeria is the place to put your money not only because we moved up 24 places in ease of doing business recently but more so because the rate of return on investment is 34 per cent- one of the highest in the world. The Nigerian government together with relevant stakeholders developed a roadmap that included but not by any means limited to: safety and security, infrastructure strengthening: Concession of Airports (starting with Abuja, Lagos. Kano. And Port Harcourt), establishment of a national carrier (private sector led); establishment of maintenance, repair, and overhaul (MRO) centre, establishment of an aviation leasing company (ALC), development of agro cargo terminal and associated infrastructure, establishment of an aviation/aeronautical university ) and the development of aerotropolis.
“In executing the roadmap, which is private sector-led through PPP, the government has engaged internationally reputable transaction advisers for the various components in accordance with the Infrastructure Concession and Regulatory Commission Act (ICRC) of 2007 and also in-line with global best practices. These advisers have since commenced work,” the minister said.
Investment
The AfDB President, Dr Akinwumi Adesina, said the African aviation industry needed huge investment, especially in infrastructure expansion and modernisation because of the growing passenger movement and the funding of aircraft acquisition to make it easy for African airlines to increase the number of their operating aircraft.
According to him,“We need to develop airport terminal capacity to expand passenger growth, develop regional aviation hubs to improve connectivity, and upgrade air navigational services and air traffic control to improve safety. Modern and cheaper technologies such as the satellite based air navigation services now preclude the need for ground infrastructure, and make it possible to serve remote areas with radars. We must also develop within Africa, aircraft maintenance services and strengthen regional and sub-regional aviation safety agencies.”
Adesina said Africa needed to procure about 970 jets and 700 turboprops over the next 20 years, noting that financing needs would exceed $150 billion. He added that African aviation needed fleet modernisation, efficiencies, better connectivity and much improved quality of services for an exponential growth in the number of passengers.
“The fact is Africa faces much higher costs for aircraft purchases due to the relatively small size of most airlines, weak balance sheets for corporate loans, a lack of access to export credit agreements, higher insurance costs, inability of commercial banks to provide long term financing, and very high interest rates when they do. Africa also does not have any aircraft leasing markets, and therefore has to lease planes at much higher costs, sometimes 100 percent higher than developed economies. There is a compelling need to address market failures in aircraft financing,” said.
High Taxation
Adesina averred that, what had significantly contributed to the stunted growth and development of air transport in Africa was the high taxes leveled on airlines by government agencies and that explains why the region loses about 80 per cent of its market to foreign airlines.
According to him, it costs much more to travel in Africa than any other part of the world by air and that has undermined the growth of the sector in the region, thus denying the continent thousands of more jobs that would have been created by the aviation industry.
“The cost of air travel in Africa remains exorbitantly high and is 200 per cent more than costs in the European Union and 250 per cent higher than in India for similar distances.
“A big part of this is the very high taxes, fees, and levies that are charged in Africa. For example, it costs $128 to fly between London and Rome, but $597 to fly between Abidjan and Niamey, a shorter distance. And just to go from Johannesburg in South Africa, to next door neighbor Lilongwe in Malawi, the cost is $406. Again, a much shorter distance than from London to Rome.
“If you require another example of this serious imbalance, consider for a moment that taxes paid for a Lagos to Kinshasa ticket amounts to $397 which is 300 percent higher than the total air travel costs between London and Rome. And that’s just the taxes alone!” he said.
Adesina also lamented that Africa’s aviation growth was held back by very restrictive regulatory environments, which limit market size, profitability, and drive up costs. Noting that a study by the International Air Transport Association (IATA) showed that liberalising aviation markets through open skies for 12 African countries alone would increase annual GDP by $1.3 billion and create an additional 150,000 jobs, he remarked that essentially, open skies meant more jobs and increased trade and investments.
Urgent Need
The President of ICAO Council, Dr Bernard Aliu, who is also a Nigerian, emphasised that there were challenges with aviation infrastructure in Africa, noting that by 2020 most airports in the continent would exceed their capacity due to the projected high growth of passengers in the region. He regretted that during the period, there would be increase in the number of passengers, who travel by air and the airport facilities that would be overstretched might not be expanded to meet the passenger surge. This, he said, would become an impediment to airport operation.
“So the airport infrastructure has to be ready for that growth. This is not limited to airport terminals but includes runways and taxiways; landing aids, meteorological equipment and others. The African Development Bank and World Bank are looking at ways towards the funding of airport facilities. It is better to invest in airport infrastructure in Africa to make them consistent with global standard,” Aliu said.
Liberalisation
The Secretary General of African Civil Aviation Commission (AFCAC), Mrs. Iyabo Sosina, stressed that Nigeria and other African countries would benefit hugely from the Yamoussoukro Decision, which is open sky policy for Africa endorsed by African states since 1999 but yet to be implemented.
She said it would open the door for the liberation of African sky, which would give a boost to air transport in the region with the attendant economic explosion and huge growth in the continent’s GDP .
Sosina pointed out that before now only 11 countries agreed to adopt the open sky policy, including Nigeria, but as at last week, the number of countries agreed to embrace the open sky policy had increased to 23.
The implementation of theYamoussoukro Decision would commence in January 2018.
Perhaps it was not a coincidence that the ICAO World Aviation Forum, which largely dwelled on how to develop air transport in Africa was hosted in African heartland, Abuja, Nigeria. With pledges made by international and regional financiers in their commitment to infrastructure development of airports, it is hoped that the dream of having modern, expanded airport facilities would be realised.