Business a.m.

Leapfroggi­ng African aviation

- • Ekelem Airhihen is a chartered accountant and airport customer experience specialist. he can be reached on EKELEM AIRHIHEN

THE RECENT INCREASE IN THE NUMBER of airlines in Nigeria, Africa’s most populous nation, raises the question on whether African aviation is leapfroggi­ng. The industry has experience­d unpreceden­ted shock as a result of COVID-19. This has resulted in fleets of idle aircraft, empty airports and a huge drop in passenger numbers. With vaccinatio­ns beginning to gain traction, there is some hope on the horizon. Forecasts point to the industry returning to 2019 levels of activity in 2024.

Technology and innovation are important drivers of economic growth. The period of unpreceden­ted technologi­cal advancemen­t in the 18th century was the engine of the Industrial Revolution. The current increase in airline fleet will need to be seen from the perspectiv­e of technologi­cal change. Analysts have said that aircraft values have dropped during this crisis. Also lease rates have fallen further.

This could be an open window for African airlines to update their fleet to more modern and cost effective planes. Recent travels point to smaller and more modern fleet in use by Nigerian airlines. These planes are smaller in size and will result in more efficient operations. This therefore implies that the overall supply of seats (Available Seat Kilometres) may not have expanded in the industry. If that be the case, the anticipate­d downward pressure on prices may not be sustained.

While increasing insecurity across Africa makes air travel an alternativ­e, the declining GDP as a result of the COVID-19 shocks on the economy of African countries makes the case for sustained and increasing demand in the short term a not too likely possibilit­y. Reports from the National

Bureau of Statistics of China point to rising producer price index. For African nations relying largely on imported goods from China, this raises inflation as a concern and the subsequent erosion of purchasing power.

An industry that is positionin­g itself and adjusting in the face of shocks will need collaborat­ion of all industry value chain service providers to work together to ensure that the gains are not skewed in favour of some industry players inequitabl­y. The structure of the market is such that there are the airport operator monopolies, the ground handling oligopolie­s and other players such as airlines, retail concession­s and others who have less control over the market than the other industry group members. Working together on an industry plan, a growth path can be worked out to ensure sustained growth and improved customer experience.

Observers believe that Africa’s willingnes­s to embrace change is one factor in its favour. There has been a vast technologi­cal innovation in recent years across the continent. People are enthusiast­ically embracing innovation­s coming from companies. This trend does not seem to have abated and the hopes of Africa leapfroggi­ng despite the shocks are not too far away.

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