10 Aug 2020

By Marcel Langeslag, Director Aviation Africa at NACO

In the first of my “3-Sixty” articles (compact reads of 360 seconds), I explored the impact of COVID-19 on the African aviation industry and the possible road to recovery. Here, I want to take a closer look at exactly how airports might be able to not only mitigate the impacts of the crisis, but also navigate a route to a position where they might thrive.

It all starts with diversification

Airports that are currently strapped for cash will be looking for ways to improve their financial resilience in the future. Diversification is one approach that deserves to be explored in detail by all.

According to ACI, African airports on average derive only 26% of their income from non-aeronautical activities, compared to the global average of 40%. This means that even before the crisis, there was an imperative for reducing airports’ reliance on the core functions of handling aircraft and passengers. Non-aeronautical revenues are structured differently from aeronautical revenues, often operating on longer cycles of lease or concession agreements.

Diversification isn’t a silver bullet however. Even the most diversified airports are struggling at the moment. But while diversified incomes can be linked to passenger numbers, there is scope for further diversification to be provided by undertaking activities that are not linked to passenger numbers. The main source of these non-passenger revenues is commercial real estate. Indeed airports may find that the development of airport cities (or aerotropolis) not only supports core business and diversification but also offers the possibility to spread risk.

Industry revenue distribution (Source: ACI Airport Economics Report, 2020)

Cargos the word

While passenger traffic has all but dried up over the past weeks, cargo – or air freight – has continued to be flown all over the world. Less glamourous than the passenger business, cargo is not only a crucial link in our global supply chains, but also an important link in the aviation value chain. 

Logistics companies for instance have been working around the clock to support the global efforts in combating the pandemic by transporting essential medical supplies and equipment. Paradoxically, the COVID-19 crisis has laid bare some of the vulnerabilities of our global supply chains while also highlighting the importance of the air cargo business. With these developments in mind, African airports  can begin to focus their efforts on developing comprehensive strategies that give air freight the attention it deserves.

This is particularly true in light of the ambitions to increase intra-Africa trade by means of the African Continental Free Trade Agreement (AfCFTA); an agreement currently signed by 54 African countries and ratified by 29. Implementation of this agreement is expected to boost trade between African countries by more than 50%. Air cargo will undoubtedly play an important role in facilitating the flows of high-value and time-sensitive goods.

African airports can play a significant role here by engaging with the cargo stakeholders in their catchment areas and ensuring their needs and expectations are understood. Cargo communities with meaningful collaboration cultures will be able to weather the COVID-19 storm together and be better positioned for future growth.

Towards open borders and open skies

Freedom of movement and regional economic integration are key objectives of the African Union, which have led to the development of the AfCFTA and the Single African Air Transport Market (SAATM) initiative.  It is anticipated that this may also one day lead to the abolition of visa requirements for all African citizens. Although the current crisis puts a damper on these initiatives, it is imperative that governments across the continent resume their efforts here as soon as possible.

We may see the introduction of new health check systems, or harmonised screening and vaccination requirements once a vaccine becomes available. These are positive developments that will make us more resilient in the event of future outbreaks. However, a balance must be found between border controls and health measures on the one hand, and freedom of movement and the increased economic activity that aviation supports on the other. This is an areas where– and airports have a part to play.

The opening of the African skies has been on the agenda for far too long with far too little progress being made. The Institute for Security Studies (ISS) argues that the current crisis means that “Today, more than ever before, African leaders need to revive momentum for deeper regional integration”. This sentiment is shared by Muhammad Al Bakri, IATA’s Regional Vice President for Africa and the Middle East, who has stated that “Cooperation and harmonisation across borders will be essential to restart aviation”.

The new normal for African aviation gives airports, governments and stakeholders the chance to re-align and move forward together; to a future where the industry thrives – whether that’s opportunities to make a step-change in visa openness and open skies, or diversification towards airport cities and increased attention for cargo.

References

ACI, 2020: Airport Economics Report
ACI, 2020: Policy Brief: COVID-19: Relief measures to ensure the survival of the airport industry
ISS, 29 April 2020: COVID-19 could stall Africa’s integration agenda, from: https://issafrica.org/iss-today/covid-19-could-stall-africas-integration-agenda
IATA, 23 April 2020: Aviation Relief for African Airlines Critical as COVID-19 Impacts Deepen, from: https://www.iata.org/en/pressroom/pr/2020-04-23-02/#__prclt=bRYl2Z3M

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Marcel Langeslag

Director Aviation Africa

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