On implementing open skies agreements and lowering operating costs What advantages does Ethiopia possess as a regional aviation centre and how can it maintain competitiveness?
TEWOLDE GEBREMARIAM: Ethiopia has significant advantages due to its strategic location and the efficiency of its airports. However, there is also strong competition among airlines in the region. Therefore, large investments are being made to maintain Ethiopia’s competitiveness.
The African continent has a lot of potential to grow, as a result we are confident about sectoral development over the medium term and we expect large growth in terms of passenger traffic. In order to meet our targets, however, we need more passengers, more planes, more destinations and a higher number of flights per day to the destinations that are already being served. Current passenger traffic in Addis Ababa stands at 66% transit and 34% arrivals, but we anticipate this to shift to 60% transit and 40% arrivals, with the goal being to reach 2.5m tourists per year.
What markets do you expect to contribute to the growth of the tourism sector?
GEBREMARIAM: Europe, South America, the US and Canada are some of our largest trading partners and we expect them to remain key sources of arrivals. That said, the markets where we anticipate the most growth from are the trade, investment and tourism industries coming from India, China, Japan, Thailand and the rest of the Asian continent. This expected growth is due to rising purchasing power, the increased visibility of Ethiopia and Africa as tourist destinations, and the improving interconnectivity of the Asian and Africa continents in terms of transportation, investment and trade.
What impact will open skies agreements have on the African aviation market?
GEBREMARIAM: The implementation of the Yamoussoukro Decision is of paramount importance in achieving open skies for African aviation. Unless we work together, African airlines may see their share of business decline. The African Union and other entities, especially African aviation bodies, have the utmost responsibility to encourage countries to liberalise and open their skies for the easy movement of air transport.
These organisations have made several positive steps towards achieving these goals. Nevertheless, African carriers will need to navigate a number of challenges, ranging from fuel and services costs and inadequate infrastructure, to the lack of human resources and competition from non-African airlines. If we are able to achieve open skies in Africa then we will be able to create more jobs, especially for the young, while also improving the movement of people and goods within the continent, thereby enhancing intra-Africa trade.
How can the high operating costs for airlines be addressed?
GEBREMARIAM: Air transport, more than any other product or service, is levied with a high rate of tax, even higher than cigarettes. This discourages and impedes the overall development of African aviation. Therefore, landing and refuelling costs along with other airport services should be liberalised as well.
What are the challenges to establishing an airline in Africa?
GEBREMARIAM: It is challenging to establish an airline company regardless of the location, as it is very capital intensive and requires a skilled workforce. A key challenge to operating a successful airline in Africa, however, is that African countries often restrict their air services markets to protect the share held by state-owned carriers. Africa is home to 12% of the world’s population, but it accounts for less than 1% of the global air services market, which means there is significant opportunity for growth. The implementation of the Yamoussoukro Decision would certainly help unlock some of this potential.
What impact has currency volatility had on your operations in African markets?
GEBREMARIAM: Despite being in its nascent stage, the transportation of goods is one of the key drivers of growth in the aviation sector in Africa. However, currency volatility due to rising food and fuel prices, declining foreign reserves, structural factors and domestic macroeconomic policy could be cited as major factors that put this sectoral growth at risk. Nevertheless, we have so far managed to navigate currency related problems through proper planning and the prudent evaluation of risk.
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