Regional Vice-President for Africa and Middle East, International Air Transport Association, Kamil Alawadhi, speaks with OYETUNJI ABIOYE on the state of the African aviation industry, challenges facing international airlines over trapped ticket revenues in Nigeria and other countries
How would you assess the state of infrastructure in the African aviation industry?
Let me talk about the Nigerian aviation industry. Nigeria happens to have the two most expensive airports to operate to, which is Lagos and Abuja airports. The fees are almost a double and half than the GCC airports. The airport itself doesn’t give that much, it doesn’t give that high quality of services to the passengers or the airlines, yet they charge humongous amounts of money to operate to and from those airports. These are all charged in hard currency. They are willing to reap the benefits of the taxes and charges in Nigeria for the aviation industry, but they are not willing to give the airlines their due. This will stop, you know, I mean, it is getting to a breaking point for Nigeria where airlines will stop dropping off and not operating to Nigeria, which will then mean that their source of hard currency when it comes to aviation will also start reducing and it becomes a vicious cycle. I have spoken about this so many times and I would like Nigeria to take the issue very seriously. I think it’s affecting a lot of African airlines; African airlines now have blocked funds and are suffering to the point they don’t have the cash to spend or pay some of their bills; this is because of the large amount of money blocked in Nigeria. And I would like to see the Nigerian government taking some very positive steps to reassess where it is spending the dollars and prioritise aviation.
Few months ago, IATA said it was working with Ethiopian Airlines on blocked funds. Could you please give us an update on what the Ethiopian government said about blocked funds and how they are going to help airlines recover those funds?
Ethiopia has a different approach. They are talking central bank to central bank. This means the Ethiopia government and other countries will settle the blocked funds with one another. That is a different approach, Ethiopia is seeking a way to resolve this issue.
The Nigerian government recently said it was resolving the problem of blocked funds. How much of the funds has the Nigerian government paid to the airlines?
The first step for us in solving this blocked funds issue is for both parties to engage. If parties don’t engage, it is very difficult to move forward. I have not been able to engage with the new CBN Governor, Olayemi Cardoso. I had a report that he would engage with me when he has a solution but I have engaged with the Aviation Minister Festus Keyamo who was very understanding. This was in September. I was hoping to move forward from that but unfortunately, we did not get very far after that. The numbers you are looking at now is the dollar values. I will pose a question to you. What was the Naira in January 2023 and what is the Naira today to the dollar. Then you can see why the airlines are suffering. One airline in Africa is being owed $34m in Nigeria. That $34m is blocked, depreciation has set in on the money. The airline has already lost $10m because of depreciation. That is not fair for the airlines because they have paid all the dues to the operators of the airports. Every due has been paid for. They carry Nigerian officials on these flights and they can’t get their money.
Aviation infrastructure challenge at African airports is different from one country to another. I just want to know your assessment on what is stopping the governments in Africa from developing efficient infrastructure for passenger processing and to know if these challenges have any impact on the traffic and tourism in Africa.
The reasons for infrastructure challenges could be lack of knowledge or transparency to develop or expand the airport. If you want to expand your aviation industry, you need to improve your infrastructure and remove bottlenecks on the aviation industry. You need to consider the airspace itself which includes optimising the airspace for a number of reasons; one for traffic growth and secondly to make it more efficient by reducing the burning of fuel on every single flight from point A to B which will reduce the wear and tear on aircraft plus burning of fuel and CO2.
What is the state of collaboration between IATA and Africa Airlines Association?
That is a very good question. AFRAA represents African airlines and IATA represents the African airlines plus the rest of the planet earth airlines. We do have MoU which focuses on the Focus Africa initiative which is great. We understand that AFRAA is limited with resources. We involve them in all of our initiatives and there would be gains on every initiative we involve with them. We are not moving one inch in Africa unless we have all of the stakeholders like AFRAA, African Civil Aviation Commission working together. All the entities in Africa are already engaged with us.
Safety remains a journey and not a destination. How is IATA using its various programmes to advance the safety frontier?
So, in general, the approach that IATA had in the past was to conduct workshops and advocate for airlines to take the IATA Operational Safety Audit; for the ground handling companies, we advise them to take ISAGO, and work with civil aviation to identify weak spots and so on and so forth. However, due to the nature of our approach and how complicated it is, there’s no point of you fixing one country and the airlines fly to the other country and have an accident, okay? So it has to be done collaboratively and that’s the approach that we are taking with stakeholders in Africa. So we are taking a step back and looking at the core issues more in-depth, the areas such as regulatory requirements, training of the inspectors, workshops that need to be highlighted, and all the other safety issues. So we are going from the bottom up again, going through all those phases. And this is not being done just by us. This is being done by many large partners that are partnering with us with years of experience. And so we are going to approach this in a collaborative manner.
Would you say we have made some progress as far as the Single African Air Transport Market initiative is concerned?
Okay, I will give you a very fast-paced answer to that. The issue of SAATM itself is quite complicated. And the approach might differ among different entities. For me, at this particular moment, you have to remember certain things. I’ve actually asked airlines to tell me if they have a commercial and viable connectivity route within Africa that they are not able to operate to because of bilateral restrictions, to let me know and I will assist them in opening up these routes. I’ve had like two or three requests. The point I’m trying to make is, it is at this stage, in my opinion, a little too early to talk about the connectivity and SAATM as an end state until we sort out some of the ground rules and try to level the playing field, okay? However, should airlines feel it necessary to operate to route which is commercially viable, being blocked by a state or another airline, we can assist willing to tackle that. But I don’t think at this particular moment that the African region has the extra capacity and equipment, or it is commercially viable to jump into this or start discussing the end state while there’s a lot of ground work to be done. I hope that answer your question in a very diplomatic way. I hope so.
With regards to the Focus Africa initiative, have you experienced any unexpected challenges so far?
A very political question! It’s a challenge by itself. I mean it is an ambitious project, which involves many stakeholders. And it’s the first time that it is being approached this way. Initially, it was hard to get the civil aviation entities within Africa to jump on board but we are at the place now where we can launch sufficient projects with sufficient states in a harmonised manner together. So I think you have to be patient and tale away obstacles one by one.
I want you to talk about the profitability of African airlines. You mentioned the challenges such as the jet fuel, et cetera. When can we expect African airlines to start making a profit? And how long can they continue making losses and still operate?
Alright, so that’s a good question. I’m just going to think of one country, okay? To answer the question, every airline has its challenges, depending on where it’s located and where it operates to. But I’ll just answer this question just using Nigeria as an example. So Nigeria has the two most expensive airports, their fuel is 10-15 per cent higher than anywhere else in the world. The insurance is six times more expensive for that type of equipment than anywhere else in the world. The interest rate on loans are 25 per cent, 30 per cent, which is ridiculous. I mean, it’s the highest interest rate. So when you set up this airline, you are already at the disadvantage. Any airline outside Nigeria operating in and out of Nigeria has a cheaper operating cost and cheaper fixed costs than the Nigerian airline. Now you apply that model across Africa at various levels, and then you can see why it is really hard for airlines in Africa to make money. They start off at the disadvantage.
