The Economic Effects of Air Transport Market Liberalisation

A Perspective Analysis of the Single African Air Transport Market (SAATM)

Author: Eyden Samunderu

Publisher: Springer Nature Switzerland

Book Series : Advances in African Economic, Social and Political Development

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

Table of Contents

About this book

This book rigorously examines the air transport market liberalisation process on the African continent and presents key highlights, challenges, and impediments to embracing an “open skies” market environment in Africa. It focuses on the economic impact of air transport liberalisation, policy constraints, challenges of harmonisation, and regional economic integration and its impact on air transport development, employing a quantitative assessment based on the Air Transport Liberalisation Index (ALI) to evaluate how an open skies policy would change the competitive dynamics of air transport in Africa. Adopting a two-tier gravity model, the book explores how demand and route networks would be impacted by the deregulation of the air transport market. The book also applies a historical perspective by evaluating the initial ratification of the Yamoussoukro Declaration (1999), which acted as a catalyst for Africa’s 2063 regional agenda, focused on establishing the Single African Air Transport Market (SAATM).

The book also provides a comprehensive analysis of the African Continental Free Trade Area (AfCFTA), exploring its multifaceted impacts on Africa’s single market from economic, regulatory, and sustainability perspectives. This includes an introduction to the AfCFTA, highlighting its inception as a major step towards continental economic integration aimed at enhancing intra-African trade, promoting sustainable development, and fostering industrial diversification.

It then examines the capacity and competency building of African aviation personnel. Training gaps and skills are extensively evaluated to ensure that the African region is prepared for the “new” competitive equilibrium post SAATM.

The book also raises critical questions regarding the status of the African air transport market. Firstly, with the introduction of an open skies policy in Africa, will the national flag carriers be able to compete under the new market dynamics? Will the SAATM become a game changer in paving the way for the privatisation of some of Africa’s poor-performing airlines? Will the SAATM create a competitive market and a shift in airfares? How will policymakers deal with the excessive aviation taxes, fees and charges that make airfares in Africa the highest in the world? What will the economic benefits be for signatory states that embrace the SAATM? Will there be a significant growth trajectory in terms of air travel demand?

This book is intended for researchers studying air transport economics in developing markets, graduate students with a primary focus on air transport development, senior policymakers and professionals at governmental agencies, and industry practitioners who want to expand their understanding of the dynamics shaping Africa’s air transport landscape.

Frontmatter

Chapter 1. The Scope of the Global Aviation Industry

Abstract

This chapter provides a holistic exploration of the global aviation industry, from its foundational statistics to the intricate dynamics of business models like full-service network carriers (FSNCs) and low-cost carriers (LCCs). It critically evaluates the sustainability of the low-cost model in Africa, juxtaposed with the strategic significance of hubbing, including its benefits and challenges. The narrative delves into the specialised hub-and-spoke models, their implementation, and their particular relevance to the African context. Furthermore, it extends the analysis to the global airline market, the aerospace industry structure, and the pivotal role of commercial aviation. The chapter also assesses the competitive landscape of aircraft manufacturing, emphasising the theoretical framework of structure conduct performance. It includes an examination of the global Maintenance Repairs and Overhaul (MRO) and aircraft engine markets, alongside the exogenous factors impacting the industry. Additionally, it addresses the global energy market’s influence, risk management strategies such as fuel hedging, and the critical perspective of Environment, Social, and Governance (ESG) in aviation. The African air transport and cargo markets are scrutinised for their current state, growth forecasts, and inherent challenges. This comprehensive analysis offers insightful perspectives on the aviation industry’s complexities, its evolving market dynamics, and the emerging trends shaping its future.

Eyden Samunderu

Chapter 2. Contextual Setting of the African Air Transport Market

Abstract

This chapter offers a comprehensive examination of the African air transport market, emphasising the distinctive challenges and opportunities it faces in comparison to global standards. It starts with an overview of the market’s current state, underscoring the limited global passenger traffic share but noting significant intra-African growth prospects and the potential for future expansion as predicted by industry forecasts. The chapter critically assesses the role of regional economic communities (RECs) in fostering economic integration across Africa, highlighting their efforts towards liberalisation and the varied success across regions. It further explores the vital importance of infrastructure integration and air connectivity, detailing the determinants, benefits, and the post-Covid-19 recovery prospects. The narrative then shifts to the challenges plaguing the African aviation industry, including infrastructural inadequacies and regulatory barriers, which have historically stifled growth. Additionally, the chapter evaluates the transformative impact of the African Continental Free Trade Area (AfCFTA) on the aviation sector, proposing enhanced market access and increased intra-African trade as principal advantages. The examination extends into the broader implications of AfCFTA for air transport infrastructure and stakeholder engagement, providing a nuanced analysis of its potential to redefine African aviation. Through this exploration, this chapter elucidates the complex interplay between regional economic policies, aviation market dynamics, and infrastructural development, offering insights into the future trajectory of the African air transport market.

Eyden Samunderu

Chapter 3. The Deregulation of Air Transport: An International Perspective

Abstract

Chapter 3 provides a detailed analysis of the transformative deregulation processes within the global aviation industry, highlighting pivotal developments in North America, the European Union (EU), Asia Pacific, and South Africa. It begins with a historical overview of airline regulation and the academic consensus that influenced the Airline Deregulation Act of 1976 in the United States, setting a precedent for liberalisation efforts worldwide. The chapter examines the Chicago Convention of 1944 as the foundational framework for international air transport regulation, elucidating the evolution of air service agreements, multilateral agreements, and the significance of the freedoms of the air. Special focus is given to the impact of deregulation in various regions, including the rise of low-cost carriers (LCCs), the expansion of hub-and-spoke networks, and the integration of airline alliances. The EU’s progressive liberalisation, culminating in a comprehensive single aviation market, is discussed alongside the challenges and opportunities presented by the African market’s liberalisation, particularly through the Yamoussoukro Decision. The chapter concludes by assessing the ongoing global shifts towards liberalisation, the economic benefits of open skies agreements, and the broader implications of deregulation for airline competition, market access, and consumer choice.

Eyden Samunderu

Chapter 4. African Air Transport Liberalisation: The Yamoussoukro Decision

Abstract

This chapter delves into the Yamoussoukro Decision (YD), a landmark agreement aimed at liberalising air transport across the African continent, tracing its historical roots and examining its impact and challenges. It begins by exploring the evolution of civil aviation policy in Africa, from the era of strict national sovereignty to bilateral regulation and the gradual shift towards deregulation, emphasising the colonial legacy that initially focused on connections with Europe rather than intra-African connectivity. The chapter highlights significant milestones such as the Chicago Convention, the formation of Air Afrique, and regional efforts like ASECNA, which laid the groundwork for collaborative air transport initiatives. It details the phases of the Yamoussoukro Declaration, aimed at airline cooperation and eventual integration, by presenting the challenges in its implementation. The Decision’s objectives for liberalisation, including the free exercise of air rights and safety standards alignment, are outlined, reflecting a shared vision for a unified air transport market in Africa. However, the chapter critically assesses the varying degrees of implementation across African states, the challenges of regulatory fragmentation, and the role of regional economic communities (RECs) in driving liberalisation efforts. Despite the ambitious goals of the YD, the chapter concludes with a reflection on the complexities of achieving a fully liberalised and integrated African air transport market, underscored by the diverse economic, political, and infrastructural landscape of the continent.

Eyden Samunderu

Chapter 5. Economic Benefits and Passenger Developments under the Single African Air Transport Market (SAATM)

Abstract

This chapter outlines the economic benefits and passenger developments under the Single African Air Transport Market (SAATM), illustrating the transformative potential of liberalising air transport across Africa. The chapter is divided into two main parts, each addressing critical components of SAATM’s implementation and its impacts.

Part 1 delves into the foundational aspects of SAATM, exploring its introduction within the context of the African Union Agenda 2063, aiming to create a unified African sky to enhance connectivity and economic growth. The narrative progresses through a detailed analysis of the current status of SAATM implementation, highlighting the progress made and the challenges faced. It provides a comprehensive examination of the role of Regional Economic Communities (RECs) in facilitating this integration, the status of Bilateral Air Service Agreements (BASAs) and their compliance with SAATM’s objectives, and the broader impact on air navigation systems and infrastructure development. This section also discusses the alignment of SAATM with the United Nations Sustainable Development Goals and ICAO’s strategic objectives, underscoring the global relevance and the envisioned benefits of an integrated African air transport market.

Part 2 transitions into a quantitative methodology to assess the impact of air transport liberalisation in Africa, introducing an empirical two-tier forecasting model to analyse data and predict outcomes. This analytical section meticulously examines the elements contributing to the Air Liberalisation Index (ALI), including statistical indexes and the scoring of intra-African BASA provisions. The impact of recent global challenges, such as COVID-19, is also considered within the context of autoregressive models and time-series forecasting, offering a nuanced understanding of SAATM’s potential economic impacts on tourism, trade, and overall economic growth within the liberalisation framework.

In conclusion, this chapter provides a thorough exploration of SAATM’s economic benefits and passenger developments, presenting a compelling case for the continued push towards air transport liberalisation in Africa. It not only highlights the progress made but also the significant challenges that must be overcome to fully realise the vision of a single African air transport market that fosters economic growth, enhances connectivity, and contributes to the sustainable development of the continent.

Eyden Samunderu

Chapter 6. Challenges and Complexities Affecting African Air Transport Market Development: A Skills, Competency, and Capacity-Building Perspective

Abstract

In this chapter of the provided document delves into the intricate challenges and complexities that pervade the development of the African air transport market, with a keen focus on the pivotal roles of skills, competency, and capacity building. This comprehensive analysis reveals a multifaceted perspective on how the sector is confronting and addressing the myriad of issues related to training, development, and workforce management, underscoring the critical importance of human capital in ensuring the growth and sustainability of air transport across the continent.

The chapter begins with an exploration of the fundamental significance of training and development within the industry, setting the stage for a detailed investigation into the current landscape of skills, training, and development across Africa. It meticulously examines the intricacies of record-keeping, the broader context of air transport in Africa from a training and development viewpoint, and projects the demand for aviation-skilled personnel, illuminating the gaps in training across the aviation sector.

Furthermore, the chapter discusses the entities providing aircraft Maintenance, Repair, and Overhaul (MRO) services, addresses the “No Country Left Behind” initiative, and delves into the gender imbalance in aviation. It also tackles the themes of restructuring and change management, the utilisation of dashboards to track agility performance, leadership development, and succession planning, and the pivotal relationship between aviation and the environment.

A significant portion of the chapter is dedicated to conducting a training needs analysis on Africa’s aviation personnel, presenting a methodological framework for executing such an analysis with limited resources. This analysis is not only comprehensive, covering the design of surveys and the interpretation of research findings, but also focuses on the strategies to maximise and measure the impact of training programmes and the design and development of effective training modules.

Eyden Samunderu

Chapter 7. Liberalisation of Trade Regime Under AfCFTA: A Perspective Analysis on Africa’s Single Market

Abstract

In this chapter provides a comprehensive analysis of the African Continental Free Trade Area (AfCFTA), exploring its multifaceted impacts on Africa’s single market from economic, regulatory, and sustainability perspectives. It commences with an introduction to the AfCFTA, highlighting its inception as a major step towards continental economic integration aimed at enhancing intra-African trade, promoting sustainable development, and fostering industrial diversification. The chapter further examines the potential economic impacts, including increased competitiveness, integration into global value chains, and significant boosts in intra-African trade.

Additionally, it delves into the complexities of tax and fuel harmonisation, addressing the challenges of coordinating fuel policies and prices across member states to reduce trade barriers and support a unified market. The exploration into sustainable aviation fuels (SAF) discusses the transition towards aviation decarbonisation, presenting feedstock options, production challenges, and the potential for creating a sustainable aviation sector within the AfCFTA framework.

Through detailed examinations of the economic, regulatory, and environmental dimensions, the chapter outlines the transformative potential of the AfCFTA, while also acknowledging the hurdles in realising a fully integrated African market.

Eyden Samunderu

Title: The Economic Effects of Air Transport Market Liberalisation
Author: Eyden Samunderu
Publisher: Springer Nature Switzerland
Electronic ISBN: 978-3-031-61864-2
Print ISBN: 978-3-031-61863-5
DOI: https://doi.org/10.1007/978-3-031-61864-2