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close this bookThe Courier N 156 - March - April 1996 - Dossier: Trade in Services - Country Report : Madagascar (EC Courier, 1996, 96 p.)
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close this folderTrade in services
View the document(introduction...)
View the documentA trailblazing project for services in Africa
View the documentServices potential in the Caribbean
View the documentWhat do ACP nations have to win or lose from global liberalisation of services?
View the documentImplications for developing countries of liberalised financial services
View the documentTemporary movement of persons
View the documentNew realities for national shipping in Africa
View the documentState-owned airlines try to avert crash-lanclings
View the documentAir Jamaica: the bride without dowry soars to new heights
View the documentGlobal tourism
View the documentThe 'phone' phenomenon

State-owned airlines try to avert crash-lanclings

by Baffour Ankomah

As competition in the aviation industry becomes fiercer, African national carriers - once considered as essential to statehood as an anthem and a flag - are finding it increasingly difficult to stay in the skies.

Without massive cash injections, better management and sounder policies, several carriers are likely to follow Zambian Airways into liquidation, leaving the runways free for private companies. Its December 1994 collapse followed the seizure of three of its aircraft and other assets by international creditors fed up with its failure to settle outstanding bills.

Out of the ashes, a partly private phoenix has risen: Alliance, a collaboration between South African, Tanzanian and Ugandan interests, which will link the three member nations and London, Dubai and Bombay. Its maiden flight took off in July 1995 with a cabin crew trained by South A*ican Airways (SAA). Tanzanian Prime Minister, Cleopa Msuya, spelt out the lesson at the Alliance launch: 'With meagre resources, small national airlines are fast becoming a thing of the past. African nations can no longer afford to operate individual airlines in a highly competitive world market.'

With a few exceptions such as Ethiopian Airlines and SAA, African airlines are state-owned, badly-managed and hugely unprofitable. Many are run like government welfare agencies which survive on political patronage. The catalogue of woes also includes an ageing fleet which is increasingly expensive to maintain, lack of a common ticketing system and bizarre policies on fares which range from inordinately high (because of lack of competition in the home countries) to uneconomically low (demanded by governments because of poor conditions at home).

A recent United Nations aviation review was scathing about the continent's record: 'Airline companies are simply treated as an extension of the public administration or government departments under the control of politicians who allot key management posts as political favours without any consideration of merit. Africa's poor economic performance has further hindered the industry. Over the past 20 years, African airlines' share of global traffic has dwindled. In 1994, the continent's traffic volumes decreased by a further 4.2% even as the number of air travellers around the world increased by 7%.'

Some like Nigeria Airways, always a profligate spender, have tried to buy their way out of their problems by buying new aircraft. It purchased four Airbus A310s to augment its once impressive fleet of Boeings, but succeeded only in pushing the airline deeper into the red to a point where it can no longer pay its debts. The Nigerian government would like to privatise the loss-making carrier but cannot do so because of its 'massive debts', according to Aviation Minister, Aremu Yahaga.

Even Air A*ique, one of the continent's most respected carriers, ran into severe problems, stemming in part from interference and squabbling amongst the 12 francophone West African countries which own it. In 1993, France saved it from imminent collapse by putting up 80% ($20.4 million) of its re-capitalisation. ln the first ten months of 1994, it announced a $662 000 profit - the first for many years - in contrast with a deficit of $14 million in the same period in 1993. The international courier company, DHL, has acquired a 3% stake and a further $15.7 million is being sought from the private sector.

One reason to improve airline operations is to cash in on the World Tourism Organisation's predictions that Africa 'will be the region where tourism grows the fastest in the next few years.' But to capture the predicted increase in tourism traffic, African carriers will have to drastically revamp their operations. This will include mergers, the introduction of a common ticketing system, proper management procedures - and privatisation.

Cameroon is planning to privatise the loss-making Cameroon Airways, and Congo is its internal operator Lina Congo. Another privatisation candidate is Ghana Airways, whose day-to-day management recently passed to Speedwing Consulting, a British Airways subsidiary. The Ghanalan government was impressed with Speedwing's success with Kenya Airways. In the five years before the Speedwing takeover in 1992, Kenya Airways ran a debt of $57 million. Although Speedwing raised fares by 107%, traffic increased. In 1994, for the first time in many years, Kenya Airways showed a profit of $7 million. The airline is on course for a $10 million profit in 1995.

Perhaps taking a cue from Ghana and Kenya, Zambia has replaced its dead national airline with a private carrier, Aero Zambia, owned mainly by Belgian investors. Asking foreigners to manage their national airline may be a blow to African pride, but it is the reality of the free market. B.A.