One fine day long ago in Yamoussoukro, in 1988 to be exact, 44 African states sat around a table in the capital city of Côte d’Ivoire and agreed that they would all want to play a fair game in a huge air bubble. Fast forward 30 years later to 28 January 2018, in Addis Ababa, Ethiopia, the signing of 23 participating governments marks the birth of the Single African Air Transport Market (“SAATM”) agreement. Voilà – the game has officially started.
To the layman it all sounds French, but to aviation industry players, it’s only just the beginning of what will hopefully be a burgeoning fully fledged, competitive airline industry thereby levelling the African playing field between airlines. The Single African Air Transport Market (“SAATM”) is one of the flagship projects of the African Union’s Agenda 2063 ensuring that aviation plays a major role in connecting Africa in achieving social, economic and political integration and boost intra-Africa trade.
Originally evolved from and known as the Yamoussoukro Declaration in 1988, which then became the Yamoussoukro Decision (“YD”) in 1999, the recently signed SAATM remains the single most important air transport reform policy initiative by African Governments to date.
Why was this agreement necessary at all? Do we not have enough airlines flying the skies, or is all not as it seems to be? This is, of course, a naïve question if you are a role player in aviation – but not to the man in the street – of which there are millions in Africa who are simply not even aware of SAATM, but will be indirectly affected at one time or another in the future.
Simply put, it means changing old aviation rules in order to let players explore undiscovered frontiers in the game. The SAATM was implemented by recognising and acknowledging that restrictive and protectionist intra-African regulations existed based primarily on Bilateral Air Services Agreements (“BASAs”). These very agreements impeded the growth and improvement of air transport on the African continent. One of the vital parts of the Decision was air service liberalisation, which was viewed as a means to develop and free up African airspace. In essence, it is meant to open up air new travel routes within Africa and allow the 23 signatories multilateral exchanges of up to fifth freedom air traffic rights between African destinations.
In order to fully understand what this actually means, we need to understand the concept of freedom of the air rights. Freedoms of the air are a set of commercial aviation rights granting a country’s airline an allocated permission to enter and land in another country’s airspace. The formulisation of these rights came about as a result of disagreements between international states over the extent of aviation liberalisation at the Convention on International Civil Aviation of 1944, known as the Chicago Convention. These “freedoms” are the fundamental building blocks of international commercial aviation route networks and confer entitlement to operate international air services only within the scope of various applicable multilateral and bilateral treaties (air services agreements) between countries.
Since 1944 aviation has grown exponentially and IATA’s work duly expanded, however, the Chicago Convention could not initially resolve the issue of who flies where, which resulted in the thousands of bilateral air transport agreements between countries in existence today.
Governments and aviation industry role players needed a mechanism that would not only disable protectionist strategies that many African States employ to protect the existing (and future) market share of their domestic airlines, but would also realise the full potential and benefits of the Yamoussoukro Decision, thereby unlocking the full potential of the African aviation industry and help to enhance connectivity, facilitate trade and tourism, create employment, and ensure that the aviation industry plays a more prominent role in the global economy and significantly contribute to the AU’s Agenda 2063.
Ultimately, how will the new SAATM benefit aviation in Africa and open up the playing fields? We spoke to aviation expert Linden Birns, managing director of Plane Talking:
“Under the current regime of restrictive bilateral air transport agreements, cross-border airline flights must either originate or terminate in their home country. SAATM envisages unrestricted access and operations between any points on the continent, without flights having to start or end in the airline’s home nation.”
“This is precisely what has taken place in Europe under the EU and what gave rise to the big low cost carriers such as Ryanair, easyJet and Vueling as well as niche regional feeders like FlyBe.”
“No doubt SAATM will also spur industry consolidation, mergers, acquisitions and the creation of alliances as the industry’s survival in a fast growth phase is dependent on rapidly achieving economies of scale. This will require proactive measures by national government regulators in reforming airline ownership and control regulations, which currently place ceilings on foreign shareholdings and management personnel.”
A knowledgeable glimpse into the future built on years of industry experience. Chief Executive Chris Zweigenthal from the Airlines Association of Southern Africa (AASA) added:
“The opportunity for unlimited frequencies would assist those states that have possibly had Bilateral Air Service Agreements (BASA’s) with limited frequency availability to further develop the market between the two states.”
“In addition, opportunities exist to operate fifth freedom rights including a third destination, even a destination that is not served by current airline operations. This all opens up the possibility of introducing flights between new city pairs and also increasing frequencies on existing routes. Airlines will therefore be able to develop strategies around satisfying market demand between these markets without constraints in the medium and long term. As more states join the SAATM, the opportunity to open up many more city pairs and markets will increase. Opening up the market will provide new and more travel options for tourists to visit various states, some possibly not served previously. Tourism and business travel should increase.”
There has been mostly positive praise with the signing of SAATM. The International Air Transport Association (IATA) welcomed the launch of the Single African Air Transport Market (SAATM) initiative by the African Union (AU) to open up Africa’s skies and improve intra-African air connectivity as well.
“The SAATM has the potential for remarkable transformation that will build prosperity while connecting the African continent. Every open air service arrangement has boosted traffic, lifted economies and created jobs. And we expect no less in Africa on the back of the SAATM agreement. An IATA survey suggests that if just 12 key African countries opened their markets and increased connectivity, an extra 155,000 jobs and US$1.3 billion in annual GDP would be created in those countries,” said Rapahel Kuuchi, IATA’s Vice President for Africa.
“We commend the 23 states that have signed up to SAATM. It is an important step forward. But the benefits of a connected continent will only be realised through effective implementation of SAATM—firstly by the countries already committed and also by the remaining 32 AU member nations still to come on board,”
On the surface, surely all bodes well if the trade association of the world’s airlines controlling body (IATA) conveys its well wishes – but there are still some key issues that remain to be addressed. South African based airline Airlink’s CEO Rodger Foster guarded against the many pitfalls that need to be navigated through to achieve effective implementation of SAATM:
“The SAATM will facilitate improved air access between South Africa and key destinations within other African states. However, the net beneficiaries of the SAATM will be those airlines predisposed to a geographic advantage in terms of being able to access global markets whilst gaining access to economically buoyant markets within Southern Africa that without SAATM they would not have access to.”
“The net losers will be the airlines operating within Southern Africa. Although SAATM is intended to create fair and equal access to all markets by all African airlines, the situation is far from fair and equal. Access to markets is not equally reciprocal for a myriad of considerations, ranging from the process and cost of securing foreign operators permits, to inequalities in competition, especially where privately owned airlines are in contest against state subsidy.”
In addition, says Foster, there is still a myriad of issues that need clarity and attention:
“Aeropolitical – a clear understanding of air traffic freedoms and their applicability, e.g. under what conditions do fifth freedom traffic rights apply, and how and under what circumstances licenses and designations are granted.”
“There is inconsistency with regard to when a State Civil Aviation Authority and the safety oversight of that authority are recognised by another State Civil Aviation Authority and when not. There is no common set or Civil Aviation Regulations and Technical Standards. There isn’t a common antitrust legislation.”
Aviation is not for the faint hearted, it is highly competitive and capital intensive. Airlines also must abide and operate within local and international civil aviation laws and agreements:
”Much work still needs to be done to ensure effective implementation. This in my view includes drafting of SAATM competition rules and regulations, dispute resolution mechanisms, and implementing provisions, including a Joint Competition Authority” says Airlines Association of Southern Africa’s (ASSA) Chief Executive Chris Zweigenthal.
“Also an Executing Agency or similar body needs to be established to implement and monitor the implementation of SAATM. All states that have made the solemn commitment need to be on the same page and have the buy-in of their airlines to make this successful. In my view, the ground rules ensuring fair reciprocity both in terms of rights and value opportunities need to be agreed for all participants.”
Plane Talking’s Linden Birns further explains:
”Right now SAATM is a set of principles underpinned by a text, which commits the signatory AU member states to adopting. Unlike the European Union (EU), the African Union (AU) does not currently enjoy any legislative powers and its resolutions do not supersede the sovereign laws of its member states.”
“In order for SAATM to have a meaningful impact, each AU member nation must subscribe to SAATM and then follow-through by passing enabling legislation and regulations that allow for its implementation. This will require the replacement of the current regulatory framework, which relies on restrictive bilateral air transport agreements between individual states, with the SAATM’s principles and proposed mechanisms. In addition to opening up Africa’s skies to the continent’s airlines, items such as Consumer Protection laws will also need to be aligned on a continent-wide basis.”
“Full implementation of SAATM will require political will and courage, which has been notably absent ever since the creation of a single market was first proposed in 1988 by the AU’s predecessor, the Organisation of African Unity (OAU), at its summit in Yamoussoukro.”
In simple terms it means that although signatories have committed to SAATM, ratification and legalisation still has to happen and be entrenched in each country in order to bind each participating state to SAATM properly. This could mean the mutual scrapping or amending of current bilateral air transport agreements between countries, and replacing them with the new SAATM framework. As the saying goes, Timbuktu was not built in one day meaning that full implementation of SAATM could take many years to say the least.
Other key questions remain: why has it taken so long, i.e. 1988 – 2018 (30 years), from intent to ready, set go in terms of formal implementation? Also, why have only 23 out of 55 African states committed to SAATM?
Interestingly, we asked industry players to speculate, why only 23 nations have committed at this point in time. Air Botswana spokesperson Thabiso Leshoai:
“Most African countries do not have enough financial resources to capitalise their airlines (mostly owned by government) to enable them to effectively compete. In my speculation, countries want to subscribe to SAATM after improving their airlines, hence the delay.”
Rodger Foster from Airlink is a bit more specific:
“There are 55 political boundaries, 55 sets of Civil Aviation Regulations and Technical Standards, 55 sets of Air Services and Licensing Legislation, 55 different Civil Aviation Authorities, 55 sets of Competitions legislation.”
“It is not up to the airlines to participate in liberalisation but rather their State Aeronautical Authority. Airlines are designated by their State to operate traffic rights between countries. Where there has been coordination and harmonising in the national interest as in the instance of Ethiopia, the national carrier has benefitted handsomely. However, in most cases, airlines have not been able to derive benefit.”
AASO Chief Executive Chris Zweigenthal:
“Some airlines may be concerned at the potential impact of liberalisation on their operation, and will need to develop strategies to maybe change their business model and get to a position of taking advantage of new business and market opportunities made available by this initiative.”
“Certain states and their airlines, frustrated by the delay in implementation of the YD, have on a bilateral basis implemented the YD and liberalised their markets bilaterally. Delays to the full implementation on the YD (on a continental wide basis) can probably be attributed to reluctance of some states to implement and for some or other reason, advising they are not ready. Regional or internal conflict could also impact a state’s readiness to be part of this initiative as they look to rebuild their country and their aviation industry after resolution of the conflict.”
“In addition, setting up the institutional arrangements, e.g. the Executing Agency, and finalising Competition Rules and Regulations, a Dispute Resolution mechanism, a Joint Competition Authority. An Executing Agency or similar body needs to be established to implement and monitor the implementation of SAATM. All states that have made the solemn commitment need to be on the same page and have the buy-in of their airlines to make this successful. In my view, the ground rules ensuring fair reciprocity both in terms of rights and value opportunities need to be agreed on between all participants.”
There is resistance in some quarters, notably Ugandan president Yoweri Musevini who expressed fear that SAATM will lead to the supremacy of African skies by a few, already dominant African airlines.
“Few airlines are going to dominate and that is not good,” Museveni said. He said he would prefer that African countries form regional airlines first before liberalising their skies.
Looking at West Africa, although Nigeria is a signatory to SAATM, the Airline Operators of Nigeria (AON) has resisted charging that they (AON) were not included by their own government ministers in the discussions leading to the endorsement of the implementation of the policy. During a sensitisation workshop on the implementation of SAATM, the President of AON, Captain Nogie Meggison was highly critical: “We must put Nigeria first. What advantages does Nigeria stand to gain if we open the skies? Do we (Nigerians) have visas to travel around Africa before we open the skies?”
He said some African states target Nigerian airlines by charging them outrageous levies when they operate to those countries. Citing high interest rates levied against private Nigerian airlines compared to other government owned airlines, he intimated that the playing ground was not level, citing that “over 50 Nigerians airlines had collapsed in the past”. Other countries’ airlines enjoy some protectionism, lower interest rates on loans, and waivers on import duty for aircraft and spares, he said.
Plane Talking’s Linden Birns: “In other cases, the absence of political will have been based on preserving narrow, short-term advantages and rivalry between states. For all of the positive talk and good intentions behind SAATM, Africa remains the most conflicted continent on the planet. Contrary to how people in other parts of the world might view Africa, it is not a homogenous conglomerate. It is a diverse collection of states with complex relationships and histories. It remains to be seen just how the AU intends to live up to its name and ‘unite’ them.”
“What all African countries do have in common is the desire to grow their economies, educate, skill and employ their citizens and create a more prosperous and better life for them. This socio-economic imperative is becoming recognised and appreciated by an increasing number of African governments.”
Despite impending criticism and reluctance by some African nations to join SAATM just yet, it is a positive sign of the evolving maturity of the African airspace – albeit moving at a snail’s pace.
Chris Zweigenthal says: “The SAATM is a natural progression for African aviation following the deregulation of the US market in 1978 and in the EU in 1993.”
“African aviation contributes only 3% of global passenger traffic, whilst having 12% of the world’s population and 15% of the world’s land mass. The potential for growth is clearly evident.”
“Africa is also a high cost environment. Many airlines’ operating costs are in US Dollars, e.g. aircraft ownership and leasing, maintenance, distribution costs, jet fuel, navigational and infrastructure costs if operating outside of South Africa. African state’s volatile exchange rates further contribute to high operating costs. This increases the cost base of the airline and the air fares become higher to try and cover these costs and achieve some profitability.”
A quick peek at the starting line will tell us that certain airlines are already well positioned to take advantage of SAATM. Again here an insider’s view is relevant:” Some carriers, notably Ethiopian Airlines, are rapidly establishing bridgeheads across the continent. Ethiopian Airlines’ rapid route network and parallel fleet expansion is already delivering the goods and has seen the airline attain double-digit annual growth and profit margins (the latter being a rarity in the global airline industry).” Says managing director Linden Birns from Plane Talking.
“If and when SAATM comes to pass, this footprint will undoubtedly be to Ethiopian Airlines’ advantage. In contrast, South African Airways, once regarded as the biggest threat under an open skies in Africa, is shrinking its network and cutting back on its fleet. It is a move that seems designed to restore its balance sheet and profitability in the short term, but successful airlines are those that grow their networks through increased productivity and optimised utilisation of resources.”
RwandAir has also not been idle with its ambitions for its national airline, including route launches to Europe a good indication of capitalising of new routes. For a landlocked country that is relatively small, having a national carrier may seem like a luxury, but Rwanda’s government is convinced of the need to enhance transport links and grow its size of the aviation cake to serve West and Central Africa as a whole.
RwandAir deputy chief executive Yvonne Makolo says: “RwandAir’s ambitions are very much in line with the country’s economic ambitions. Being landlocked, it is imperative we have access, we have a huge part to play.”
“RwandAir has a hub-and-spoke model and we are trying to get as many feeders into the hub as we can. Some countries in Africa, particularly in the west, are underserved. We see an opportunity to take these people to China, Mumbai and now the UK as well.”
Other dominant airlines, apart from star performer Ethiopian Airlines, include Kenya Airways, Egypt Air, and potentially South African Airways.
With these big airlines well positioned to take advantage, does this not beg the question of how SAATM will affect smaller airlines? Aviation expert Linden Birns:”Airlines compete in a tough environment and require robust strategies, resilient business models and either deep pockets or access to sufficient finance, to survive. Under SAATM, any regulatory market access protection airlines currently enjoy in their home markets will be removed and, just like any other business, they will have to employ their competitive wits to identify and exploit their commercial advantages in order to survive and grow.”
“This may compel some carriers to forge alliances or commercial partnerships, it will force them to re-think how they market themselves and to look to the destinations and markets they serve or want to serve, for marketing support and other incentives.”
IATA’s Vice President for Africa Rapahel Kuuchi cautions: “The decision is momentous. SAATM is a decisive step towards greater intra-African connectivity and delivers the framework on which to achieve it. Now it’s time to get down to the work of implementation. Greater connectivity will lead to greater prosperity. Governments must act on their commitments, and allow their economies to fly high on the wings of aviation.”
Looking at SAATM and the future, exciting times lie ahead and it will be interesting to observe how the African airspace develops with current and emerging players. Political will, strategy and an ambition to successfully compete on a global scale will be key factors in how African airlines evolve within the context of SAATM in a brave new sky.
Current signatories to Single African Air Transport Market (SAATM) are: Benin, Botswana, Burkina Faso, Cape Verde, Republic of Congo, Ivory Coast, Egypt, Ethiopia, Gabon, Ghana, Guinea, Kenya, Liberia, Mali, Mozambique, Niger, Nigeria, Rwanda, Sierra Leone, South Africa, Swaziland, Togo and Zimbabwe.
This article was written by Dieter Göttert.