By end-Sep 2023, USD1.68 billion of airlines’ foreign revenue was trapped in African countries experiencing foreign exchange reserves shortages
65% of the 1.4bn African people are below the age of 25 and need digitalized jobs
23 of all African nations including Uganda have ratified the AU’s Single Africa Air Transport Market (SAATM) accord
The 55th African Airlines Association AGA has opened in Uganda ‘s capital Kampala with pomp under the “Strides to Transform Aviation for Development .
The AFRAA AGA is the biggest aviation summit in Africa. Uganda Airlines will is proudly hosting the 55th AFRAA AGA under the Ministry of Works and Transport led by Gen Edward Katumba Wamala and the national airlines CEO Ms. Jenifer Bamuturaki is the current President AFRAA.
The International Air Transport Association’s (IATA) Regional Vice President for Africa & Middle East, Mr Kamil Alawadhi, who represented the IATA Director General Willie Walsh, while addressing the delegates regretted to note that by end of September 2023, USD1.68 billion out of USD 2.36 billion globally of airlines’ foreign revenue was trapped (blocked funds) in African countries experiencing foreign exchange reserves shortages. This he said had led to a financial crisis for many airlines on the African continent.
“ The numbers are alarming and the impact of this on connectivity is devastating. This must stop. African governments shuld take up this issue and resolve it urgent if African airlines are to thrive, open up the African airspace to allow connectivity ,Kamil Alawadhi pleaded .
The bigger chunk of the blocked funds is in Africa ironically one of the leading economies in Africa .
Alawadhi explained that aviation industry is capital intensive one and therefore cash flow is key for airlines’ business sustainability . “When airlines are not able to repatriate their funds, it severely impacts their operations and impacts their decisions on where to fly.
But the risk of blocked funds is not just limited to airlines; the negative impact extends to the countries blocking the funds. It impacts the country’s economy and its connectivity, and it hurts investor confidence and reputation. Aviation is not only an economic enabler, it is a pillar of modern economies, he added .
The IATA VP stressed that governments must prioritize aviation and find sustainable solutions in the clearing of blocked funds, and we continue to offer our support in any way we can.
High costs
He also recommended that as Africa’s aviation industry continue to recover from the devastating Covid -19 pandemic governments should avoid imposing higher fees, levies, carbon taxes or new taxes on air transport, trade or tourism.
“These measures would only make air travel more expensive and less accessible in Africa, where the average airfare is already 30% higher than the industry average and the jet fuel cost is 10-20% higher than the global average,” he said .
Higher costs would discourage customers who are sensitive to prices, resulting in lower demand and revenue for airlines and other stakeholders in the aviation sector, such as airports, ground handlers, suppliers and air navigation services.
They would also hamper economic development and limit the opportunities for job creation and income generation. High cost leads to high price, which reduces demand and growth in a price elastic market, and ultimately affects connectivity negatively.
“The message is clear: governments should follow ICAO’s policies on charges and infrastructure and consult with airlines and industry to ensure a fair and cost-effective operational environment that benefits a more connected continent.”
The summit was informed that 23 of all African nations have ratified the AU’s Single Africa Air Transport Market (SAATM accord (a key pillar of the African Continental Free Trade Area) and connectivity More work needs to be done to encourage more countries to join.
Mr Aaron Munetsi – Director General, the Airlines Association of Southern Africa (AASA) highlighted other challenges airlines on the continent are facing including , governments policy ambiguity ,disproportionate share of costs, “break through” challenges like climate change the and geopolitical problems like wars in Ukraine and Middle-east that have led to increased price of fuel.
The other is the demographic challenge where out of the 1.4bn African people 65% of those are youth looking for jobs. “We need to create new jobs for the new generation. We must have a continental approach to these challenges,” Munetsi stated.
He said there was a need to incentivize and stimulate Africans to travel by reducing the cost of air travel.” Lets make flying a career through skills development.”
