Single African Air Market Is ready? May 2018 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

Executive Summary

“In 2017, more than 4 billion The liberalisation of civil in Africa as an impetus to the Continent’s economic integration agenda led to the launch of the Single African Air passengers used aviation to Transport Market (SAATM). The Open Sky agreement, originally signed by 23 out reunite with friends and loved of 55 Member States, aimed to create a single unified air transport market in Africa. ones, to explore new worlds, to do business, and to take advantage of Africa is considered a growing aviation market with IATA forecasting a 5.9% year-on-year growth in African aviation over the next 20 years, with passenger opportunities to improve themselves. numbers expected to increase from 100m to more than 300m by 2026 and Aviation truly is the business of SAATM is a way to tap into this market. The benefits of SAATM to African Countries include job creation, growth in trade resulting to growth in GDP and freedom, liberating us from the lower costs resulting to high numbers of passengers. However, is Africa restraints of geography to lead better ready for a Single African Air Transport Market? lives. In Deloitte’s opinion, SAATM needs to consider various aspects in regards to ownership and effective control, eligibility, infrastructure, capacity and frequency De Juniac, IATA (2018) of flights. In this situation, we turn to various international treaties as guideposts where these Open Skies agreement have been done relative success. However, of uttermost importance is that, these agreements ensure that they put in place mechanisms that ensure fair playing ground to all signatory countries. These mechanisms look at competition rules, ownership and control, consumer rights, taxes and commercial viability. These mechanisms are integral to an open sky treaty to ensure the realization of the benefits to the signatories.

From Deloitte’s research and conversations with industry stakeholders, the low commitment from AU Member States is likely to be brought on by the treaty’s lack of a proper implementation framework. This framework is necessary to harmonise existing differences between as well as provide a level playing field going forward. From our research, we have identified several gaps within SAATM that need to be addressed to attain successful implementation.

2 3 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

The first open skies The Convention on International The Chicago Convention also established agreement was signed (1944), also known as the core principles permitting international the Chicago Convention prepared a transport by air and led, through article in 1992 between the framework within which civil air transport 43, to the creation of the International Civil Introduction could function. The Convention established Aviation Organization (ICAO)2, which is Netherlands and the rules of , charged with coordinating and regulating of America, and safety, and detailed the rights of the international . In January 2018, The African Union Heads of State and which gave both countries signatories in relation to air travel. The Government launched the Single African Air Transport Chicago Convention put in place important Game changer – Freedoms of air Market (SAATM) more commonly referred to as the Open unrestricted landing rights articles such as: One of the ways that ICAO works to on each other’s soil. harmonise air transport is through the Skies Treaty. This initiative is one of the flagship projects •• Article 1: “...every state has complete and . These freedoms are of the African Union’s (AU) Agenda 2063. The initiative is exclusive sovereignty over airspace above fundamental to the implementation of its territory where territory.” geared at creating a single unified air transport market in open skies globally. The freedoms of the air are a set of rights Africa through the liberalization of civil aviation in Africa. •• Article 2: “...the territory of a State shall be deemed to be the land areas and granting a country’s airlines the privilege This is seen as an impetus to the continent’s economic territorial waters adjacent thereto under to enter and land in another country’s integration agenda1. The International Air Transport the sovereignty, suzerainty, protection or airspace. They are the fundamental mandate of such State.” building blocks of the international Association (IATA) has welcomed the launch of the SAATM commercial aviation route network. initiative by the AU to open up Africa’s skies and improve •• Article 6: “No scheduled international air service may be operated over or intra-African air connectivity. At the publishing of this into the territory of a contracting State, report, 23 out of 55 Member States have committed to except with the special permission or the single air transport market. other authorization of that State, and in accordance with the terms of such permission or authorization.”

This ensures that every State has, to the What is open sky? •• to liberalize the rules for international exclusion of all other States, the unilateral The open sky principle is an international aviation markets and minimize and absolute right to permit or deny entry policy concept that calls for the government intervention as it applies to into the area recognized as its territory liberalization of the rules and regulations passenger, all-cargo, and combination air and similar right to control all movements of the international commercial aviation transportation as well as scheduled and within such territory. This means that industry—especially commercial charter services; and no other state can go to another states’ aviation—in order to create a free-market •• to adjust the regime under which military territory without permission hence open environment for the industry. For and other state-based flights may be skies is all about agreements between open skies to become effective, an (bilateral permitted. states. or multilateral) must be concluded between two or more nations. Its primary objectives are:

2 1 The Single African Air Transport Market Convention on International Civil Aviation (1944) 4 5 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

Freedom of the Air

Seventh Freedom First Freedom The right for an airline to carry on The negotiated right for an airline from flights that originate in a foreign A B C country (A) to overfly another country’s country (B) bypass its home country (B) airspace. (A) and deposit the passengers at A B another international destination (C). Home Country

Home Country

Second Freedom Eighth Freedom The right for a commercial aircraft A B The right for an airline to carry from Country (A) to land and refuel passengers from one point in the A B C (commonly referred to as a technical territory of a country (B) to another stop) in another country (B) point within the same country on a Home Technical flight that originates in the airlines home country (A). This freedom Country Stop Home Point 1 Point 2 is also known as and is Country Pick up passengers Deliver passengers extremely rare outside of . Third Freedom The right for an airline to deliver revenue passengers from the airline’s A B home country (A) to another country.

Home Ninth Freedom Country The right for an airline from a A B C particular country (A) to originate a flight in a foreign country (B) and carry passengers from one point to Fourth Freedom another within the foreign country. Home Point 1 Point 2 The right for an airline to carry revenue Also known as the stand-alone Country Board Passengers Deliver Passengers passengers from another country (B) to the A B Cabotage. It differs from the aviation airlines home country (A) definition of true Cabotage, in that it does not directly relate to one’s own country. Home Country

Fifth Freedom Freedom Rights for SAATM For SAATM to work, there would be fifth (Sometimes referred to as beyond rights) SAATM would allow airlines the fifth freedom rights that would give other The rights for an airplane to take passengers freedom rights, which allow airlines to carry country airlines to pick passengers and from its home country (A), deposit them at A B C traffic to a third country, provided the flight drop them in another country. A good destination (B) and then pick up and carry originates or terminates in the partner example would be looking at Rwanda Air passengers on to another international country. These open-air agreements that has fifth freedom rights with Kenya destination (C) allow carriers of two or more countries to and Uganda where RwandAir moves from Home operate any route between the countries Kigali, drops and picks passengers in Country without interference in decisions about Kenya and then flies to Entebbe routes, capacity and pricing, making it Uganda where it can do the same. Sixth Freedom easier for carriers to provide affordable, (Combination of third and fourth freedoms) convenient and efficient air service for The right for an airplane to carry passengers A B C consumers. or cargo between two foreign countries (B & C) provided the aircraft touches down in the airline’s home country (A). Home 6 Country 7 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

First Package This package started to relax established rules. For intra-EU traffic, it limited the right of governments to object 1987 to the introduction of new fares. It gave some flexibility to airlines concerning seat capacity-sharing.

It continued liberalisation efforts in the same areas, allowing greater flexibility over the setting of fares and Second Package capacity-sharing. It also gave all EU carriers the right to carry an unlimited number of passengers or cargo 1990 between their home country and another EU country (3rd and 4th freedom traffic right).

Third Package It fully liberalised tariff setting, capacity, market access, introduced the possibility of Member States to tender 1992 public services obligations (PSO) and harmonised requirements for an operating licence for EU airlines.

ECAA benefits daily flying time and elimination of free in- The ECAA approach was gradual in its flight passenger services resulting in cost The Application formation, allowing the different countries savings. In 2015, LCC accounted for 48% time to set in place mechanisms that would of seat capacity. ensure the members attain benefit from •• EU aviation policy has had a the agreement. As a result of its successful positive impact on the demand for implementation, the ECAA proffered aeronautical products. By liberalising several benefits to its members and the market access and ensuring the market. of Open Skies regulatory framework, standardisation •• The treaty created new markets for and certification efforts enable for the airlines. This resulted in a significant export of aeronautical goods. increase of intra-EU routes available to The Open sky principal has been present in the world •• Today the EU aviation sector directly consumers by 303% between 1992 and employs between 1.4 and 2 million where two states sign air agreements with the aim of 2015. This growth has been sustained to people and has created unprecedented date. For example, scheduled passengers liberalizing aviation services. One of the most successful opportunities for employment models carried between the UK and EU increased open sky treaty, and one that SAATM could learn from, is such as multi-AOC airline consortia from 69 million passengers in 1996 to or pilots employed through agencies. that of the European Common Aviation Area. over 130 million in 2015. In total the sector supports 4.7 to 5.5 •• Expansion of the airline industry. million jobs (including indirect and European Common Aviation Area The EU gradually moved to a single aviation This alleviation of commercial restrictions induced impacts) (ECAA) market by sequentially putting in place allowed EU network airlines to expand •• Aviation has considerable multiplier The ECAA was created in 2006 as an mechanisms and regulations through and intensify their “hub-and-spoke effects, which increase the overall extension of the Single Aviation Market that “packages”. networks”, which led to more passengers contribution to jobs and growth. This is was established in 2002 overseen by the for EU airlines and a larger share for EU After a transitional period until 1997, EU seen mostly in the growth in and European Agency (EASA). industry carriers also gained the right to operate contribution to the attractiveness of the Its legislation is enforced by the European a route within another Member State •• Development of low cost carriers. The EU as a business location. Court of Justice (ECJ). The creation of the (so called “Cabotage”) which was an introduction of Low Cost Carriers such single European aviation market has seen a •• Direct contribution to the EU’s GDP unprecedented step in international air as Easy Jet and Ryan air, which provide revolution in the economic and regulatory by EUR 110 billion which increases to transport. service savings, operational savings and landscape of air transport in Europe. €300bn taking into account indirect and overhead savings, resulted in increased induced impacts. number of seats per aircraft, increased

3 An Aviation Strategy for Europe – 8 9 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

ECAA Challenges •• The number of individual city pairs The ASEAN Single Aviation Market 50-60% increase in air traffic and tourism. The implementation of the ECAA has (departure and arrival at different cities) (ASEAN-SAM)8,9 The ASEAN Open countries are working not been without its share of challenges. increased by 30%. The number of Association of Southeast Asian Nations towards harmonizing the infrastructure, Two of the more recent challenges being passengers grew by 18% to more than 52 Single Aviation Market (ASEAN-SAM) capacity and agreeing on the freedom experienced are4: million scheduled passengers between agreement was first entered into force rights for all members.10 2004 and 2014. A comparison with other in 2009 between 10 South East Asian •• The increase of intra-EU routes was key extra-EU markets shows that the US countries. The agreement is geared In all these case studies, the open skies accompanied by a strong shift towards is by far the most important extra-EU towards the development of a unified agreements have more pros than cons to more competition on these routes. The market. For example, in July 2015, there and single aviation market among ASEAN. the countries that sign these agreements rise of strong competitors in the Gulf were 4 million scheduled seats offered However, its implementation has been and hence a good background to having countries and Turkey is linked to this shift on EU-US flights, which is the combined delayed as not all members had signed SAATM in Africa. of the world’s economic centre of gravity number of seats offered to the different protocols by the target to the East. The geographical position of and Turkey, which are currently the date of 1 January 2016. The benefits that these countries enables them to tap into second and third most important extra- are expected will be realized with the the rapid economic growth of Asia. EU markets.5 agreement: •• Brexit - When the UK leaves the EU, the •• The treaty will account to USD 2.7Billion - UK’s membership of the ECAA would The EU-Morocco Aviation Agreement USD 5.7Billion in additional direct GDP by lapse. This would affect the ability of In 2006, the EU and Morocco signed an 2025 to the Indonesian government; airlines to continue accessing the UK-EU aviation agreement that provides for the route. Free movement of people is a key abolition of all restrictions on nationality, •• An additional 16,000 – 29,000 direct and requirement for ECAA membership; and capacity, frequency and routes by indirect jobs by 2025; and this is one of the key reasons why many in European or Moroccan airlines between •• Promotion of economic growth through the Brexit camp wanted to leave the EU in the two regions. It also provides for far enhancement of infrastructure policy, the first place. reaching regulatory convergence in areas planning and investment. such as air traffic management, safety Other open sky treaties around the and security, environment, competition world and consumer protection. The aviation The EU-US Aviation Agreement market between Morocco and Europe was The EU-US Air Transport Agreement was previously governed by restrictive bilateral negotiated and signed in two stages in air transport agreements, constraining the 2007 and 2010 and governs the world’s potential for growth. largest intercontinental traffic flows. The ultimate objective is to create a Trans- The benefits of the agreement was an Atlantic Open Aviation Area: a single air increase in traffic where traffic increased transport market between the EU and the from 5.6 to almost 12 million annual US with free flows of investment and no passengers between 2006 and 2014, restrictions on air services, including access achieving a compound annual growth rate to the domestic markets of both parties. of more than 11% across the period. Fares The benefits include: also reduced representing a consumer surplus gain of around EUR 3.5 billion. •• Airlines are allowed to fly without The EU-Morocco aviation agreement also restrictions from any point in the EU contributed to the creation of jobs, notably to any point in the US. This triggered a in the Moroccan tourism sector, which dramatic increase in services particularly in 2013 contributed to 1.8m, jobs (direct, in those parts of the Trans-Atlantic indirect and induced) and contributed to market that were previously subject to 19% (direct, indirect and induced) to the significant restrictions on operations Moroccan GDP6. Morocco welcomed more arising from the pre-existing bilateral than 10 million tourists in 2013 – most of agreements: whom are from the EU. This number grew by almost 60% since 2006 – also due to the development of air traffic since the conclusion of the Agreement in 2006.7

4 Aviation and the European Common Aviation Area (ECAA) 8 The State of ASEAN Aviation in 2016 – ASEAN Briefing 5 An Aviation strategy for Europe - European Commission 9 Implementation framework of the ASEAN single aviation market - ASEAN 6 Fair competition in aviation is a must - The European Cockpit Association 10 An Aviation strategy for Europe - European Commission 7 An Aviation strategy for Europe – European Commission

10 11 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

What would SAATM mean for Africa? Convenient air service facilitates the arrival What would SAATM mean for Africa? of larger numbers of tourists to a region Open Skies or country. The opportunity for new jobs Air transport can open and connect markets, facilitating trade and enabling include the employment at and African organisations to link into global navigation services providers as well supply chains. It plays an especially pivotal as many other positions along the air role in just-in-time global manufacturing transport value chain. However, there production and in speeding fresh is a need to analyze the source markets in Africa produce from agricultural communities for African states to ensure they take full to appropriate markets. Enhancing air advantage of SAATM to grow its tourism connectivity can help raise productivity by business. Currently, East and encouraging investment and innovation; is the largest source market for Kenya Africa’s Aviation scenario •• The effect of the procurement of goods improving business operations and followed by Europe and the Middle East and services through the supply chain Africa has an estimated 76.6 million annual efficiency; greater cooperation between with growth in the United States. 11 has an impact of USD 11.3 billion. air travellers. According to IATA .By 2035, African airlines; access to cross- it will see an extra 192 million passengers •• The benefits that arise when employees investments and mergers. Africa’s History on Open Skies a year for a total market of 303 million of the industry and its supply chain On 17 October 1988, the Ministers in passengers. The top ten fastest-growing spend their wages in the local consumer Air transport is indispensable for tourism. charge of Civil Aviation of forty African markets in percentage terms will be in economy account for another USD According to ICAO, aviation supported States met in Yamoussoukro, , Africa: , Guinea, Central 5.2 billion of economic impact. Direct, USD 46 billion of GDP to Tourism sector in and adopted a new African Air Transport African Republic, , , Rwanda, indirect and induced, respectively, Africa. Examining some of Africa’s most well Policy, known as ”Declaration of , Uganda, Zambia and Madagascar. contribute USD 26 billion to the African known Tourist destinations reveals: Yamoussoukro on a New African Air Each of these markets is expected to grow Transport Policy”, which is commonly GDP. •• 5.1% of Kenya’s GDP is supported by air by more than 8% each year on average referred to as the “Yamoussoukro transport & foreign tourists arriving by over the next 20 years, doubling in size •• In addition, the spending by foreign Declaration.” The Declaration envisaged air, and foreign tourists spent USD 0.8 each decade. The potential growth of the tourists in the continent accounts for the gradual liberalisation of the Aviation billion in 2014.13 African air transport is further showcased USD 46 billion of the total economic sector within Africa. This was proposed to by the fact that Africa is home to 16% of the impact. •• 4.4% of Egypt’s GDP is supported by air be done through: world’s population and yet only has a share transport & foreign tourists arriving by 01. The integration of airlines in three With the high growth forecast in regards to of 2.2% of global air passenger traffic. air, and foreign tourists spent USD 6.9 phases over a period of eight years. air travellers, it is evident that a strong case billion in 2014.14 02. Gradually eliminating the need to According to the 2017 Air Benefits Report for open skies in Africa exists. exchange traffic rights. by ICAO12, Air transport in Africa supports •• 3.5% of South Africa’s GDP is supported 03. Have African Civil Aviation 6.8 million jobs and contributed USD 72.5 by air transport & foreign tourists arriving Administrations and airlines undertake billion to Africa’s gross domestic product by air, and foreign tourists spent USD 9.2 to increase cooperation aimed at (GDP). Of this, USD 9.9 billion was a direct billion in 2014.15 minimising operating costs and thereby impact on Africa’s GDP. Beyond this, the reducing tariffs. sector impact reaches economies in multiple ways.

11 IATA Forecasts Passenger Demand to Double Over 20 Years 13 The Importance Of Air Transport To Kenya (2016)- IATA 12 Aviation Benefits – 2017 – ICAO 14 The Importance Of Air Transport To Egypt (2016)- IATA 15 The Importance Of Air Transport To South Africa (2016)- IATA 12 13 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

The policy geared towards a Benefits of Liberalising African Skies The report demonstrated that complete comprehensive reform of the air transport (IATA) air connectivity across these 12 countries a i

s industry and the unification of the i A report published by the International Air would provide an extra 155,000 jobs and n

u fragmented African air transport market. T Transport Association (IATA) outlines the USD 1.3 billion in annual GDP. A potential Unfortunately, the declaration did not Morocco benefits that would accrue if 12 African five million passengers a year would be come to fruition however it has always nations were to implement the 1999 able to travel due to the fare savings. Ticket been an agenda for the AU. In 2013, the Yamoussoukro Decision. The 12 nations prices would go down by as much as 35% Algeria ra liberalization of air transport as part a Libya in the report are: Algeria, Angola, Egypt, and trade would grow by USD 430 million. h a Egypt of the continent’s socio economic and S Ethiopia, , Kenya, Namibia, Nigeria, rn te development agenda was included in s , South Africa, Tunisia and Uganda. e W the African Union (AU) Agenda 2063 as a Cape flagship project leading to the launch of Verde Islands SAARM in 2018. Mali Liberalization Air Traffic Growth Effects Effects Sudan What would SAATM seek to achieve Senegal Eritrea SAATAM picks up from the 1999 New Routes & Increased Tourism Burkina Yamoussoukro Decision16 which called for: Djibouti Frequencies

Faso n Guinea- Guinea Increased Trade Nigeria Somalia •• The full liberalization of intra-African air Beni Inward Investment C™te Central Ethiopia Shorter Travel Times transport services in terms of market South Sierra Leone d'Ivoire Togo Ghana African Sudan Enhanced Connectivity Republic access; Liberia Lower Fares Economic Growth •• The free exercise of first, second, third, ille v Equatorial Guinea a Job Growth fourth and fifth freedom traffic rights z Democratic z Uganda Kenya a Republic of for scheduled and freight air services by r Sao Tome -B the Congo o Rwanda eligible airlines; and Principe g n 18 o Burundi Jobs and GDP Impact for the 12 countries - IATA C Seychelles •• Eligibility criteria for African carriers; Cabinda Tanzania Country Additional Employment Additional GDP (USD M) •• The full liberalization of frequencies, tariffs and capacity; Comores Algeria* 11,100 123.6 •• Safety and security standards for African Angola Angola* 15,300 137.1

carriers; and Zambia Malawi Egypt** 11,300 114.2 e “Connecting Africa through qu •• Mechanisms for fair competition and bi Ethiopia 14,800 59.8 am r z a dispute settlement and consumer aviation and other transport o c Ghana 9,500 46.8 Zimbabwe M s a protection. Namibia g infrastructure is critical to a Kenya 15,900 76.9 d Botswana a M Namibia* 10,600 94.2 The full implementation of the 1988 integration, intra-Africa trade, Reunion Yamoussoukro Declaration, ultimately, the as well as to tourism, economic Nigeria** 17,400 128.2 single market will evolve into a common Swaziland Senegal* 8,000 40.5 aviation area, calling for: growth and development more South Africa 14,500 283.9 Lesotho Tunisia* 8,100 113.7 •• The abolition of bilateral air service generally. The sector is also an South Africa agreements between Member States for important creator of jobs and Uganda* 18,600 77.6 intra-Africa traffic; critical skills on the Continent. A recent example of this in Africa is South where fares between the two countries •• Recognition of community airlines owned Africa’s and Zambia 2013 bilateral open- fell by nearly 40 percent and a there was a by African nationals; The aviation sector is strategic skies agreement. This resulted in benefits 38% increase in passenger traffic as well as •• Harmonisation of competition regulation; for the implementation of being realized in regards to fares and costs higher travel frequencies. and Agenda 2063” •• Establishment of a Board of Appeal and AUC Chairperson H.E. Dr. Nkosazana Dlamini-Zuma, (2015) *Not signatories to SAATM. an Arbitration Tribunal to guarantee the ** Have since pulled out from their initial commitment to SAATM basic rights of the consumer.

16 Decision Relating To The Implementation of The Yamoussoukro Declaration Concerning The Liberalization Of Access to Air Transport Markets 17, 18 Significant Benefits of Liberalized African Air Markets - International Air Transport Association In Africa

14 15 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

SAATM - good on paper, but far from SAATM’s challenges: A lack of an Concerns hindering the adoption of NCLB focuses and expands ICAO’s SAATM needs to be governed through good! implementation framework SAATM support to States for globally harmonized rigorous legal mechanism that all parties At the onset, SAATM looks good on Despite these benefits, SAATM is facing an Some countries such as Nigeria19 and Egypt implementation of SARPs so that all must adhere to. An agreement on all the paper however there are a number adoption challenge across the continent. At have pulled out of the treaty. They have States have access to the significant below mechanisms will ensure a level of factors that must be put in place to its announcement, SAATM only had 23 out raised the following specific concerns they socio-economic benefits of a safe and playing field. Without this, SAATM will either ensure that SAATM benefits the individual of 55 Member States accenting to it, about have with the treaty in its current form. reliable aviation system. These socio- favour few states or collapse entirely as country as it liberalizes the African sky. half of the original 44 member states. In economic benefits include: expanded each state looks after its own interests. Technology In a move that appears to be similar to East Africa, Kenya, Rwanda and Ethiopia tourism; greater access for businesses and There is a lack the Act of the US, •• Competition; are part of the treaty, but Tanzania, Uganda Unfair producers to foreign supplies and markets; of technology the recently launched SAATM lacks the and Burundi declined to sign up. Further financial gain needed to improved emergency transport and search •• Consumer Rights; Lack of proper mechanisms required to govern afield, Nigeria has already pulled out of the While pulling facilitate and rescue capabilities; and many other reciprocity the different airlines. It differs with the •• Commercial Viability; agreement shortly after its announcement out of SAATM smooth and cultural and economic advantages arising Non-protection The principle Nigeria cited efficient original 1988 Yamoussoukro Declaration was made. of indigenous from the global connectivity provided by •• Fees and Taxes; of open skies that Ethiopia air traffic in its lack of clear mechanisms and rules Charges and airlines aviation. SAATM can apply ICAO’s initiative is based on makes 45 management that would be used to implement SAATM. •• Infrastructure; and taxes of No Country Left Behind (NCLB) campaign Restrictions on There is the threat a reciprocity per cent of across the Across the Further, its proposal for an ‘instantaneous’ free movement of non-African approach. Today its income various to assist States to effectively implement •• Safety Standards. continent, there investors abusing in Africa, this is from Nigeria, countries roll out and its lack of a phased approach Unfair Free movement of ICAO Standards and Recommended is a lack of the open skies not currently yet Ethiopian involved. to implementation will likely be to the competition people and trade Practices (SARPs) and policies to enable uniform charges deal by setting up applied on Airlines has detriment of most signatories and go For example, is an integral standardization of the aviation industry. and taxes. This airlines in some Visas as well as not employed Government aspect of the against ICAO’s initiative of No Country Left also touches African countries movement of Nigerians supported airlines treaty however, Behind (NCLB). 21 on unfair trade and taking full cargo. as in Nigeria attain passengers practices. Some advantage of or ground loans at 2% will still need African countries the policy as technical staff. interest rates and prerequisite subsidize their there is no way no Value Added visa. As it stands, local operators to ascertain the A case of unintended consequences: The US Airline Deregulation Act 22,23,24 Tax while private there is limited and when they fly shareholder The effects of a lack of an implementation framework can be best illustrated by the events that followed the 1978 Airline organization movement of into foreign states structure. attain loans at Deregulation Act in the USA. This move caused profound changes in aviation and the aeronautical industry. Prior to the Act, airlines people within the and charge full 28% interest rate competed on service alone, as fares were regulated by the government. Deregulation resulted in the rise of Low-Cost Carriers like Africa unlike the fares. and pay VAT on EU where open Southwest and the collapse of larger carriers like . It also significantly reduced the powers and eventually dissolved the Civil top of that. The skies is thriving. Aeronautics Board, allowing passengers to be exposed to market forces in the airline industry. private airlines Immediately following deregulation and for a few years after, airline prices dropped and passengers increased especially with LCC’s also do not have access to forex. coming into the market. To increase their efficiency, airlines adopted the hub-and-spoke system using a few major airports as central connecting points. This maximized aircraft use, increased passenger loads, and kept more aircraft flying. However, it increased and air traffic congestion and eliminated many convenient nonstop flights. Moreover, where one airline dominated a hub, the lack of competition often led to higher fares. One of the stated goals of the Deregulation Act was “the avoidance of unreasonable concentration which would tend to allow one or more air carriers to unreasonably increase prices, reduce services or exclude competition.” However, a 2015 report by the Associated 20 Case study: Air Afrique Press found that at 40 of the 100 largest U.S. airports, a single airline controls a majority of the market, as measured by the number One of the key principles behind open skies is the removal of restrictions on ownership of airlines. This is not new in Africa. In 1961 of seats for sale. This was up from 34 airports a decade earlier. By 2015, after years of consolidation, the US had four major airlines newly independent West African governments created Air Afrique as a symbol of regional integration. The airline was done through that controlled 80% of the market. Overall, domestic fares climbed 5 percent over the same period, after adjusting for inflation the Treaty of Yaoundé, signed on 28 and was mainly owned by 11 West African countries, and UAT (Union excluding other add-on charges that many fliers now pay. Aéromaritime de Transport) a French airline. Airlines also shed routes they no longer wanted, prompting the provision of ‘Essential Air Service.’ Under this program, the Air Afrique was established as the official transnational carrier for francophone West and Central Africa and had its headquarters in Department of Transportation determines the minimum level of service required at each eligible community by specifying a hub , Ivory Coast. It was supposed to be a solution to the reality of uneconomic national airlines. The carrier was a member of the through which the community is linked to the national network. The programme cost USD 283 million in 2016 having grown by about IATA as well as the ’s smaller IATA-like Association Internationale de Transporteurs Aériens Francophones (ATAF). 47% since 2012 in nominal dollars. The airline brought about the expansion of the airline’s routes to numerous African capitals and European and Western countries. The deregulation also did not serve to better the fortunes of the airlines. In 27 years prior to deregulation, no airline went bankrupt. The passenger traffic grew from 300,587 to 757,323 passengers per year/month between 1961 and 1985, and to an extent, it fulfilled On the other hand, 160 airlines have ceased activities in the United States since 1978. In 2005, almost all major North American some of its original ambition of being seen as a sign of regional integration and progress. airlines filed for bankruptcy. It is important to note that pre-deregulation prosperity of airlines was also a result of government However, a number of issues lead to the demise of Air Afrique. First was the lack of an institutional framework for the different regulating fares that ensured the profitability of airlines. states. Secondly, the purchase of aircraft exposed it to foreign currency risks and consequently doubled the value of the debt Despite this Deregulation benefited the US aviation industry through lower fares where the average of the fares that passengers due to devaluation of the currency. In addition, the airline was saddled with huge personnel enlistment and unpaid air tickets actually paid—declined 30 percent in real, inflation-adjusted terms. The industry also experienced an improvement in productivity in from governments. Finally, a collapsed debt-rescheduling plan led to the seizure of aircraft, which lead to unbearable delays, and terms of infrastructure and allowed better adaptation of equipment to markets. However, the demise of many carriers, reduction in cancellation of flights. All these brought the airline to its knees in 2001 despite numerous attempts to revive the airline. service quality and dominance of hubs in the market is a case of unintended consequences of deregulation.

19 Airline Operators of Nigeria reject proposed African open skies 21 No Country Left behind - ICAO 20 The Rise and Fall of Air Afrique 22 Effects of the Airline Deregulation Act on Aeronautical Industry - International Journal of Advance Innovations, Thoughts & Ideas 23 Essential Air Service (EAS) – Rachel Tang (Congressional Research Services) 16 24 Airline Deregulation 17 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

In addition “AFCAC shall put in place Without a comprehensive competition adequate rules of competition in Air law, countries would be hard pressed to Transport services and dispute resolution get into an open skies agreement with Mechanisms mechanisms. Ethiopia. Nigeria has already been vocal with its concerns with . The need for a strong competition According to airline industry stakeholders regulator is especially important due to: without a competition mechanism in place, •• Differences in levels of aviation AU Member States could see the downfall development between AU Member of their national carriers possibly through necessary States; a price war. Passengers will generally go •• Concerns regarding the protection of for the cheaper option and without these individual state interests; and regulations, resulting in the cannibalisation or collapse of competitors. After that, the •• The lack of a level playing field for airlines dominant airline will be operating in a within their jurisdictions among others monopolistic environment and could then adjust fares at will. for SAATM’s To illustrate the importance of a competition policy, we can look at What should be done? Ethiopia’s national airline, Ethiopia In Deloitte’s opinion, SAATM needs to Airways. In July 2017, Ethiopia Airways consider various aspects in regards to merged with Ethiopian Airports Enterprise ownership and effective control, eligibility, (EAE) to create the Ethiopian Airlines infrastructure, capacity and frequency of Group. The merger allows the Group to flights. In this situation, we turn to various success provide airport services to air operators, international treaties as guideposts to and construct, expand, maintain and developing our own regulation. Some of administer airports that were the domains the treaties we have referred to include: of EAE. This has caused ripples in the Based on the various case studies, for any open sky industry with stakeholders expressing a agreement to succeed, there must be certain rules that 01. The European Commission Treaty, fear of monopoly and conflict of interest 02. The Agreement between the the signatory countries must adhere to. These rules are in the aviation industry. Opening the up Government of the put in place through the various mechanisms that are the the market to allow for fifth freedom right and the Government of the United will expose its competitors to a distinct core to the agreement and must be followed. States of America relating to Air disadvantage owing to this relationship. Services between their Respective This would be due to the possibility of Territories ( I Agreement) influence across the airports operator from Competition The Yamoussoukro Decision formed 03. The Consolidated air services the airline. Further, its size and the size of A Competition policy aims to provide an executing agency; African Civil agreement between the Government its network given its significant ownership and maintain a level playing field where Aviation Commission AFCAC and one of of the United States of America and the of airlines in West, Central, Southern, and economic actors, and in this case, nations, its mandates was that on Competition. Government of the United Kingdom East Africa would allow it to easily engage can freely and fairly compete and that will According to article 7 of the decision “State of Great Britain and Northern in a price war. This is reminiscent of what ensure that the different nations do not Parties shall ensure fair opportunity on non- (Bermuda II Agreement) happened to some of the smaller players engage in practices that would put any discriminatory basis for the designated African in the US, following the Airline Deregulation other actor at a disadvantage. airline, to effectively compete in providing Act. air transport services within their respective territory.”

18 19 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

Anti-Competitive agreements between Agreement by a carrier designated by the In 2017, the EU revised the current This has been brought on by ‘booming’ players: other Contracting Party in the event that it is Regulation that grants all carriers, airlines from the Gulf region who have not satisfied that substantial ownership and European and non-European, the same expanded their capacity on many of the Article 81 of the EC Treaty (ex Article effective control of such carrier are vested in rights and same opportunity of accessing routes previously serviced by European 85) prohibits “…all agreements between nationals of either Contracting Party” air transport related services. This was carriers. Consequently, European airlines undertakings, decisions by associations being done in order to safeguard fair are not only losing market share, they are of undertakings and concerted practices Furthermore, according to Article 3(6) competition in EU external aviation losing entire markets while the Gulf carriers which may affect trade between Member of the Bermuda II Agreement, each relations and reinforce the competitive are not creating additional demand. The States and which have as their object Contracting Party is required to grant the position of the EU aviation industry, ensure problem is that many of these gulf airlines or effect the prevention, restriction or appropriate operating authorisations and reciprocity and eliminate unfair practices.25 are (partly) state-owned, supported by distortion of competition within the technical permissions to an airline when state subsidies, benefitting from access common market…” certain conditions are satisfied, including to cheap (airport) infrastructure, fuel and the condition that substantial ownership Abuse of Dominant positions: capital. and effective control of that airline be Aviation Competition legislation in Africa 26 Article 82 of the EC Treaty “Any abuse by vested in the Contracting Party designating one or more undertakings of a dominant the airline or in its nationals. This ensures COMESA-EAC-SADC JOINT COMPETITION AUTHORITY (JCA) position within the common market or in a fair playing ground for the states under The Joint Competition Authority (JCA) was established under the Regulations for Competition in Air Transport Services within a substantial part of it shall be prohibited the treaty. the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and Southern African as incompatible with the common market Dispute resolution Development Community (SADC) of 2004. The JCA was launched to oversee the full implementation of the Yamoussoukro insofar as it may affect trade between Decision on Air Transport in the three RECs commencing January 2009. The Decision Relating to the Implementation of the Member States.” There is also a need to put in place Yamoussoukro Declaration Concerning the Liberalization of Access to Air Transport Markets in Africa signed served as the a working governing body that is State Aid backbone of this project. empowered to resolve disputes among Article 87 of the EC Treaty (ex Article states and prevent economic waste The objective was the need to develop a framework to assist the Regional Economic Communities (REC) to institutionalise the 92) “Save as otherwise provided in this caused by unreasonable competition. JCA for the purpose of overseeing the full implementation of the Yamoussoukro Decision within the common territory of the Treaty, any aid granted by a Member State This mechanism is already stipulated in Tripartite RECs. Article 7 of the JCA looked at the compliance with the Regulations for competition in Air Transport Services or through State resources in any form the Chicago convention under Article 84 within the RECs. The article stipulates, “Each Member State undertakes to implement within its territory the Regulations whatsoever which distorts or threatens to which states “If any disagreement between for competition in air transport services within COMESA, EAC, and SADC of 2004 to promote and guarantee free and fair distort competition by favouring certain two or more contracting States relating competition within the three RECs.” undertakings or the production of certain to the interpretation or application of this goods shall, insofar as it affects trade Convention and its Annexes cannot be settled Unfortunately, the operationalisation and execution of the JCA has been delayed due in part to the absence of an active between Member States, be incompatible by negotiation, it shall, on the application of monitoring institution. with the common market.” any State concerned in the disagreement, be decided by the Council.” Article 87 if the EC Treaty is especially important as the Yamoussoukro Decision SAATM states that YD provides for the specifically states effective control by a creation of an African Aviation Tribunal, Consumer Rights anti-competitive behaviours.” While this State Party as one of the eligibility criteria to facilitate the dispute settlement For any Open Skies Agreement to work, it was adequate prior to SAATM, consumer for airlines. This provision within YD in mechanism. However, YD does not mention is essential to put in place clear regulation protection now needs to be a harmonised essence locks out private airlines and goes a Tribunal, but rather a Monitoring Body. that ensures no infringement harms the across member signatories in order to against the very principles of Open skies. This Body’s responsibilities include stating interest of consumers in any of the Member afford all consumers equal rights. its views on any disputes, interpretation States and gives competent authorities Ownership and Control of the Decision and recommending the right to conduct simultaneous An early effort at harmonisation came from The Agreement between the Government solution to the dispute. The stated African investigation and these enforce measures. the tripartite initiative between COMESA, of the United Kingdom and the Aviation Tribunal needs to be set up and Under SAATM, AFCAC, as the executing EAC and SADC that eventually led to the Government of the United States of empowered to take up the role of an agency has this mandate where it states, formation of JCA, which attempted to America relating to Air Services between arbitrator within SAATM. “Aviation Authorities and service providers address consumer protection. It went their Respective Territories (Bermuda I shall establish consumer service units to as far as drafting policies and guidelines Importance of competition legislation Agreement) provides a good guidance on enlighten consumers of aviation services and setting a framework for their ownership and control. Under Article 6 The Competition legislation in the aviation of their responsibilities and rights as well implementation. The framework identifies it states, “each Contracting Party reserves industry is key in ensuring fair playing as address their grievances”. In addition, key principles such as “conducting air the right to withhold or revoke the exercise ground for all signatories however, it also “All aviation service providers must avoid transport in the interest of the consumer of the rights specified in the Annex to this shields signatory nations from external all forms of predatory pricing and other and whose interests shall be considered competition.

25 Regulation of the European parliament and of the council on safeguarding competition in air transport, repealing Regulation (EC) No 868/2004 26 A Framework For The Operationalization of The COMESA-EAC-SADC Joint Competition Authority (JCA)

20 21 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

as protected”; and “considering liberalised either reimburse or re-route passengers This differs with IATA’s 2016 forecast that residence and right of establishment.” The routes as a public good held for the in case of long delays and cancellations. Africa will grow by 5.9 percent by 2036 ratification of this protocol will go a long use of and interest of the citizens.” The It requires compensation of €250 to higher than the global average of 3.6 way in facilitating intra-African travel. final report on the development of the €600 depending on the flight distance percent. Given Africa’s underdeveloped The fact that travel within Europe is framework also included YD-compliant for delays over 4 hours, cancellations, or road and rail infrastructure as well as the unrestricted for Europeans and for non- Air Service Agreement template that being denied due to overbooking. size of the continent, air transport will be Europeans with a Schengen VISA has been recognised that efficient and competitive Shorter delays mean a percentage of the an important means of transport going key to promoting the fortunes of Europe’s international air services are important to full compensation. Airlines must provide forward. However, for this to be achieved, carriers. European carriers surpassed benefit consumers. Unfortunately, despite refreshments and accommodation where Africa needs to first facilitate the growth in 2014’s operating profits29: USD 7.4 billion the adoption of the Common Regulations appropriate. The European Court of Justice capacity by addressing two major obstacles in 2015 compared to USD 1 billion in the for Competition of Air Transport Services enforces this regulation. Every year, the EU to capacity growth: high airfares and the previous year. IATA forecasts that Airlines implementation remains pending in all member states network identify common free movement of people. in Europe are expected to deliver a net three RECs to date. enforcement priorities and carry out Air transport in Africa is expensive. This profit of USD 11.5 billion in 2018. In 2015, sweeps or systematic checks to investigate Therefore, the situation that remains situation is further exacerbated by the Europe’s top three airlines by profitability breaches of consumer protection law. The across Africa is one where different states relatively low disposable incomes across were Lufthansa, Ryanair and IAG, the members coordinate their legal approach have their own consumer protection laws. the continent making air transport less first and the latter Full Service Carriers on consumer rules and adopt a common For example, In Kenya, the Consumer accessible to the average African. More (FSC), while Ryanair operates as a Low position. Protection Act under the Civil Aviation Act worryingly is that it is sometimes more Cost Carrier (LCC). In terms of passenger (Cap. 394) protects the consumers when A lack of a proper consumer protection expensive to travel within Africa than it is to volumes, Ryanair was the top European it comes to the aviation. The law provides mechanism exposes SAATM to a lack of travel out of Africa. For example, a 5-hour carrier in 2015, followed by Lufthansa and for passenger rights and the standards of adoption due to consumers not having a non-stop flight from Nairobi to Dubai costs EasyJet. The growth of Ryanair and EasyJet service by air carriers including access to platform in which they can seek redress about USD 365, while a 4hr 40min non- serves to demonstrate the potential for necessary services while on a grounded air where they feel aggrieved. All signatory stop flight from Nairobi to LCC’s in Africa given the right market carrier, customer complaints, notification of member states will need to adopt and will cost you a minimum of USD 815. In conditions. delays, cancellations, overbooking, enforce harmonised, consumer protection order to travel to Johannesburg at a fare The right market conditions in Africa concerns, compensation for passengers regulations in order to give all consumers similar to the Dubai one, one needs to take will need to be within a well-established and the right to deplane where such rights across the continent a level playing field a 9-hour flight with a stop at Addis Ababa. legal framework. One of the key issues are infringed. when using their services. It is only then The second option may be attractive to a to be tackled within this framework will that SAATM will be able to achieve its leisure traveller on a budget, but may not On its part, the EU has comprehensive be capacity. In this regard, we can refer objective of ensuring the sustainable be attractive to a business traveller. The consumer protection regulations. Article 22 to the Bermuda I and II treaties that development of air transport in Africa. relatively low fare on the second option of the EU Regulation 1008/200827 provides governed USA and UK open skies treaty. to Johannesburg raises a question of airlines with pricing freedom. However, These treaties state “there shall be a fair Commercial viability – Capacity, whether the flight is commercially viable it goes ahead to state that “…Member and equal opportunity for the carriers of frequency and equipment and whether any anti-competitive practices States may not discriminate on grounds the two nations to operate on any route The Chicago convention identifies sound may be in play such as state aid. of nationality or identity of air carriers in between their respective territories (as economic operation as one of the tenets of allowing Community air carriers to set fares The second area that will need to be defined in the Agreement).” They also any open skies treaty. Similarly, the primary and rates for air services between their addressed to enhance capacity is the free go further and say, “in the operation by purpose of the 1988 Yamoussoukro territory and a third country.” Article 23 movement of people. Opening up of the the air carriers of either Government Declaration was to create a conducive obliges airlines to disclose all applicable skies will need to be accompanied by less …, the interest of the air carriers of the environment for the development of intra- conditions when offered or published. The restrictive visa requirements between other Government shall be taken into African and international air services. At final prices should include the applicable member states. The African and consideration so as not to affect unduly the end of the day, the commercial aviation airfare, taxes, charges, surcharges and fees free movement of people is one of the the services which the latter provides.” In industry needs to provide fair returns to its which are unavoidable and foreseeable at AU’s flagship projects under Agenda 2063. essence, airlines of either country could investors. The Single African Air Transport the time of publication. This needs member states to sit at a table introduce as many services as they saw Market is a flagship project of the African to harmonise visa rules amongst each fit within the overall capacity constraints In addition, EU regulation 261/200428 Union Agenda 2063, strategic framework other and to eventually implement these set out by the Agreement. However, it establishes common rules on for the socio-economic transformation of standards. The AU already has in place a remained open for either Government to compensation and assistance to the continent. “Draft protocol to the treaty establishing object that the airlines of the other country passengers in the event of denied According the 2017 IATA report, Africa the African Economic Community relating were putting too much capacity on a route, boarding, flight cancellations, or long commands only 2.2% of global passenger to free movement of persons, right of a matter which would then be reviewed, delays of flights. Airlines are obligated to traffic. According to ICAO’s long-term possibly leading to a reduction or an traffic forecasts, passenger traffic for increase in frequency. the Africa region is expected to grow by around 3.8 percent annually up to 2032.

27 Regulation (EC) No 1008/2008 of The European Parliament and of The Council 29 2016 EU Air transport Industry Analyses report 28 Regulation (EC) No 261/2004 of the European Parliament and of the Council

22 23 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

What about cargo? Tax regimes, airport fees and An example of how to address issues When it comes to Cargo, SAATM will repatriation of funds around taxes, airport fees and repatriation facilitate trade in Africa, and allow Specific national taxes on aviation are of funds can be borrowed from the West connections beyond areas where the applied by different countries. Depending African Economic and Monetary Union cargo airlines have not reached before. on their application, these taxes could (WAEMU)31 Competition Law that was IATA forecasts a growth in Airfreight in promote or harm the competitiveness adopted in May 2002, which consisted of Africa due to a strong upward trend in of the air transport sector with wider among others: traffic between Africa and Asia. SAATM economic repercussions. SAATM in •• Control of state support within WAEMU would enhance Africa’s intra-continental its current form does not have any that could distort competition, for trading. However, this has limitations. The direct mention of the harmonization or example, subsidies or no landing taxes first constraint is that African countries application of taxes and fees. However it for a particular corporation or airline; and generally produce similar products limiting identifies “high charges” at some airports how much trade can effectively take and “other restrictions imposed to restrict •• Cooperation between the WAEMU place between them. Second, according competition to national airlines” as Commission and national authorities in to stakeholders in the airline industry challenges faced by airlines in the market. It law enforcement. WAEMU competition view, while SAATM is a noble initiative it is goes further to state that “these challenges law takes precedence when in case of a mainly passenger driven with Cargo as an will be resolved the once the Executing conflict with national law afterthought. In this regard, SAATM did not Agency of YD, AFCAC, becomes effectively look at some of the imbalances that would functional.” affect the cargo trade in the continent. Hence, until AFCAC becomes fully Africa has the least intra-continental operational, there remains the possibility trade; currently standing at 10 percent of some states unfairly applying their tax as compared to other continents such regimes and regulations to take advantage as Asia. Most countries in the continent of SAATM. Of concern are government produce the same primary goods. Another backed airlines and the advantages they challenge seen in the cargo industry is receive in taxes as compared to private lack of infrastructure with some countries owned airlines. not being able to handle cargo. Thirdly, Regarding repatriation of funds, Article in Africa, countries are protective of their 11 of the Yamoussoukro Decision grants space and there is use of covert practices airlines to the right to request, and in such as imposing high navigation and accordance with applicable foreign freight costs. For example to transport exchange regulations, convert and remit to cargo to Ethiopia costs 4 times more than the country of its choice, all local revenues what it costs to bring in cargo to Kenya from the sale of air transport services and it is cheaper to deliver flowers to West and associated activities directly linked Africa through Europe as compared to to air transport in excess of sums locally delivering them straight from Kenya! One disbursed. Conversion and remittance is to industry stakeholder in the logistics space be permitted promptly without restriction, noted that, “the challenge with air transport discrimination taxation in respect thereof is not in flying the goods to a country, These rules of engagement should in accordance with the applicable foreign but rather in getting the goods through encompass all aspects of transportation exchange regulations. The application of in a speedy manner while paying a of airfreight in accordance with ICAO this article will remain a hurdle in today’s fair taxes and duties.”30 According to them, guidelines. Stakeholders in the logistics African context. In the last few years, customs clearance may take as long as the space will also be looking to aspects of several African countries have imposed actual flight to bring in goods. In addition, optimisation in terms of cost and transit limits on the exchange and remittance of the valuation of items can sometimes be time and this may call for a change in their foreign currency. This has put many airlines arbitrary especially for unique items. business models to take full advantage in dire straits due to working capital being of SAATM. It is also anticipated that the SAATM should be driven by trade and locked in a foreign state. proper implementation of the Continental each country assured of the benefits to Free Trade Area will go a long way in be attained. For SAATM to work, there is addressing trade barriers that they face. a need for reciprocity and clear rules of engagement.

30 Logistics Company 31 West African Economic and Monetary Union

24 25 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

“The Kenyan aviation market and indeed majority of This phased approach could take the form of domestic operations and the EAC aviation market is not adequately prepared international operations where domestic for full liberalization given that the region is yet to operations would consist of agreements encompassing regional blocks first. These establish functioning competition and consumer blocks would have effective control and protection regimes. Attempts at establishing a mechanisms. These blocks would then form the second phase where agreements competition mechanism so far have not been are made with other blocks and eventually successful, with the latest being the establishment with other continents. Conclusion Finally, at its core, SAATM MUST be based of the tripartite COMESA – EAC – SADC Joint on treaty law of reciprocity that states Competition Authority, which has stalled. Kenya’s “favours, benefits, or penalties that are own competition regime is still nascent, and we are granted by one state to the citizens or legal entities of another, should be yet to complete the development of aviation specific returned in kind”. This will ensure a fair Aviation is one of the greatest enablers In order for SAATM to be implemented playing ground for all member states and of economic growth and largest tourism successfully, African states must ensure competition ruling. Without a functioning and binding ensure all member states benefit from enabler. States should view aviation as an that the necessary mechanisms and competition regime, Kenyan airlines stand at a gross the declaration. From our discussions instrument of economic advancement. This regulations are put in place to ensure with stakeholders it is clear that should can only materialise should states see the fair play. This would not require the disadvantage and are unlikely to survive should SAATM be implemented as is, it could most aviation industry and specifically airlines, AU to start from scratch, but examine instantaneous deregulation occur.” probably lead to the collapse of some as infrastructure to enable growth and the declaration in its current form national airlines due to lack of reciprocity not necessarily for commercial objectives. against the 1988 YD to determine if the Joan Chesoni (2018) amongst nations. This is best exhibited by the Economic objectives of the original declaration are Impact of aviation in the United Arab achievable through the implementation On the other hand, should SAATM not Emirates32 where their Airline, of SAATM. Currently, SAATM leans heavily be implemented, what would it mean? Dubai Airports and the aviation sector as towards instantaneous deregulation as Currently in EA, Tanzania have launched a whole contributed $26.7 billion to the opposed to gradual liberalization and its their national airline and have begun with Dubai economy in 2013, which was almost implementation will do more harm than their domestic flights while Uganda have 27%* of Dubai’s GDP and supported a good to the African air transport market. put in place plans to revive their national total of 416,500 jobs accounting for 21% carrier. Further, afield, a partnership Additionally The AU should not be in of the emirates’ total employment. The between Ethiopian airlines and the a hurry to implement all provisions of region is seen to have a potential economic Zambian government is set to revive the SAATM at once. The original Yamoussoukro contribution of 44.7% of total GDP and national airline for Zambia while Nigeria is Decision proposed a phased approach 35.1% of total employment by the year also planning to relaunch its own airline. through regional blocks that would 2030. These lofty growth ambitions are Without SAATM, airlines across the be necessary to allow the proper exactly what SAATM should be seen as continent would have to navigate the air on harmonisation of the air transport market providing. However, it should only be their own and only time would tell if they to the benefit of all stakeholders. implemented under certain terms and survive or not. agreements that benefit all member states.

32 Quantifying the Economic Impact of Aviation in Dubai

26 27 Single African Air Transport Market | Is Africa ready? Single African Air Transport Market | Is Africa ready?

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2. Convention on International Civil Aviation 19. Regulation (EC) No 1008/2008 of The European Parliament and of The Council; Common rules for the operation of air services in the http://www.jus.uio.no/english/services/library/treaties/07/7-01/international-civil-aviation.xml Community (Recast) https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32008R1008 3. History of ICAO https://www.icao.int/about-icao/History/Pages/default.aspx 20. Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers and repealing Regulation (EEC) No 295/91 (Text with EEA relevance) - Commission Statement 4. Law – An Aviation Strategy for Europe – European Commission https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=celex%3A32004R0261 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52015SC0261 21. 2016 EU Air transport Industry Analyses report 5. An Aviation strategy for Europe - European Commission; https://ec.europa.eu/transport/sites/transport/files/2016_eu_air_transport_industry_analyses_report.pdf https://ec.europa.eu/transport/modes/air/aviation-strategy_en 22. West African Economic and Monetary Union 6. Fair competition in aviation is a must - The European Cockpit Association http://en.reingex.com/UEMOA-West-African-Economic-and-Monetary-Union.asp https://www.eurocockpit.be/fair-competition-aviation-must 23. Kenya National Bureau of Statistics 7. Aviation Benefits – 2017 – ICAO https://www.icao.int/sustainability/Documents/AVIATION-BENEFITS-2017-web.pdf 24. Quantifying the Economic Impact of Aviation in Dubai: Oxford Economics https://cdn.ek.aero/downloads/ek/pdfs/int_gov_affairs/Oxford_Economics_Quantifying_the_Economic_Impact_of_Aviation_in_Dubai_ 8. Aviation – benefits beyond November_2014_Final_v1.pdf https://aviationbenefits.org/media/149668/abbb2016_full_a4_web.pdf 25. A Framework For The Operationalisation Of The COMESA-EAC-SADC Joint Competition Authority (JCA) 9. Aviation and the European Common Aviation Area (ECAA) https://www.sadc.int/files/8214/5009/9455/JCA_Operationalisation_FinalReport_Main.pdf https://www.instituteforgovernment.org.uk/explainers/european-common-aviation-area-ecaa-brexit-explained 26. The Importance Of Air Transport To Kenya 10. Declaration Of Yamoussoukro On A New African Air Transport Policy https://www.iata.org/policy/Documents/benefits-of-aviation-kenya-2017.pdf http://repository.uneca.org/bitstream/handle/10855/13773/Bib-55144.pdf?sequence=1 27. Airline Deregulation by Alfred Khan 11. Decision Relating To The Implementation of The Yamoussoukro Declaration Concerning The Liberalization Of Access To Air Transport http://www.econlib.org/library/Enc1/AirlineDeregulation.htmlICAO – No Country Left Behind Markets In Africa: Economic Commission for Africa; Economic Commission for Africa https://www.icao.int/annual-report-2015/Pages/all-strategic-objectives-nclb-initiatives.aspx

12. New Report Confirms Significant Benefits of Liberalized African Air Markets - International Air Transport Association 28. The Agreement between the Government of the United Kingdom and the Government of the United States of America relating to Air http://www.iata.org/pressroom/pr/Pages/2014-07-07-01.aspx Services between their Respective Territories (Bermuda I Agreement) https://www.state.gov/documents/organization/171560.pdf 13. Effects of the Airline Deregulation Act on Aeronautical Industry; International Journal of Advance, Innovations, Thoughts & Ideas 29. The Consolidated air services agreement between the Government of the United States of America and the Government of the 14. Airline Operators of Nigeria reject proposed African open skies United Kingdom of Great Britain and Northern Ireland (Bermuda II Agreement) http://aeropolitics.com/airline-operators-nigeria-reject-proposed-african-open-skies/ https://www.state.gov/e/eb/rls/othr/ata/u/uk/176322.htm

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28 29 Meet the team

Authors: Anne Ngumba Mbagara Karita

Acknowledgements: Joan Chesoni – Bryan Terry – Global Aviation Leader Deloitte Marcello Gasdia - TH&S Research Leader

Contacts: Freda Muchena Partner Deloitte East Africa [email protected]

James Mwendia Partner Deloitte East Africa [email protected] Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.

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