Security matters

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Given that nine of the world's 20 fastest growing economies are in Africa, it is hardly surprising that IATA predicts sustained annual growth of 5% for African airlines over the coming two decades.

The industry group's forecast may even be conservative. A separate report by Intervistas, an economic consultant, estimates that intra-African liberalisation in just 12 countries would rapidly unlock latent demand for 5 million new passenger journeys a year, more than doubling traffic in heavily protected markets like Angola and Algeria.

Yet rosy forecasts have been made about the continent before – and have generally been proven wrong...

Small steps to big prize

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When London-based Fastjet took to the skies in Tanzania in November 2012, chief executive Ed Winter vowed to “democratise air travel in Africa” by importing the low-cost carrier (LCC) model that had proved so successful elsewhere in the world.

His vision of a 40-strong fleet catalysing price-sensitive demand was dismissed by many industry experts, who rattled off a familiar roll-call of challenges facing LCCs in Africa. Bilateral restrictions, high fuel prices, monopolised ground services, and a lack of secondary airports had confounded all prior efforts by no-frills operators to break into the continent.

Fast forward two years and the start-up’s achievements to date fall somewhere in the middle of these two narratives...

Southern Africa's local issues

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While financial turmoil at South African Airways often makes headlines in the sub-region, the Johannesburg-based flag carrier is far from the only troubled aviation asset in southern Africa. Botswana, Zimbabwe, Namibia and others are also struggling to develop suitable air infrastructure to match their relatively niche economies.

“Most governments in southern Africa face a quandary. On the one hand their national carrier plays a vital role in boosting trade and tourism, and on the other the airlines constitute a drain on the national treasury,” explains Nick Fadugba, chief executive of African Aviation Services and a former secretary general of AFRAA...

Fastjet's South African adventure

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Fastjet, the pan-African low-cost carrier backed by Stelios Haji-Ioannou, will begin South African services in July with a Boeing 737-300 wet-leased from local operator Star Air Cargo. Division chief executive Kyle Haywood believes that the launch will restore price competition in a market dominated by two low-cost players – Comair’s Kulula brand, and South African Airways’ Mango subsidiary.

But the myriad legal difficulties Fastjet has endured since its November 2012 launch show no sign of abating, with Comair chief executive Erik Venter already hinting that his new rival’s corporate structure may fall foul of South African law...

SAA's state shackles

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State-owned South African Airways surprised no-one in May when it said it was borrowing 1.5 billion rand ($167 million) to cover its near-term operating costs. The loan, secured against last year's 5 billion rand government guarantee, will be used as working capital while the flag carrier implements its latest turnaround plan – the ninth such strategy put before its shareholder.

Scepticism about SAA's ability to turn the corner has been fuelled by a spate of management resignations and dismissals, with Monwabisi Kalawe due to become its fourth chief executive in less than a year. Although his interim predecessor, Nico Bezuidenhout, insists that "green shoots" are emerging following last year's 1.3 billion rand loss, the airline's chequered history and its status as an end-of-line carrier has left analysts reserving judgment...

Calling the slots

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The European Parliament’s endorsement of secondary slot trading last December appeared, on the surface, to sanction the long-standing practice of selling, leasing and swapping runway rights at the continent’s over-stretched aviation hubs.

Although proposed legislation is unlikely to progress during Ireland's presidency of the EU, which ends in June, this delay stems from a largely unrelated debate in Brussels. The European Commission had drawn up slot trading proposals as part of a wider package of measures governing airport reform. The European Parliament reached a consensus on slot trading and aircraft noise mitigation, but it came unstuck over the issue of how best to liberalise ground handling services.

Notwithstanding the slow pace of reform, Morgan Foulkes, deputy director general of Airports Council International (ACI) Europe, says that legislation enshrining slot trading will be a welcome boost to the continent's over-stretched airports...

Air Baltic sets out on recovery road

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Rumours that the EU may instruct Latvia's Air Baltic to pay back up to €80 million ($104 million) in state aid are understandably of concern to chief executive Martin Gauss - not least given his memories of heading up Hungary's Malev, which went to the wall over €280 million of EU debt.

But Gauss has form for turning around European carriers - having sold DBA, formerly Deutsche BA, to Air Berlin in 2006 - and his 'ReShape' plan at Air Baltic is already beginning to show signs of progress.

The former Boeing 737 pilot took up his position in Riga in November 2011. His appointment followed a bitter dispute between the Latvian government and previous chief executive Bertolt Flick, whose offshore investment vehicle subsequently sold its 47.2% stake in Air Baltic back to the state...

Loose connections at Heathrow

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News that Patrick McLoughlin, the UK's new transport secretary, has postponed his decision over Heathrow's third runway until after the next General Election, in 2015, has prompted a collective groan across the aviation industry and the wider business community.

"How many more reviews do we actually need," asked Laurie Price, former aviation adviser to the select transport committee between 1997 and 2005, in his opening remarks at a conference in London last week.

Previous attempts to reach a consensus on airport expansion have included the 1971 Roskill Commission and the 2003 Future of Air Transport White Paper. These, however, have often appeared to kick decision-making into the long-grass, sparing successive governments the headache of long-term infrastructure projects that risk angering the electorate, while delivering scant benefit to their political backers...

Fast track into Africa

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FastJet, the new pan-African low-cost carrier backed by Stelios Haji-Ioannou, and one of the highest profile new entrants to the market this year, is at the show to explain its routes philosophy. The carrier will launch operations in Dar es Salaam, Tanzania in early November and plans to expand its fleet size up to 15 Airbus A319s within the first year of operations.

Chief executive Ed Winter says east African governments have been sympathetic to its arguments against taxation. "We've shown them that a reduction in the tax - and the stimulation of demand and the overall size of the market - will cause a rapid increase in the net revenues for government," he explains. "But it needs a bit of a leap of faith for governments to actually reduce taxes...

Hedging your bets

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When Delta Air Lines announced its intention to acquire an oil refinery earlier this year, the unusual move drew a mixed response from analysts. Some praised its innovation, arguing that its daily consumption of 210,000 barrels of jet fuel justified cutting out the middle man. Others questioned whether airlines should be in the business of refining crude oil.

But one thing no one disputed was the urgent need to offset fuel price volatility. According to IATA's latest forecast, Brent crude, the main European benchmark, is likely to average $110 a barrel this year - but in just six months spot prices have ricocheted wildly between $128 and $88.

For airlines that rely on stable ticket pricing to deliver profitability, such swings have brought fuel hedging firmly back into vogue during the post-2008 recovery. In its simplest form, hedging allows fuel prices to be fixed or capped for future expenditure, smoothing out unforeseen spikes in the oil price and bringing some certainty to margins...