Before we open the skies

By Lakinbofa Goodluck

The aviation industry world over has become a highly important segment of the world’s transportation system. Presently, there is perhaps no other industry that has aided mobility across the Atlantic like the aviation industry. It is a very strategic industry for the world and individual nations; it remains vastly regulated and protected for many reasons. Chief among these reasons is security – national security, and protection of lives and property. This explains why airlines are subjected to diverse scrutiny and processes to acquire certification for business operations. Nations engage in varied bilateral and multilateral agreements to promote cooperation and ensure economies of scale for their respective local airlines, especially the national carrier. One of the primary motives for national carriers usually is to promote protectionism and ensure that the individual country fully takes advantage of its airspace. Without active bilateral or multilateral agreements, airlines from a country may be restricted in navigating another country’s airspace. These are some of the complexities of the industry. However, no nation can ignore the enormousintrinsic benefits in this $7 trillion industry that accounts for 1 in 10 jobs worldwide.

In order to ensure liberalisation and flexibility in the aviation business, the idea of “open skies” has become prevalent with the United States leading the advocacy. The beginning of “open skies” can be traced to the proposal by President Dwight D. Eisenhower at the Geneva summit in 1955 for “mutual aerial observation” relevant to US and Soviet Union’s military operations. However, the “open skies” proposed then is essentially different from the “open skies” implemented now. According to the United States Department of State, “open-skies” policy is designed to eliminate government involvement in airline decision-making about routes, capacity, and pricing in international markets.  The “open skies” policy confers specific rights for the conduct of air transportation, which may not have been possible otherwise. The policy allows airlines from participating countries to fly across participating countries’ territories without landing; it also offersright to make stops in those territories for non-traffic purposes. The agreement further allows airlines of parties in the agreement  operate flights in either or both directions, combine different flight numbers within one aircraft operation, transfer traffic from any of its aircraft to any of its other aircraft at any point; combine traffic on the same aircraft regardless of where such traffic originates, among other provisions.

The United States for instance currently has an “open skies” agreement with over 120 partners. Supranations like the European Union also have an “open skies” agreement with the United States and other countries. This prevailing arrangement has contributed enormously to the liberalisation of air transportation in the western world. But the assimilationof the “open skies” policy is not limited to the western world; it is active in Asia and among few African countries.

However, the aviation industry in Africa is peculiarly challenged, yet endowed with opportunities. The continent is responsible for 12 per cent of the world’s population but only accounts for less than 1% of the global air service market.Currently, the aviation industry’s contribution to the continent’s Gross Domestic Product, GDP, is estimated at $73billion and expected to grow at five per cent annually for the next twenty years.  The industry employs about seven million people, with an average of 130,000 people per country in Africa. Its capacity is expected to grow from serving 120 million passengers in 2015, to over 300 million passengers by 2035.The prospects are quite enormous. On the other hand, the industry in Africa is plagued by huge challenges that have capped its growth for years. For instance, aircraft departure fees in Africa are more than the global average by 30 per cent, in addition to the taxes, fees and charges that are eight per cent higher than the global average. The other most restrictive challenge facing the industry is the regulatory environment, which threatens profitability and increases cost of doing business. The expectation is that a widely operational“open skies” policy will go a long way in addressing some of the challenges facing the African aviation industry.

Specifically in this regard, the Ministers of Civil Aviation from 44 African countries converged in Yamoussoukro, Côte d’Ivoirein 1999 to reach an open skies agreement, which is now known as the Yamoussoukro Decision or otherwise referred to as the Single African Air Transport Market (SAATM). The agreement is in consonance with Article 61 of the treaty establishing the African Economic Community, ECA, also known as the Abuja Treaty adopted in 1991 and came into force in 1994. The 1999 decision was actually a follow up to the Yamoussoukro Declaration of 1988 where African nations agreed to liberalise their air services in principle. The 1999 decision, which was eventually endorsed by the Heads of States of the Organisation of African Union in 2000 and became operationally binding in 2002, seeks to deregulate air services, and promote regional air markets opening to transnational competition.In the absence of the open skies policy, travelling within the African continent has remained a longwinded experience. For instance a flight from the northern part of Africa to western Africa may be routed to Europe before making a connecting flight. This is not only expensive; it is debilitating to business growth. The time spent on going round the world could be maximised for other benefits if there were sufficient direct flights among African countries. This current situation has contributed greatly to the stagnancy in intra-African trade when compared to progress made by other continents. The richest man in Africa, AlikoDangote once lamented that despite his status and the size of Dangote Group, he still requires visa to travel across Africa.

There have been renewed calls from diverse quarters for participating countries to actualise the intents of the “open skies” agreement. It is believed that the implementation of the agreement will impressively increase air traffic in Africa and benefit countries in great measure.The experience in Europe has been cited as enough incentives for Africa to accelerate the implementation of the policy. Between 1992-2000, being the first eight years of the implementation of open skies in Europe, the number of direct flight between European countries increased by nearly 75%, passengers enjoyed 88% more flight options and double the number of seats, with 15% drop in airfare. And in Africa when South Africa opened its skies to Kenya airlines, the number of passengers jumped by 70%.

Similarly, the International Air Transport Association, IATA, in a study released in 2014 and based on 12 selected countries, reported that a functional “open skies” agreement between these countries would boost GDP by $1.3billion, and more than 23, 000 direct and indirect jobs would be created. Inferentially, if an operational “open skies” policy could potentially boost the economies of 12 African nations by $1.3billion, how much more could be added if all the 52 nations embrace the policy?

But countries have been hesitant in implementing the agreement because of the inherent threats it poses to their protectionism ideology; especially for the state-owned air carriers. However, at the 2015 edition of the African Union Summit, 11 countries including Nigeria recommitted to the implementation of the Yamasokourri Decision to be effective from 2017. As contained in the charter, the countries “declare their solemn commitment to the immediate implementation of the Yamoussoukro Decision towards the establishment of a Single African Air Transport Market (SAATM)by 2017. These Member States will be constituted as a working group at Ministerial Level in order to achieve its goal and it will remain open to those that will join later.”

The pressure for implementation heightened in late 2017 being the year the eleven States had set for implementation. At the 2017 edition of the ICAO World Forum in Abuja, the Nigeria’s former Minister of Agriculture and now the President of the African Development Bank (AfDB), Dr.AkinwumiAdesina renewed calls for the implementation of the agreement, painting a glowing picture of an open Africa. On its part, the federal government of Nigeria, a nation still without a national carrier, has reiterated its support for the implementation of the agreement without commensurate plan to support local airlines.

In a pragmatic manner Airline Operators of Nigeria (AON) have kicked against moves by the federal government to implement the open skies agreement citing the prevailing unequal operating environment. Nigerian airlines are faced with the challenges of multiple taxation, infrastructural challenges, uncertain energy environment, unreliable and scarce foreign exchange regime, and a near absence of government support. Essentially, they are currently operating under harsh economic environmentthat makes competing with better funded and heavily supported airlines nearly impracticable. Presently, it appears there are no immediate plans from the federal government to aid Nigeria airlines in maximising the benefits of the “open skies” policy. Implementing the policy without measures to empower the local airlines is tantamount to boosting a positive external image at the expense of killing local companies. Nigeria can only benefit from the policy when our local airlines are strong enough to compete globally. That should be the focus of the government now.