J Radebe: Airlines and Air Transport Africa 2006

23 August 2006

"Winning Strategies for Airlines, Airport Operators and Tourism"

Honourable Commissioner for Infrastructure and Energy of the African Union,
Dr Bernard Zoba
Honourable Minister of Aviation of the Republic of Nigeria, Professor Babalola
Borishande
Honourable Minister of Transport and Communications of the Republic of
Zimbabwe, Mr Chris Mushohwe
Permanent Secretaries and Directors-General
Airlines executives
Representatives of civil aviation associations
Ladies and gentlemen

It is a great honour and privilege for me to address this distinguished
gathering of the aviation industry African air transportation industry. Your
presence here clearly demonstrates your ongoing commitment to the development,
strengthening and promotion of the air transport industry in Africa.

Recent events in the global aviation sector brought about by the dramatic
reaction of United Kingdom (UK) and United States of America (USA) aviation
administrations to apparent new and systematic threats against trans-Atlantic
aviation have emphasised once again the sensitive nature of the global
commercial aviation industry. The figures are not yet in, but the economic
costs to passengers and airlines, to airports and other administrations of the
security actions in UK and elsewhere, including the increases in baggage theft
of electronic items and misplaced cargo, are enormous. In this atmosphere, the
theme of this conference, "Winning strategies for airlines, airports and
tourism," clearly summarises the challenge before us.

Fortunately or otherwise, African aviation was not affected anywhere as
badly this time around, but it would not do if we remained complacent. The
challenges facing the African aviation industry highlight the need for African
countries to tirelessly work towards enhanced intra-African co-operation to
effectively address the challenges facing civil aviation, in particular, air
transport within the continent.

Having said that though, I must re-emphasise my comments and views expressed
at the Board of Airline Representatives of South Africa (BARSA) board meeting
recently that safety and security in aviation, in the air, on aircraft, and on
the ground, remain a top priority and must remain at the forefront of proactive
intelligence work, planning, training and implementation. South Africa has
embraced all International Air Transport Association (IATA) and Operational
Safety Audit (IOSA) initiatives to enhance security and we do not operate on a
minimalist programme. Last week the International Civil Aviation Organisation
(ICAO) completed the first voluntary safety audit in terms of its new programme
and although I await the full report soon, I am told that no issues of material
significance were noted by the ICAO team, confirming yet again that in this
difficult field, and despite hiccups from time to time, we are on top of things
as they stand.

In Dakar last month, an African Aviation and Business Leadership conference
heard encouraging reports from across the continent about how we are dealing
with safety and security issues, including the maintenance, repair and
operation of older generation aircraft that are more often than not involved in
incidents where these occur. Next month in Abuja another conference convenes to
assess the practical steps that African states are taking, particularly in
light of the European Union (EU) prohibition on a number of airlines.

Evidence from around the world suggests that strong tourism destinations are
most effectively built in combination with strong airlines, both state-owned
national airlines and private carriers. In Africa, many countries also rely on
a strong general aviation component to distribute high-fee paying tourists to
remote safari locations as well. We must remind ourselves that air transport
services are a means to an end and that the African tourism industry therefore,
requires partners in aviation that play for the long run, share responsibility
for growing the overall industry, and whose behaviour is predictable and
consistent.

I have had occasion before to highlight the impact that aviation plays in
modern economies, including the growing economies of Africa. By way of summary,
air transport contributes about 2,4 percent of global Gross Domestic Product
(GDP). It has become the primary means of moving people and high-value freight
around the world, so that over two billion passengers and about 40 percent of
interregional exports, by value, now travel by air. Air transport generates
about 470 000 direct and indirect jobs across Africa, contributing over US$11,3
billion to the African GDP. If we add air transport dependent sectors such as
tourism, then the number of jobs increases to about 3,1 million and the
contribution to African GDP reaches some US$55,5 billion.

Tourism is, therefore, a significant driver of economic growth in a number
of African countries and is also assuming an ever-increasing importance in
South Africa. It is therefore no surprise that the South African government has
identified the tourism sector as one of the immediate priority sectors within
the Accelerated Shared Growth Initiative of South Africa (AsgiSA).

The contribution of the tourism sector to the South African economy, through
air transport, has increased substantially, growing from approximately one
million tourist arrivals in 1990 to over seven million in 2005. Tourism is the
only priority sector that has grown both its GDP and employment contribution to
the economy. It is estimated that growth of tourism arrivals contributes one
new direct job for every 12 new tourists in South Africa. In South Africa,
tourism generates in excess of R48 billion in revenues from foreign tourists
each year and since 2000, has grown at rates averaging between four percent and
six percent per annum. In addition, the tourism sector has grown its GDP and
employment contribution to the economy by supporting 540, 000 direct jobs and
670,000 indirect jobs.

Even in this context of growth, we have identified certain aviation
constraints potentially hindering the development of the tourism sector. These
include instances where the absence of an integrated network approach towards
air services serving South Africa and its key markets has created problems of
capacity. Furthermore, it has also become clear that, in the context of a
global trend towards rapid economic liberalisation, full alignment between
bi-lateral air services frameworks and national policies and strategies is
vital for accelerated and sustainable economic growth. Gaps have appeared in
our own experience in this field. And lastly, the role of government in a
globally competitive environment should be clearly defined to facilitate the
creation of an enabling regulatory framework to allow for greater access and
competition in the industry, whilst allowing for flexibility to serve unique
markets.

In this context, the South African Government on 26 July 2006 approved a
five-year strategy for the regulation of air transport in support of the
Accelerated Shared Growth Initiative of South Africa through:

* greater alignment with the Tourism Growth Strategy and industry
* prioritisation of tourism and trade markets
* unblocking obstacles to growth through regulatory mechanisms and bilateral
and multilateral air services negotiations. In particular, the Strategy
supports the Millennium Development Goals and the objectives of New Partnership
for African Development (NEPAD) to increase African connectivity and access
through the accelerated implementation of the Yamoussoukro Decision (YD).

Copies of the Airlift Strategy are available at this conference and of
course your comments and constructive criticism are welcomed. Let me take this
opportunity, then, to highlight some of the key elements of the Airlift
Strategy.

The overall objective of the Airlift Strategy is to increase aviation's
contribution towards sustainable economic growth and job creation. This
requires the creation and maintenance of an enabling framework within which
both suppliers and consumers of air transport services may exercise reasonable
flexibility and choice. In particular, the Strategy aims at enhancing the
prospects of South Africa as a preferred air travel destination and to
synchronise the basis for bilateral air services negotiations with other
national priorities.

It also provides specific guidelines for various unique markets with
emphasis on the needs of intra-African air services, encourages a common sense
of purpose amongst stakeholders, and aims to improve the regulation of
particularly the supply-side of air transport services.

The strategy in particular focuses on the following key issues:

* Mandates for air services negotiations must be aligned with government
policies and strategies, in particular with the Tourism Growth Strategy. Thus,
the identification of core, investment and potential markets and routes, has
been aligned to the Tourism Strategy. These will be prioritised in line with
national interest considerations regarding strategic markets.
* Unblocking capacity constraints through the negotiation of air service
capacity ahead of demand. In planning for capacity, an aircraft passenger
load-factor of 70 percent will be applied in respect of key markets. This will
provide for capacity ahead of demand of approximately 10-15 percent. This is
aimed at ensuring availability of adequate capacity enabling airlines to
rapidly respond to market demand.
* We will also set targets in respect of liberalising key elements of bilateral
air services agreements, in particular with regard to the multiple designations
of airlines, tariff regimes, code-share frameworks and implementation of the
Yamoussoukro decision.
* Addressing airline safety oversight capacity at an institutional level.
* The "use-it-or-loose-it" principle is an approach aimed at preventing one
airline blocking another from introducing new air services or to expand current
services through retention of unused traffic rights, in terms of our tactical
approach to this principle.
* A South African airline not using its capacity allotment in terms of its
international air service license within a specified period, will loose its
rights to such capacity allotment.
* Additional capacity in terms of a particular air services agreement will be
granted to compensate for the capacity shortfall on a route due to the
non-performance of a South African airline.
* Airport slots not used by airlines, both foreign and South African, at least
80 percent of the time within a given IATA timetable period, will be withdrawn
and re-allocated.
* Due to globalisation and high levels of airline co-operation worldwide, air
services agreements and routes are interdependent and the setting of
negotiation mandates will be evaluated in terms of actual and potential impact
on the network of air services serving South Africa and its key markets. In
particular, the African Union (AU) Common External Air Transport policy in
respect of open-skies arrangements (other than YD) and the European
Union-Ownership clause (once approved) will be applied.
* Efficient airports and effective airspace management are critical to the
future development of air transport. Three projects aimed at addressing air
transport infrastructure are currently underway, namely: The Air Freight
Logistics Project, the creation of a National Airports Development Plan and a
project aimed at the possible establishment of an independent slot-coordinator
for South Africa. The principle of "fair and equal opportunity" enshrined in
the Bilateral Air Services Agreements will be applied in cases of
slot-constrained airports with a view of achieving maximum economic benefits
within a pro-competitive environment.

It is expected that the successful implementation of this Strategy will
result in a significant increase in the number of passengers moving through
Johannesburg International Airport (JIA), Cape Town International Airport (CIA)
and Durban International Airport (DIA). The Airports Company of South Africa
(ACSA) has committed some R8 billion over the next few years for modernisation
and upgrading projects at our major airports, partly to meet the advent of the
A380 in the near future, but also to build a new passenger and cargo airport as
part of the Dube TradePort complex north of Durban. For its part, the Air
Traffic and Navigation Services Company (ATNS) has made major strides to
improve our airspace management safety scenarios. Infrastructure investments to
assist the programme include R96 million for the renewal of terrestrial
aeronautical navigation systems, and some R160 million for the replacement of
existing older radar systems in certain areas of South Africa. We are delighted
that ATNS can offer its specialist services in its newly appointed capacity as
the Aeronautical Regional Monitoring Agency for Africa. These are exciting
technology developments that we are proud to support.

Delegates, as you will recall, during their meeting of May 2005, the African
Ministers responsible for air transport in Africa decided that the African
Union should coordinate the development of a Common External Air Transport
Policy addressing the issues of open-skies within the African context.

In terms of our strategic approach to this principle, we will:

* Accelerate the implementation of the Yamoussoukro Decision (YD) through
the modernisation of Bilateral Air Services Agreements with all like-minded
African states as an interim measure, pending full implementation across Africa
on a multilateral level. This will include developing an econometric study to
quantify the economic cost of regulatory constraints, including benefits that
could be reaped as a direct result of the implementation of the Yamoussoukro
Decision. This will guide South Africa's approach towards the Yamoussoukro
Decision when engaging with the African Union, NEPAD and bilateral counterparts
in Africa.
* Actively participate in the activities of the African Union towards the
creation of a Common External Air Transport Policy for Africa.
* Ensure strict enforcement of competition rules as the ability and
jurisdiction of the Competition Commission and Competition Tribunal to
effectively and timely intervene in cases of abuse of dominance, predatory
pricing and capacity dumping are critical to the successful implementation of
an open-skies regime.

The Airlift Strategy provides for practical implementation of our current
Aviation Policy and will be implemented through a period of five years, based
on an annual programme for the amendment of bilateral air services agreements
with our counterparts across the world. Recently in Dakar, Senegal, I announced
that the Department of Transport had already begun its work to revise the
Bilateral Air Services Agreements (BASAs), and I do not foresee any reasons for
undue delay in getting this important work completed in as short a time period
as possible, so that we can begin reaping the benefits of this policy sooner
rather than later.

I can just indicate that we already have unlimited capacity agreements with
six African countries, and just last Friday the Minister for Transport and
Communication of Ethiopia and myself initialled an agreement to further expand
and accelerate air service arrangements between our countries. The face of
South African-African aviation relations is about to change forever, and we are
all excited about this development.

There is today strong recognition across Africa that we need greater
coordination between and within African governments, airlines, airport
operators and the tourism industry; that there needs to be greater investment
in research and development of new technologies to enhance the training, human
resource and intelligence drivers of the aviation sector.

We should take advantage of tourism's role as a vital tool for development
with particular emphasis on its capacity to help in the fight against poverty,
to create jobs and achieve economic growth. Let us all work towards improving
air access to all African countries by easing regulatory constraints, lowering
air travel costs, facilitating airline partnerships and promoting regional
operating consortia, while instituting fair competition and operating
frameworks.

Ladies and gentlemen, much of our work in the aviation sector will have a
major impact on our ability to deliver a superb African 2010 Federation
International Football Association (FIFA) World Cup. The fact of the matter is,
much of our infrastructure planning for both ACSA and the ATNS preceded the
awarding of the competition to South Africa, but the agencies have worked hard
to adjust their immediate plans to accommodate special needs. But confidence in
the aviation sector of our continent goes far beyond hosting successful
events.

That confidence is critical to our economic livelihood, the ability of
Africa to be an attractive investment destination offering sustainable
solutions to the myriad of problems that continue to beset our continent and
its people. So while often the focus of commentators will be on the progress we
make towards 2010, for those of us who are close to the process and responsible
for air transport policy generally in South Africa, we know that the legacy of
sound aviation infrastructure and services is an important pillar in the whole
edifice of our country and must be jealously guarded as a result.

Thank you for your attendance, and may I wish you fruitful deliberations
over the next four days.

Issued by: Department of Transport
23 August 2006
Source: Department of Transport (http://www.dot.gov.za)