1. 6-7 April 2006 1st African Airlines Forum 2006 Strengths and Weaknesses of African Airlines By Raphael Kuuchi Commercial Director - AFRAA 6 - 7 April 2006 Bamako, Mali

2. 6-7 April 2006 Structure of Presentation Introduction Recommendations Strengths Weaknesses Opportunities Threats 1 2 5 4 3 6

3. 6-7 April 2006 One of the fastest growing air transport markets in the world but accounts for only 4% of global traffic African airlines carry only 30% of international traffic In the 1970s and 80s African airlines dominated the African sky The rules of balanced rights and reciprocity ensured a level playing field at the time The industry began to evolve following deregulation in the USA in the late 1970s Industry consolidation through alliances, code- shares, mergers, etc started in the 1980s At about the same time, privatisation of airlines was happening Africa failed to evolve with the industry The continent has since not caught up Introduction 1

4. 6-7 April 2006 Core dedicated workforce despite low salaries Prestige Travel opportunities STRENGTHS 2 Low staff turnover

5. 6-7 April 2006 Well trained and experienced pilots and engineers (who meet international standards) STRENGTHS 2

6. 6-7 April 2006 Significant number of airlines renewing their fleet STRENGTHS 2 Direct flights to most international destinations

7. 6-7 April 2006 STRENGTHS 2 Self handling at their hubs Competitive labour cost

8. 6-7 April 2006 Domestic and regional routes that feed and distribute long haul flights State support Financial guarantee Debt underwriting Assumption of debt STRENGTHS 2 Intimate knowledge of the African market

9. 6-7 April 2006 High turnover of CEOs Under-capitalisation Most never re-capitalised since formation Poor service delivery Ageing fleet WEAKNESSES 3

10. 6-7 April 2006 WEAKNESSES High operating cost Poor safety record Government interference in operational matters Limited network and frequencies 3

11. 6-7 April 2006 WEAKNESSES Low aircraft utilisation Low level of automation Lack of loyalty programmes Lack of skilled non-technical Workforce resulting in Over-staffing 3

12. 6-7 April 2006 OPPORTUNITIES 4 Growing economies Political stability Embracing democracy Trade and business opportunities Undeveloped routes Intra-Africa Between Africa and other parts of the world Focus on tourism development Governments’ focus on tourism development as an alternative source of revenue and employment generation

13. 6-7 April 2006 OPPORTUNITIES 4 Strategic location of Africa Strategically located with natural hubs to Europe, Middle East, North and South America and the Caribbeans High yields on African routes Yields on flights to/from Africa are among the highest in the world Liberalisation Liberalisation through the full implementation of the Yamoussoukro Decision will result in; Significant growth in intra-African traffic Rapid hub development Integration

14. 6-7 April 2006 THREATS 5 Invasion of African sky by foreign airlines European and Middle East carrier are here North American carriers may start flights to Africa The effect will be; Increased competition Lower yields Elimination of weak African airlines Uncontrolled granting of traffic rights to foreign airlines at the expense of African carriers

15. 6-7 April 2006 THREATS 5 Globalisation and the impact of the mega-alliance Groupings. While African airlines continue to operate point-to-point, these airlines criss-cross the globe with convenient schedules and frequencies Failure to privatise African airlines Failure of African airlines to work together or join mega alliances

16. 6-7 April 2006 THREATS 5 Increases in charges and taxes Airport tax Handling charges ATNS fees Fuel surcharge Security surcharge Limited access to preferred airports in Europe

17. 6-7 April 2006 THREATS 5 Proliferation of hi-tech in the industry Modern aircraft E-ticketing, Radio Frequency Identification (RFID), Common Use Self-Service (CUSS), Bar-Coded Boarding Pass (BCBP), E-freight Unpredictable business environment Forex and interest rates fluctuation Political uncertainties

18. 6-7 April 2006 Where do we go from here? Recommendations 6

19. 6-7 April 2006 Privatise airlines –Bring in needed capital –Avoid government interference –Management stability –Retain skilled manpower through better remuneration Work together –Through code share, joint operations, mergers, alliances, cross-border investments, etc –Resources and knowledge could be shared by airlines Recommendations 6

20. 6-7 April 2006 Improve service delivery by recruiting, training and giving competitive remuneration Modernise fleet –Match aircraft with traffic –Improve operating economics –Improve level of safety and reliability Undergo the IOSA programme to assure all that African airlines are safe Recommendations 6

21. 6-7 April 2006 Liberalise the African sky in accordance with the Yamoussoukro Decision –Stimulate further growth in intra-African traffic –Increase the movement of people and goods and speed up integration –Allow airlines with the resources to effectively extend their network across the continent and beyond –Enable Africa to evolve common positions in response to decisions of third countries Liberalisation coupled with the harmonisation of the immigration and customs regulations on the continent will put Africa’s development and its air transport industry on the right track to recovery Recommendations 6

22. 6-7 April 2006 Our flights will be full with smiling passengers willing to fly with African airlines at all times

23. 6-7 April 2006 This is how we see the future intra-African route network

24. 6-7 April 2006 THANK YOU