EATP - Low Cost Carriers

EAST AFRICA TOURISM PLATFORM

A COMBINATION OF LOW COST AIRLINES & OPEN SKY POLICY- IS PANACEA TO CONNECTIVITY WITHIN THE EAC

Nairobi, October 05, 2016

A COMBINATION OF LOW COST AIRLINES & OPEN SKY POLICY- IS PANACEA TO CONNECTIVITY WITHIN THE EAC

• Air transport plays an important role in travel and tourism within the EAC. • However, over the years, it has been inhibited by high fares and limited connectivity. For instance, it is three times more expensive to fly between Nairobi and Entebbe than Nairobi and Dubai. Particularly, a flight between Nairobi and Entebbe costs between US $ 295 and US $ 390, while the one between Nairobi and Dubai (seven times farther) costs US $ 600.

• Additionally, air travel within East Africa operates in an overly restrictive regulatory environment characterized by protectionism.

• Therefore, there is an urgent need for increased expansion of low-cost airlines. Moreover, the region needs a multilateral air transport agreement that will liberalize market access and subsequently lead to increased trade.

STATUS OF LOW COST CARRIER OPERATIONS WITHIN THE EAC • Low cost air travel within the EAC is relatively recent; with the first operations by fly540 starting in 2006.

The fares of low cost carriers are generally variable but generally range between US $30 and US $300.

• Today, the region has a relatively higher representation of low cost air services as compared to the rest of Sub-Saharan Africa.

• A common trend among these airlines is that they mainly serve destinations within their home-countries due to restrictions on free movement to other countries. For instance, Jambojet serves destinations within Kenya, Fastjet within Tanzania.

• Moreover, their areas of operation are mainly major cities and popular safari destinations (see Tables 1 & 2); thus overlooking other areas. Besides, LCCs are mainly concentrated in Kenya and Tanzania with Uganda, Rwanda and Burundi being minimally served. This may be attributed to.

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Table 1: Characteristics of LCC Operations within the EAC

L.C.C.

Jambojet

Fly540

FlySAX

Kenya

Kenya

Kenya

Destinations in EAC

Fleet Size

5

6

Nairobi, Eldoret, Mombasa, Kisumu, Lamu, Lodwar, Malindi, Zanzibar

NBO-MBA (35x); NBOKIS (14x); BO-EDL (14x); NBO-MYD (7x); NBOLAU (7x); NBO-ZNZ (14x); NBO-LOD (10x)

Nairobi, Mombasa, Amboseli, Maasai Mara, Lamu, Malindi, Ukunda (Diani), Kitale, Lokichoggio, Wajir, Entebbe (Other safari destinations)

NBO-MSA (2x); NBOAMB (6x); NBO-MRA (14x); NBO-LAU (6x); NBO-MYD (6x); NBODNI (6x); NBO-KTL (6x); NBO-LOK (3x); NBOWJR (5x); NBO-EBB (9x)

Amboseli, Diani, Kilimanjaro, Lamu, Lewa, Lodwar, Loisaba, Masai Mara, Naivasha, Nanyuki, Samburu, Tsavo West, Vipingo

NBO-AMB (21x); NBODNI (7x); NBO-JRO (7x); NBO-LAU (7x); NBOLWA (21x); NBO-LDR (5x); NBO-LOA (21x); NBO-MRA (14x); NBONVA (7x); NBO-NYK (21x); NBO-SRU (21x); NBO-TVW (14x); NBOVPO (7x)

6

Kenya

12

Airkenya Express

Kenya

9

Tanzania

5 (reducing to 3)

Dar es Salaam, Entebbe, Kilimanjaro, Mbeya, Mwanza, Nairobi, Zanzibar

10

Tabora, Musoma, Kigoma, Mtwara, Mwanza, Bukoba, Arusha, Zanzibar, Nairobi,

PrecisionAir

Tanzania

Route (weekly frequency)

NBO-KIS(14x); NBONairobi, Eldoret, Mombasa, Kisumu, Lamu, MBA (35x); NBO-EDL (10x); NBO-MYD; NBOMalindi, Diani (Ukunda) LAU; NBO-DNI

SafariLink

FastJet

4

Country

Amboseli, Diani, Kilimanjaro, Lamu, Malindi, Maasai Mara, Meru, Nanyuki/Lewa, Samburu

NBO-AMB (7x); NBODNI (7x); NBO-JRO (7x); NBO-LAU (7x); NBOMYD (7x); NBO-MRA (21x); NBO-MRU (7x); NBO-NYK/LWA (7x); NBO-SRU (7x) DAR-MWZ (28x); DARMBY (14x); DAR-JRO (14-21x); DAR-ZNZ (2x) DAR-NBO (7x) DAREBB (2x) DAR-TBA (3x); DARMMA (3x); DAR-KMA (3x); DAR-MWA; DARMZA (7x); DAR-BKB; DAR-ASA; DAR-ZNZ; DAR-NBO (7x)

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Table 2: International Low Cost Carriers that operate in the East African Community

L.C.C.

Country

Fleet Size

Destinations in EAC

Route (weekly frequency) DXB-ZNZ (4x); DXB-EBB (3x); DXB-DAR (4x) JNB-ZNZ (4x)

FlyDubai

U.A.E

52

Entebbe, Dar es Salaam, Zanzibar

Mango

South Africa

10

Zanzibar

CHALLENGES & OPPORTUNITIES In spite of low cost airlines offering competitive prices, they are constantly facing numerous challenges including: • Protectionism • Inadequate infrastructural development • High fuel and maintenance costs • Limited flight network and connectivity

On the other hand, these airlines are surrounded by enormous opportunities such as:

• Underserved regional markets especially in Uganda, Rwanda and Burundi • Growing middle-class • Growth of regional capitals such as Nairobi, Dar es Salaam, Kigali and Entebbe into international hubs.

• With improved inter and intra-regional connectivity, low cost airlines will serve more East Africans constantly travelling for tourism, trade, visiting friends and relatives, and medical care.

CASE STUDY: FASTJET- A LOW-COST AIRLINE FLYING HIGH IN AFRICA • Since its inauguration in 2012, Fastjet has been serving Tanzania and other destinations in Kenya, Uganda, Zambia, Zimbabwe and South Africa.

• Its market encompasses a population of 210 million people – i.e., approximately 20% of Africa’s total population – and has attributes that are conducive to regional development such as use of a common language, historical links and migration flows.

• By 2018, the airline aims to acquire a fleet of 34 aircrafts, serving 40 destinations while selling nearly 10 million seats per year.

• Fastjet’s marketing strategy is the cheapest flights that are comparable to bus fares, especially in circumstances where booking is done early.

• Some of the challenges it experiences are; highly protected national airspace, licensing-cost duplication and lack of local skills and infrastructure. However, it is surrounded with opportunities from a growing middle class, regional networks and growth of regional trade.

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CONCLUSION • Low cost airlines are transforming the way we are travelling and we need to extend these benefits to the entire region by adopting an open sky policy that will transform EAC to one single air-space.

• Since the inception of low cost airlines, there has been massive reduction in fares and increased passenger numbers.

• EU, USA and Morocco are best examples of regions that have benefited from intense competition, a wider variety of services, greater efficiency and lower fares; resultant from air liberalization.

• So far, Nairobi, Dar es Salaam, Kigali and Entebbe are international hubs attracting flights from around the global; however, they are in deficient of inter and intra- connectedness. This is a gap that can be filled by low cost airlines.

• EATP believes that low cost carriers have the potential of stimulating the growth of inter and intra-regional tourism within the EAC. • Air liberalization will be a major boost for low cost carriers, for it will help expand the region’s flight network and connectivity, increase direct and connecting flights, facilitate access to a bigger market as well as lead to reduced fares.

• Importantly, open sky policy will bolster the expansion of LCCs to countries outside where they currently operate; thus increasing flight routes and frequencies within the region. This will be an advantage to countries that are inadequately served by LCCs such as Burundi, Rwanda and Uganda.

PARTING SHOT • Governments should shift their focus from levies and taxes and instead liberalize the aviation sector to attract increased travellers and subsequently leverage on the economies of scale.

• The time has come for EAC to whole-heartedly embrace the idea of open skies. Just like Uber and other innovations driven by consumer demand, air liberalization is an idea whose time has come. The sky of the EAC needs to be opened and liberalized.

• EAC is a rapidly growing and expanding region. It should no longer be held hostage by protectionism of national carriers, myopic political interests and visions.

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