Date: 23/08/2006
Source: Department of Transport
Title: Radebe: Airlines and Air Transport Africa 2006


  Official opening address by Mr Jeff Radebe, MP, Minister of Transport to the Airlines and Air Transport Africa 2006 summit, Michaelangelo Hotel, Nelson Mandela Square, Johannesburg

"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