The Director-General of the International Air Transport Association, the Geneva-based global body representing over 290 international airlines, Willie Walsh, speaks with some African journalists shortly after the organisation’s 77th Annual General Meeting and World Air Transport Summit held in Boston, United States. OYETUNJI ABIOYE was there, excerpts:
What do you make of South African Airways that does not have modern aircraft?
South African Airways has been in a financial crisis for many years. You cannot survive today except you adapt to competition; if you look at the changing nature of the airline industry. I look back at when I was flying; I think South African Airways was one of the big airlines that have been affected by competition. To survive in this industry, you have to face competition.
SAA has gone through so many changes in the past, and surprisingly, it is not making the required changes, what could be responsible for that?
International competition is one of the reasons. South Africa is served by a lot of airlines and they have invested a lot in their products. It doesn’t stop them from catching up. South Africa is a fantastic market and SAA has to adapt to the competition. It happens in a lot of countries. It is sad but it shows that South Africa would continue to be served. South Africa as a market is a fantastic market but South African Airways couldn’t adapt to the competition and the crisis set in. But it isn’t a surprise because it started years ago. It was not sudden, it did not happen overnight. It happens in a lot of countries and to African airlines. It is sad. It is sad to see. Consumers in South Africa will continue to be served.
But that seems to be the same pattern with so many African airlines. Many African airlines show promise but after some time, they begin to show signs of weakness, what could be responsible for that?
I suppose what makes European airlines much more efficient is the Open Skies environment in Europe which gave opportunities to new airlines and forced the so-called legacy airlines to adapt to that competition; and consumers have hugely benefitted from that and I think everybody’s performance was raised with Open Skies. Africa needs the same environment for Open Skies that will also be beneficial for Africa and will be hugely fantastic. If you are restricted, you don’t have economies of scale like you have in a bigger market and that highlights one issue-and that issue is the opportunity that exists in Africa. If there are Open Skies in Africa, it will benefit more African carriers to develop and grow. You don’t have the same economies as much as you have a much bigger market. If there was one issue, it is the opportunity that exists in Africa. If there is an open aviation area and Open Skies in Africa, a lot more African carriers will develop and grow more than they are today.
What do you make of protectionism by African governments such that their carriers are shielded from competition? I want you to look at Nigeria as a case study.
If it is the government’s policy, it is government policy. We don’t necessarily have a position on that. I am personally concerned about it as regards competition. I think airlines benefit from competition because it makes them better, rather than competing against themselves. I speak from my past experience, the market in Africa is a very attractive market although it comes with its challenges like infrastructure. The infrastructure isn’t always great, it is emerging. You have fuel supply issues with so many natural resources. It is surprising for a country that has so many natural resources. Taxation is huge, costs of operation which makes cost of profits marginal or nonexistent. I think what they do is to look at the revenue line but they failed to recognise the costs associated with operations in this industry. The profitability of the industry is way too small and profit almost nonexistent. They get taxed because they are looking at the revenue line rather than the profitability. All of these have certainly not helped carriers’ operations in Africa and certainly taken away viability. Taxation is not going to improve the situation. Taxation just really takes away investment in new products, investment in expanding. We would encourage the government to look again at the issue of taxation.
On intra African connectivity, don’t you think Africa needs to look internally?
If you look at Europe, Europe has grown because of the ability to fly within Europe, thereby increasing domestic connectivity within Europe and also increasing international connectivity in Europe. Domestic connectivity within Europe is good, same with international connectivity. We have the widest connectivity in Europe that has been made possible because of the European Open Skies; that is where growth has come from and that’s where consumers’ benefits come from in terms of prices, because of the introduction of competition to the market. If you have only one airline operating in the market, what would they do? They get more opportunities and you also get more efficient airline systems. That’s why I think there is huge potential in Africa as a market. I suppose it would happen at some stage. But it is sad to see Kenya Airways and others. As for Nigeria now, where are Nigerian airlines? It is a huge market. The competition, opening up the market, allowing people to expand will certainly help.
How about regulations?
Regulation has a role to play in the area of safety and security, absolutely. We talk about regulation in terms of who can fly, in terms of how much they can charge, and how much of capacity to operate. I am not saying regulation should be removed but if you are going to introduce regulations, you have to maintain regulation to ensure safety and security.
Only a few African airlines are members of IATA. Nigeria is one of the largest travel markets in Africa but the country’s carriers are not members of IATA. Are there specific steps IATA is taking to assist Nigerian and other African carriers to join the trade body?
Yes. There are a few things we are doing. We have for so many years been helping the industry to develop from the technical and safety points of view. I think one of the issues that some of the carriers in Africa tend to have towards being a member of IATA has to do with how expensive it is (to join); and that’s one of the things I am looking at. You have to go through the IOSA safety registration. You have to go through the safety audit. There are a number of measures we are looking at to encourage more members of IATA. We have something that adds value to them. We want to make sure we have something that adds value to them. I think one of the things we have to make sure we do is to change the perception in Africa that we are for some organisations. It is not prohibitively expensive for them to be part of IATA. I love to see more airlines from Africa to become part of IATA and I think it will be good. African aviation will benefit. I have been actually making proposals on the changes that we could make and they are being reviewed at the moment.
How have you handled the last 18 months?
Since the months that I joined IATA, things have certainly been different from what I was doing in IAG. I listened to the guys yesterday and some of them said they had to make decisions quickly. To make decisions is better than not making decisions. That pressure is incredible, because when you are in Europe running an airline group and you are facing a crisis like this, you have to be under a lot of pressure. The pressure for me in IATA is quite different from when I was in British Airways or IAG. I enjoyed it and I think it helped me in taking some decisions and by my training as a pilot, you have to make decisions. For some people, they keep analysing, analysing. Yes, I have enjoyed the last few months. I was genuinely surprised that I have had it easier. I thought I would struggle. I was due to retire in January and stand in there till the end of March but extended to September. I eased easily into the job, working 12 hours a day. The 9th of September which was the first day, it was a beautiful day looking out on the balcony. I am enjoying it, it is nice. We have challenges but it is a good organisation. The reason I am doing this is that I think I can add value. I know the challenges airlines are facing.
I think IATA has been very consistent with the criticism about the high cost of testing in Africa. Are the governments listening to IATA?
I will be honest with you. We criticise governments every day regarding the cost of testing and little has been done. It has been disappointing that governments didn’t respond earlier because there is no justification behind the high prices that they have been charging. A lot of people have been affected by that. A lot of people have made a profit with the health challenges that we have been having. We are beginning to see some actions taken but it is disappointing that the actions were not taken earlier, forcing people to take expensive PCR tests to a more cheaper and convenient antigen. They are not identical but they are a good measure; you get the antigen test result straight away-that is the disappointing aspect of it. I am of the opinion that we are getting to a situation where governments will eventually give up. We just have to keep up with the pressure. That is what we do and we will make a lot of progress. Before a government can introduce restrictions, they need to make sure the infrastructure is there. That is why one of the concerns we have about PCR tests is taking a lot of valuable capacity away in the health system. That is what we are saying-that you don’t need to have a different PCR test. The antigen test result comes out in a minute and it is a fraction of the price, and it gives you good protection. You can do it on the flight. The argument around the PCR test is that they need to sequence it. We now said, do the antigen test! If the antigen test is positive, then do a PCR test and if it is negative, let the person go. There is no reason to administer expensive PCR tests particularly when the lab facilities needed are not there. At times, it costs $87 or more to do PCR than antigen which is about $20. I was surprised by the prices I saw in the US.