Investing in sustainable African aviation

Africa's air passenger traffic has shown significant signs of recovery, reaching 108 per cent of pre-pandemic levels in 2023, with projections indicating a potential doubling to 341 million passengers by 2043. This optimistic outlook, however, is marred by various challenges that continue to hamper the growth of the aviation sector on the continent. High fuel costs, nearly 20 per cent above the global average, coupled with an average annual growth rate of 3.7 per cent, pose significant hurdles for the industry's expansion. Additionally, the issue of blocked airline funds remains a critical concern, impacting financial stability and connectivity. Marie Owens Thomsen, Chief Economist and Senior Vice President for Sustainability at the International Air Transport Association, recently addressed these pressing issues in a CNBC Africa interview. Thomsen highlighted the disparity between Africa's population share and its representation in global aviation, emphasizing the need for the continent to assert itself more significantly in the industry. One of the key stumbling blocks identified was the fragmented regulatory framework across African countries, hindering intra-continental trade. Thomsen also underscored the importance of harmonizing rules and regulations to facilitate growth and development. Additionally, the high cost of fuel in Africa and the inclination towards taxing aviation were identified as deterrents to industry progress. Thomsen called for a shift in mindset, urging stakeholders to view aviation as a vital component of economic development rather than a luxury. The interview also touched upon the issue of taxation within the aviation sector, pointing out the industry's modest profit margins compared to other sectors. Thomsen expressed concerns about potential UN airline tax reforms, cautioning against measures that could further fragment the global aviation industry. The discussion further delved into the pressing issue of blocked airline funds, with Thomsen highlighting the repercussions of liquidity constraints on airlines' operations and growth. She also drew attention to the broader issue of debt distress in African countries, underscoring the need for comprehensive solutions to address underlying economic challenges. The interview underscored the importance of collaborative efforts between industry stakeholders, regulators, and policymakers to drive sustainable growth and enhance the continent's aviation landscape. As Africa works towards positioning itself as a key player in the global aviation arena, overcoming these challenges will be crucial in realizing the industry's full potential.