For generations, airports have been places where planes simply land and take off. But that is beginning to change. The modern airport offers something more significant to the cities and communities that it serves.
As the cargo and passenger traffic grows along with the need to move them around as efficiently as possible, so has the importance of airports. The modern airport is now a magnet for both commercial and industrial development.
Throughout the globe, airport stakeholders and authorities are realizing the need to use the airport as a job and revenue generator and not merely as a “plane stop”. The airport runway is now a central point supporting vital economic systems such as industrial parks, logistic parks, hotels, office complexes, entertainment centres, shopping malls and even upscale residential development all of which generate revenues for the facility and support various businesses and economic development.
Thanks to the growth of the phenomenon of the aerotropolis, we now airport cities instead of city airports like we used to have in the past. The aerotropolis is the ideal case of the airport city, a city where the airport is an integral part of the city’s economic development. In the aerotropolis, the airport supports the city’s macro-economy and contributes significantly towards its output.
The term aerotropolis was coined in the 21st century and shows the global economy’s increasing need for speed, agility and connectivity.
An aerotropolis is a new kind of a metropolis. This kind of airport city fans out from the airport up to 20 miles and includes layers of business clusters and residences that are linked to the airport functions. All these are linked further by a network of highways and express trains that help in facilitating fast movement and seamless connectivity for the airport runway as well as the rest of the world.
The 21st century metropolitan development has witnessed a rapid rise of airport-linked commercial facilities, making the airports a commercial hub where the locals and the distant travelers can conduct business without going more than a few minutes outside the airport precincts. It provides a commercial cluster where you can find accommodation, conduct business, eat, shop and get entertained.
The aerotropolis idea is already gaining a lot of steam in many cities especially in the US but also in Europe and Asia. Many global cities now have carefully designed airports to support the aerotropolis economy. These include cities such as Dubai, Hong Kong, Guangzhou and Kuala Lumpur all of which now claim an aerotropolis status.
When it comes to the implementation of the aerotropolis economy, many of the Asian airports are far ahead in the game followed by the European and Middle Eastern airports.
In the US, airport executives are beginning to embrace the idea of an aerotropolis and weighing in on various models where airports can operate as both an aeronautical infrastructure and a commercial facility.
A lot of American airports are now trying to embrace the aerotropolis model in their planning for future upgrades. However, many of these US airports have been around for close to a century and are already at the heart of multi-modal transport networks as well as thriving economies. These airports are already ahead of the curve: they are aerotropolises by default.
Aviation powers the global economic growth, creates employment, trade links, tourism and provides sustainable development for the cities that they serve. Airports serve as important links between a city and the globe while supplying communities with the essentials of life.
For many cities in the world, air transport is generally a lifeline that supports the various sectors in the local economy including hotels, restaurants, car hire, taxi rentals and other associated services. The faster the airport grows, the faster its impact will be on the local economy. A study by IATA found that a 10% growth in passenger numbers at an airport resulted in a 1% GDP growth in the local economy. The importance of airports in opening up local cities cannot be understated.
One of the emerging modern trends is that of the aerotropolis. Aerotropolis is a term referring to a city that has been built around an airport. The common trend on most global cities is having an airport built in the outskirts of an already existing city.
However, the modern trend of an aerotropolis refers to a city that has been built around the airport. This has the advantage of allowing a much faster movement of goods as well as people. This is important in the era of globalization where efficiency in the city operation is paramount.
Cities have always been constructed around transport networks such as ports and harbors and with the advent of modern transport systems, cities have been built around train stations. Some of older cities such as New York, Chicago and Boston are examples of cities constricted around transport systems. With the growth of air travel in the 20th century, we began seeing whole cities being built around airports. In the age of globalization, this is a phenomenon that is going to get increasingly popular, with the airports offering international/global trade and people connections for the city.
With the increased travel on the 21st century, we are going to see an expansion and thriving global aerotropolises or airport cities thanks to the impact of globalization. The world’s leading airports will form a core of burgeoning economic development that will support numerous economic initiatives. Cities must take the initiative in building macro-developments around some of the bustling airport hubs in their midst.
Some of the highest volume global airport hubs include Dubai , Paris, Memphis, Hong Kong and Guangzhou. These cities on the runway have already raised a very high bar for many other aspiring Aerotropolises. The most successful global airport cities have succeeded in parlaying their busy runways into highly impactful macro economic development engines that are transforming their cities and their regions.
Many global airport cities already have ambitious development strategies that are centered around their airports. It starts with the airport itself where it is converted into a state-of-the-art facility. This then proceeds to other areas of the “airport economy” that ends up creating numerous jobs and giving the city a massive competitive edge.
The global aviation industry continues to grow from strength to strength and is currently supporting 62.7 million jobs and contributing $2.7 trillion in global GDP.
Over the next 20 years, the global aviation industry is expected to support some 99 million jobs and contribute more $5.9 trillion in global GDP. The highest growth forecast in the global aviation industry will be in those regions that has a fast growing aviation industry such as the Middle East, Asia Pacific and Africa.
A report by AviationBenefits.org details some of the important benefits of the aviation industry to the global economy. Currently, the global aviation industry accounts for 3.5% of the global GDP. The global aviation industry is bigger than the entire economy of Africa! If it were a country, it would be the 21st largest economy in the world.
The global air travel industry encompasses many sectors and refers to the global network of commercial aircraft operators, the air navigation service providers, aircraft manufacturers as well as the various air support services.
The air transport sector has been responsible for connecting the global economy for more than a century, providing millions of jobs and making it possible for humans to have a globally-connected quality of life.
You can read more about the social and economic impact of global aviation here: https://www.aviationbenefits.org/media/149668/abbb2016_full_a4_web.pdf
African airlines are losing $1.50 for every passenger that they carry, according to data but IATA. African airlines are facing serious challenges and many of them are struggling to break even. The African governments must be aware of the high cost of aviation business in Africa and make policy interventions to rectify the problem.
This could be in areas such as airline taxes, infrastructure and fuel charges and many other costs which all currently above the global average. The African aviation sector also grapples with insufficient safety oversight, restrictive air service agreements as well as the failure of the airlines in Africa to adhere to global standards. All of these factors add to the burden of doing airline business in Africa and hinder the potential social and economic benefits that Africans could realize by having a thriving aviation sector.
There is also a safety challenge facing the African airlines. The majority of them do not adhere to the international standards and best practices when it comes to safety oversight. The majority of African airlines still lack IOSA certification and that majority has a higher accident rate than the airlines that have achieved certification.
The African airlines need to pull up their socks and African governments can boost the efforts in realizing high safety standards by adopting international standards such as IOSA certification in their safety oversight.
For more information on the barriers holding back African aviation, please check out http://airlines.iata.org/news/barriers-hold-back-african-aviation
African aviation experts are looking for smarter and tougher policies and regulations that will guide a strong growth in the continent’s aviation sector.
The industry, through its association the African Airlines Association (AFRAA) is looking at engaging African governments so as to adopt tougher and smarter regulatory framework that will help it avoid unintended consequences when it comes to the design and implementation of aviation policies across the continent.
AFRAA has called on the African aviation authorizes to allocate more resources and allow operational independence so as to improve the safety standards in the African aviation sector.
Currently, the growth in the African aviation sector is being hampered by ill-conceived regulations, high cost of infrastructure as well as poor safety oversight. For example, several African countries are currently struggling to comply with the 60% or more of the ICAO recommended practices and standards.
There is need to engage African economies so as to make smarter regulations and ensure full consultations with the various airlines that will help them comply with the international standards and best practices.
The industry could gain greater momentum by improving the general awareness on safety issues among the policy makers and industry leaders so as to improve on and sustain security oversight and safety in the industry. There is also the need for ratification of the various continental aviation conventions across all African countries in order to harmonize aviation policy implementation. There are various legal instruments that African airlines can use in order to survive and thrive.
African aviation is currently growing by leaps and bounds. By 2035, the continent is expected to have a massive market of some 350 million airline passengers if the challenges that are currently bedeviling the industry can be addressed urgently.
The aviation sector in Africa currently supports some 6.8 million jobs and contributes $72.5 billion to the economies of African countries. In the next two decades, the passenger demand in the African aviation sector is expected to grow by 5.7% annually on average and this will open an incredible potential for the numerous nations of Africa.
Not too long ago, African aviation was dominated by LCCs, most of them state-owned. But the continent has experienced low cost revolution over the past 10 to 15 years. While some of the legacy carriers have collapsed, smaller LCCs have emerged to fill in the space, particularly in the domestic flights arena.
If African aviation is going to survive the foreign aviation onslaught, it has to have a strong foundation of private airlines that connects its cities.
Where are the Planes?
One of the things we have observed in the recent years has been a frenzied development of African airports. In Kenya, where there has been devolution of power to disparate 47 counties, every county has been keen on building an airport, even if those airports are currently mostly empty. But Africans are embracing air travel very fast and the low cost carriers are the ones that are going to fill in the space and provide inter-city connections between the various African destinations.
Below is a look at the top low cost carriers in Africa:-
South Africa’s iconic low cost carrier was founded in 2001 and has been doing booming business since then. The airline is operated by Comair, a local subsidiary of British Airways and has forged agreements with various international airlines such as Kenya Airways and Air France. Kulula serves various destinations such as Cape Town, Port Elizabeth, East London, Windhoek, Livingstone, Victoria Falls, Mauritius, Harare and Durban.
A recent entrant into the African aviation market, Fastjet is one of the most ambitious low cost carriers on the continent. The airline was launched in 2011 and serves domestic routes in Africa. In the recent years, it has extended its wings to four other African countries on the continent. Some of its current routes include Entebbe, Johannesburg, Dar es Salaam, Lusaka, Kilimanjaro, Mwanza and Mbeya. It has plans to expand into the South African market.
FlyAfrica.com is based in Johannesburg and has somewhat filled the gap left by Zimbabwe’s legacy carrier Air Zimbabwe that has scaled its operations over the years. The airline offers very low priced flights from Johannesburg to Victoria Falls. The airline shocked many travelers with its jaw-dropping fares which were as low as $9! Apart from its popular Victoria Falls route, the airline offers flights to Harare and Windhoek.
Mango is another popular South African LCC servicing various South African routes including Johannesburg, Cape Town, Durban, Port Elizabeth, George, Bloemfontein and Zanzibar. The airline is popular with its customers for its flash sales in its mailing list.
FlySafair is another South African LCC servicing various local destinations including Cape Town, Johannesburg, George and Port Elizabeth. The airline is also known for its very low air fares although the tickets are generally stripped down and do not include checked bags.
Founded by the Lonrho Group, this is one of the oldest LCC in East Africa. The airline has served various Kenyan routes for decades including Kenyan cities such and destinations as Kisumu, Mombasa, Malindi, Eldoret, Lamu and Nairobi. The airline also offers flights to Juba and Zanzibar. In a pan African play a few years ago, the airline offered flights in Ghana and Angola over a short stint before suspending the flights.
Jambojet is low cost subsidiary of Kenya Airways which was launched in 2014. The airline serves for Kenyan cities, namely Kisumu, Mombasa, Eldoret and Malindi from its hub in Nairobi. The airline has been cleared by the Kenyan aviation authorities to operate flights to other African destinations although it hasn’t commenced these flights yet.
Dana Air resumed domestic flights in Nigeria a few years ago after recovering from a terrible accident that killed 153 people in Lagos. The airline is yet to get international safety certifications to operate international flights.
African governments should begin to recognize the potential of its aviation industry to stimulate the African economy and spread prosperity across the continent. In the US, the aviation industry generates more than $1.6 trillion in economic value and supports more than 100 million jobs!
Currently, African is the region that has got the highest potential for growth in the aviation industry but the industry is burdened by a host of obstacles that are easy to overcome such as punitive taxes, high fuel costs and high infrastructure costs which are curtailing the many benefits of the air travel industry.
The situation is currently dire. African aviation loses $1.50 for every passenger that it carries. Most African carriers are currently struggling to break even.
African governments must recognize that Africa is a high cost environment for aviation business. The infrastructure charges, taxes and fuel charges in Africa are higher than the global average. On top of these, the African aviation industry is also struggling with poor safety oversight, a failure to adhere to global standards as well as restrictive air services agreements across the continent which makes cross continent air travel difficult and hinder the numerous social and economic benefits that the continent could potentially reap from its air travel industry.
Safety standards have improved over the recent years. In 2016, there were no fatalities or any jet hull losses in the whole of Sub Saharan Africa but the state of safety oversight across African skies is still worrying. Many African airlines have failed to adopt the IATA Operational Safety Audit (IOSA), an internationally recognized safety audit system that shows an airline’s seriousness and commitment to uphold safety standards. Such laxity will continue to hold back the aviation safety efforts in Africa.
Based on the performance statistics in the IOSA registry, the African airlines that are in the registry have a n accident rate that is half of that those that are not in the registry. Currently, only 33 African carriers are IOSA-certified.
This could be improved if more African governments used IOSA in their national safety oversight functions.
Airlines might miss out on a massive in-flight ecommerce ancillary revenue boom unless they begin treating their passengers as ecommerce shoppers. Currently, that revenue stream could be worth as much as $30 billion annually. Tapping into this lucrative opportunity will require a re-adjustment of business models to suit the needs of modern travelers who want ubiquitous internet connectivity and might be open to making a few purchases online during flight.
In-flight broadband has seen a significant growth in the recent years, allowing passengers to access new services such as high speed film and TV streaming onboard, online shopping in-flight and numerous other services. That ancillary stream has the potential to create a massive $130 billion market over the next 20 years based on a report by the London School of Economics and the satellite provider Inmarsat.
In this huge $130 billion in-flight ecommerce market, airlines could capture a massive $30 billion share by 2035 from a market of $900 million in 2018 by charging fees and offering advertising and partnerships onboard. By 2035, this significant growth in in-flight broadband ancillary revenue stream will add an extra $4 to the airlines ancillary revenue per passenger which currently stands at $17 per passenger from in-flight expenditures such as food, drink and duty-free shopping.
The use of ancillary services as a supplementary revenue stream has grown in leaps and bounds over the recent years thanks to the rise of low cost carriers with their competitive pricing models which have driven the cost of airfares while maximizing on these supplementary revenues. The rise of low-cost carriers has also applied more pressure on the legacy carriers and undermined their long-held stranglehold on the air travel market. These ancillary services currently generate an extra $60 billion for global airlines annually.
In 2016, the top ten global airlines ranked by their ancillary revenues earned $28 billion from these add-on services. This is a vast improvement over 10 years back in 2007, when the ten best performing airlines ranked by ancillary revenues grossed only $2.1 billion from their add-on services.
With the introduction of new satellite constellations, airlines are now able to offer high speed in-flight broadband services and this has opened a new frontier in ancillary revenues through in-flight online shopping. However, not all airlines have moved with speed to take advantage of this new revenue opportunity. Of the more than 5000 airlines operating globally, only 53 have installed in-flight broadband connectivity. That is roughly 1% of global airlines.
Most airlines would rather stick with what has worked for them in the past so they remain focused on the basic service of simply offering broadband service but not going further to leverage this and boost in-flight ecommerce.
There are various ways in which forward-looking airlines could leverage in-flight shopping in order to generate more revenues. For example, they could partner with leading ecommerce brands and offer passengers continuous shopping for the duration of flight whereby the items purchased are delivered either to the holiday destination of the passenger or to their home.
The airlines shouldn’t just have a broadband mindset; they must learn how they can leverage these for in-flight ecommerce.
That might require some serious marketing effort. Airlines could start by differentiating on the type passengers onboard, whether they are leisure or business passengers and then target them accordingly with the relevant ecommerce product deals. The airlines must embrace micro-segmentisation when they are developing the strategies for in-flight broadband services. The mindset must change from that of simply offering good onboard connectivity to that of targeting a potential in-flight ecommerce shopper.
To fully take adapt to this opportunity, these airlines must also install onboard broadband services that will assure consistent connectivity for the duration of flight. It is hard to deliver an smooth onboard shopping experience if you can’t even guarantee a seamless connectivity for your passengers.
The world’s fastest growing commercial aviation market is poised for an even greater growth thanks to a new ancillary revenue stream as more Chinese carriers offer ecommerce services to their passengers through their in-flight broadband connectivity.
The Chinese mainland currently has the largest smartphone as well as online retail market. This puts it in a pole position to benefit from the massive global in-flight broadband ancillary revenue opportunity stream forecast to reach $130 billion by 2035.
Chinese airlines expect to see significant revenue growth in this area because a lot of passengers now prefer carrying electronic devices on board so that they can access choice content beyond what is provided by the in-flight entertainment in the plane.
The availability of in-flight broadband enhances the customer experience but it is also a significant opportunity for many airlines to ramp up their ancillary revenues. Many brands and internet companies are also going to benefit hugely from this opportunity.
Airlines operating in the Asia Pacific region are going to see the most opportunity from in-flight broadband-driven ancillary services in the coming years. Total revenue is expected to hit $10.3 billion thanks to a wide availability of services as well as strong passenger growth.
According to study the study London School of Economics, the Asia-Pacific region will lead in broadband based in-flight ancillary services with projected revenue of $10.3 billion by 2035 followed by Europe and Russia at $8.2 billion, the US at $7.6 billion, Latin America at $1.9 billion and the Middle East at $1.3 billion. Africa will still be lagging behind with an in-flight broadband-based ancillary revenue of only $0.59 billion.
The revenues will come from multiple streams including advertising, broadband access fees, premium content and ecommerce sales as well as arrangements with some of the leading online content providers such as Amazon, Alibaba and New York Times.
The study estimates that global airlines currently receive on average $17 per passenger from the traditional ancillary services like in-flight retail, duty-free purchases, food and drink sales. The in-flight broadband ancillaries will add an extra $4 by 2035 according to the study.
On a global scale, if airlines will be able to successfully roll out in-flight broadband, they will be able to unlock other creative content, ecommerce and advertising packages that will boost their ancillary revenues.
Passengers are also demanding more. In China, an estimated 68% now rank in-flight broadband connectivity as more important than the traditional in-flight entertainment so airlines have to rise to the challenge.
Most of the major Chinese airlines have built strategic partnerships with some of the largest online retailers in China such as JD.com and the Alibaba Group so as to meet the needs of their passengers.
These partnerships often involve making these stores available to passengers in various flight routes and also offering online payment support to passengers through portals such as AliPay.
The demand for these services has been driven by the consumer behavior of the mainland passengers who are accustomed to using the internet virtually anywhere. China currently has the largest number of internet users globally at 731 million. Out of these, some 695 million access the internet through their smartphones so connectivity on-the-go is a very important aspect of Chinese internet experience which creates a huge opportunity for these airlines.
Online shopping has also grown in leaps and bounds in mainland China. This is in spite of a slowdown in the Chinese economy. By 2020, Chinese online retail is projected to hit $1.7 trillion. In 2016, the country’s online commerce was worth a whopping $750 billion according a Goldman Sachs report.
There is huge potential for in-flight broadband to personalize in-flight entertainment and generate extra revenues through this but airlines shouldn’t just treat onboard connectivity as an in-flight shopping magazine. They must also explore other innovative ways through which could entice passengers to spend more money onboard.
But it is still early days and there is huge potential for growth. Currently, only 53 airlines offer onboard broadband out of the 5000 airlines operating globally.
Intra African and transcontinental travel has long been dominated by the state and foreign legacy carriers. This is also true for the Middle East, Asia and Europe. However, in markets such as the US, the air travel industry has long been dominated by private carriers for as long as we can remember, in the process fostering a spirit of stiff competition and innovation in the aviation sector.
Africa is still a minute player globally. Its carriers are often smaller and with small fleet of aircraft; state interference has often impacted business decision-making. That is why some African aviation experts are now calling for the establishment of a global African airline from nay of the leading African airline hubs that could boost the connectivity on the continent and between the continent and the rest of the world.
African travelers used to face a myriad of travel challenges ranging from poor inter-city connectivity to long layovers in hubs such as Dubai.
But the airline industry has improved considerably over the years. It is no longer what it used to be a decade or two decades ago. The continent has experienced fast economic growth and relative stability, factors that have underpinned the boost in the international air traffic in Africa.
Africa is currently the third fastest growing aviation market after the Middle East and the Asia Pacific. There has been an onrush in foreign investments in the continent along with burgeoning economies that have led to the expansion of the African middle class.
The air traffic within the continent has also been growing rapidly. More Africans are now visiting other African countries for business and leisure. Yet the continent is massive with poor road and rail infrastructure. Air travel is therefore highly vital in providing important transport links between cities on the continent for both business and leisure travelers.
All of these factors bode well for aviation companies in Africa. But still, the many African carriers on the continent, most of them state-owned, still account for only 5% of the global air traffic. Most of the traffic is handled by US, Asian, European and Middle Eastern Airlines.
Many of these non-African carriers are also on an aggressive expansion into the African market. Turkish Airlines alone is expected to operate flights from Istanbul to 52 destinations on the African continent. 6 years ago, the airline was flying to some 14 destinations so it has increased its coverage of the continent almost four-fold in the less than a decade.
Emirates operates flights to some 30 African destinations from its Dubai hub. This massive expansion by non-African carriers is happening at a time when some of the leading African carriers such as Kenya Airways and South African Airways are experiencing serious challenges. Kenya Airways alone lost $260 million for its 2016 financial year. The only major African carrier that is currently doing well is Ethiopian Airlines.
While the competition may seem to be stiffening, this actually bodes well for the African aviation sector as an investment opportunity.