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africawings 1
Cover
insideNov 2008 issue no. 10
The objectives of the journal are to provide brief account of
the activities of AFRAA and feature
additional information of interest to member airlines and the
aviation industry.
Unsigned material may be reproduced in full or part
provided it is accompanied by reference to Africa Wings; for
rights to reproduce signed articles, please write to
the editor.
Although every effort is made to ensure the accuracy of the
information and reports in this magazine, the editors,
the publishers, printers and distributors do not accept any
responsibility whatsoever for any errors or omissions
or for any effect therefrom. The views expressed by contributors
are not necessarily those of the editors or
publishers.
All rights reserved.
PublisherAFRAA/PANAPRESS
Managing EditorChristian Folly-Kossi
Editors in ChiefRaphael Kuuchi
Biava SeshieEphrem Kamanzi
Editorial TeamAFRAA Directorate
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Special Report
-AFRAA Carbon Emission Policy-SITA & Rwanda take steps to
improving aviation safety in Africa
Feature
-Loss of Skilled Manpower-The Future of Travel Agencies-Time to
re-engineer African Airlines media relations.-African Aviation:
Changing with the times.
Safety & Security
-Emergency planning & Response Management.-Accounting
treatment of aircraft maintenance cost
Airlines Update-EgyptAir becomes 21st member of Star
Alliance-Ethiopian & ASKY sign MOU-Virgin Nigeria best Airline
in west Africa-LAM: A Giant in the Making
Profile -New Chairman & CEO of EgyptAir Group-Afriqiyah
appoints CEO & Commercial Director-Capt. Boyo- A Solid pillar
of African Aviation
Forum-AFRAA/AFCAC/ACI-Africa Sign MOU-1st AFRAA/ACI- Africa ICT
forum-AFRAA/ICAO Aviation Statistics Workshop-Fight oil price rise
with E-Commerce
News briefs
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Afraa Magazine august 2008.indd 1 11/11/2008 11:18:32 AM
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Editorial
The sudden outburst of the current financial crunch and the
subsequent economic recession has led to panic and restlessness all
over the world. Heads of States, Ministers of Finance and Heads of
the World financial institutions are holding meetings all around to
stem the effect. Africa seems to be the only continent maintaining
indifference, probably because we under estimate the potential
far
reaching impact on our economies or because we are overwhelmed
by our present dire-need state that we feel the current crisis
cannot make our situation any worse.
Whatever might be the reasons, we are wrong not to mobilize our
resources like the others and address the crisis or take advantage
of it by revisiting our fundamentals and in particular the way we
do business. In the Chinese hieroglyphics, the concept of crisis is
rightly captured by juxtaposed symbols of danger and opportunity.
The teaching is that in times of crises, we ought to search for and
focus on the hidden opportunities.
In the airline business, our continent has been in crisis for
decades. Half of the continent is dominated by the foreign
carriers. This is likely to worsen with the EU/US single airspace
concept. The size of most of African airlines is just too small and
operations ineffective to withstand worldwide competition. Yet the
crisis and the anticipated recession will result in the mega
carriers of the world intensifying their market penetration in
Africa. This unfortunately will happen at the expense of African
weak airlines. It is high time we heed this latest wake-up call,
and go the Chinese way; look for opportunities and work hard to
change our fate.
AFRAA believes that African airlines and States have a few
stimulus measures to adapt in order to create the enabling
environment airlines need to thrive and be successful.
The small size issue needs to be squarely addressed. Small
carriers should merge or forge continental alliances with the
relatively big airlines of Africa. In this regards, States should
discount the notion that airlines ownership is inextricably linked
to their sovereignty. The national flag and anthem amply play that
role. States should now encourage airlines consolidation and cross
border investments. Those States that have no airlines currently or
have ailing carriers should opt for multinational solutions. States
must extend their support to these solutions without taking the
driving seat in their management.
Consolidation will yield economies of scale that can further
enhance additional partnerships through joint projects and
negotiations. Already, AFRAA is championing joint projects for its
members in areas such as; fuel supply, ICT common platforms, ground
handling services, equipments and spare parts procurement among
others.
LOOKING BEYOND THE CRISIS
On the travel service supply side, the continent operators still
lack air services into some major emerging economic power-houses of
the world such as Latin America and the Far East. The air links
with North America and Asia remain limited and poorly spread.
Africa need to expand its presence on routes to emerging
destinations with enormous traffic growth potential in order to
grow its traffic and revenues and regain part of the lost
intercontinental traffic.
May I remind States at this juncture, of their responsibility to
ensure that African carriers are not victims of unfair competition.
African States must engage other regions, and in particular the
European Union (EU) in bloc-to-bloc negotiations on matters
pertaining to the EU single airspace and other bilateral relations
with third countries.
There should be a level playing field which guarantees a balance
in the number of European vis--vis African flights operating in our
markets. This failing, most African airlines will soon disappear.
We urge the African Union through the African Ministers responsible
for civil aviation to constitute an adhoc sub-committee to
negotiate with third party blocs on evolving regulatory and
bilateral issues. AFRAA and AFCAC will provide the necessary
technical support to such sub-committee.
Of course, the preamble to all this must be the full
implementation of the Yamoussoukro Decision that would enable
African airlines to develop more dominance on their continental
domestic markets and provide air services across the continent for
African passengers. Under the leadership of AFCAC as Executing
Agency, the earliest formation of the Club of the Ready and Willing
(CREW) States is the way forward.
Christian Folly-Kossi,Secretary General AFRAA
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Special Report
Commercial aircraft typically operate at cruising altitudes of 8
to 13 km, where they release several gases and
particles which alter the composition of the atmosphere and
contribute to climate change. Carbon dioxide (CO2) is the most
important greenhouse gas because of the large quantities released
and its long residence time in the atmosphere. Even though there
has been significant improvement in aircraft technology and
operational efficiency, this has not been enough to neutralise the
effect of increased traffic, and the growth in emissions is likely
to continue in the decades to come.
Growth in Aviation EmissionsEmissions from aviation currently
account for about 3 percent of total European Union (EU) greenhouse
gas emissions, but they are increasing fast by 87 percent since
1990 as air travel becomes cheaper without its environmental costs
being addressed (EC, 2007). The rapid growth in aviation emissions
contrasts with the success of many other sectors of the economy in
reducing emissions. By 2020, aviation emissions are likely to more
than double from present levels.
The Proposed EU DirectiveThe proposal for a directive follows up
on a September 2005 Communication which concluded that bringing
aviation into the European Union (EU) Emissions Trading Scheme
(ETS) was the best approach, from an economic and environmental
point of view, to tackling the sectors emissions. This was
subsequently supported by the Council and European Parliament (EC,
2007). The directive will treat all airlines equally, whether
EU-based or foreign. From 2011 all domestic and international
flights between EU airports will be covered, and from 2012 the
scope will be extended to all international flights arriving at or
departing from EU airports. After having examined several types of
market-based solutions (airline ticket or departure taxes and
emissions charges) the Commission concluded that the most
cost-efficient and environmentally effective option would be to
include emissions from aviation in the EU Greenhouse Gas Emissions
Trading Scheme.
International Airlines ResponseThe African Airlines Association
(AFRAA) has been working in conjunction with other international
airline associations such as the Association of Asia Pacific
Airlines to have a common response to the European Union directive
on carbon
emissions. AFRAA believes that the proposed legislation is both
premature and flawed.Firstly, the legislation appears to reject
established role of the United Nations International Civil Aviation
Organisation (ICAO) in setting globally harmonised standards for
aviation, including environmental issues. In particular, article
2.2 of the Kyoto Protocol, as signed and ratified by the EC,
provides that polices on emissions from international aviation
should be pursued by working through ICAO. Efforts towards this
objective are ongoing. EU legislation, insofar as it includes
international aviation, is therefore premature.Secondly, the
extra-territorial impact of the proposed legislation will bring the
EU into conflict with non-EU governments. The proposed inclusion of
non-EU carriers within the scheme, on the basis of unilateral
action by the EU without the consent of other governments, would be
in violation of the tenets of the Chicago Convention and
existing international aviation agreements and practice. There
is near unanimity amongst non-EU governments around the world that
such actions require mutual consent of the relevant governments.
Far from establishing the EU ETS as a model for a harmonised global
approach, any attempt to force non-EU airlines to participate in
such a scheme would be counter-productive, inevitably triggering
serious legal and political conflicts.
How African Airlines can Reduce their Emissions in PracticeAFRAA
is working with African airlines to reduce their emissions in
several ways, notably by encouraging investment in more efficient
aircraft and engines and in optimising operations. Although the
biggest improvements would typically arise from accelerated fleet
renewal, many aircraft in the current fleets also hold potential
for improvements. For instance, some aircraft can be retrofitted
with winglets, new surface treatments that reduce drag (air
resistance) and even new engines. Airlines can also optimise their
timetables, route network and flight frequencies to minimise the
number of empty seats flown. ICAO has published a catalogue of
Operational Opportunities to Minimize Fuel Use and Reduce
Emissions. In the longer term, research into more efficient
technologies and alternative fuels may provide additional
opportunities.
AFRAA CARBON EMISSIONS POLICY- Dr. Elijah Chingosho
cont. to pg 5
Aircraft emissions such as this are few in the aviation
industry. Aviation contributes about 2% of global CO2
emissions.
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Special Report
Ethiopian Airlines has won Corporate Achievement Award for its
excellence in the airline industry by Aviation &
Allied Business Publication. This prestigious award was given to
Ethiopian Airlines in recognition of its outstanding contributions
to the development of the airline industry in Africa. Through its
commitment for excellent services, Ethiopian Airlines has been
recognized for its continued contribution in setting the pace in
the airline industry in Africa thereby contributing significantly
to socio-economic integration and development.The Award is a
testimony of Ethiopian Airlines commendable and profitable
operations over the years despite serious challenges that have
adversely affected many large and small airlines globally. said Mr.
Busera Awel, Vice President Commercial of Ethiopian Airlines.
Ethiopian wins the 2008 Corporate Achievement Award
The award plaque was handed over to Mr. Busera Awel by Mr. Jeff
Radebe, Member of Parliament, Honourable Minister of Transport of
the Republic of South Africa at the 14th Aviation & Allied
Business Leadership Conference in Johannesburg, South Africa in
August.
VP Commercial of Ethiopian, Ato Busera Awel receiving the award
plaque from Hon. Jeff Radebe Minister of Transport, Republic of
South Africa
Afraa Magazine august 2008.indd 4 11/11/2008 11:18:42 AM
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AFRAA position on aviation emissions AFRAA supports ICAO efforts
in minimizing the impact of aviation emissions on the environment.
AFRAA agrees that the ICAO Committee on Aviation Environment
Protection (CAEP) should be the worldwide environmental technical
forum.
African airlines expect that emphasis should be on those
measures that reduce emissions without negative impact on the
growth of air transport, particularly in developing countries
African airlines: Support continuous development of technology
as a vehicle to reduce emissions Support improvement in global air
traffic management to create shorter-straighter routes
African airlines do not believe that imposition of aviation
emission charges is an effective solution to the problem of
emissions due to: Difficulties associated with direct application
of those charges The potential discrimination against aviation in
comparison to other more polluting sectorsAfrican airlines believe
that emission trading could be a more effective solution than
imposition of charges or taxes. However, inclusion of aviation
emissions in Emission Trading Scheme (ETS) should
follow ICAO guidelines based on mutual agreement of States and
airlines involved.
AFRAA believes that since the Kyoto Protocol does not set
emission targets for developing countries, inclusion of airlines
from developing countries in the emission trading scheme of
the European Union would be inappropriate.
African airlines believe that although the United Nations
Framework Convention on Climate Change has requested ICAO to handle
issues pertaining to aviation emissions, it should respect the
fundamental principle of differential responsibility for developing
and developed countries. (Developing countries are exempt from the
Kyoto Protocol)
The Executive Committee of the African Airlines Association
(AFRAA) held its 146th meeting in Cairo, Egypt. The meeting was
hosted by EgyptAir.
This was the second statutory Executive Committee meeting in
2008 and was convened to review and take decisions on some
administrative issues, consider preparations towards the 40th
Annual General Assembly and receive reports of the Standing
Committees as mandated by the articles and by-laws of the
Association.
The meeting in Cairo also accorded members of the Executive
Committee an opportunity to meet and welcome the newly appointed
Chairman and Chief Executive Officer of EgyptAir Group, Capt.
Tawfik Assy following his appointment in April, 2008.
Capt. Tawfik replaced Eng. Atef Abd Elhamid as Chairman of
EgyptAir Group. Until his appointment, Capt. Tawfik was the
Chairman and Chief Executive Officer of EgyptAir Tourism and Duty
Free Shops Company.
146th Executive Committee Meeting in Cairo, Egypt
Emissions such as by this aircraft pose a risk to the
environment.
Special Report
cont. from pg 3 AFRAA CARBON EMISSIONS POLICY
Some EXC Members & AFRAA Team after 146th meeting in Cairo,
Egypt
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For years, professional and highly skilled employees trained on
the meagre resources of airlines and civil aviation authorities
have been migrating outside the continent to greener pastures.
However, until recently, the rate of employees that were leaving,
though damaging, has been manageable to some extent. Airlines and
civil aviation authorities have struggled to replace some of the
losses through their normal training and hiring processes.
Traffic Growth The main driver for demand
The significant growth in air traffic in recent years
particularly in Asia and the Middle East, however, has fuelled an
exodus of professional and skilled employees from African airlines
and civil aviation authorities to these regions.
The Middle East is one of the fastest growing areas for
passenger and cargo, registering in 2006, a growth rate of 15.4%
and 16.1% respectively. The Civil Aviation Authority of China
(CAAC) estimates 11,000 additional pilots will be required by 2010
and another 18,000 by 2015. In Asia and the Middle East, based on
known aircraft orders, the Centre for Asia Pacific Aviation (CAPA)
analysis suggests a need for 154,000 employees across the region
over the next decade, including 10,200 pilots, 36,000 cabin crew,
26,800 maintenance engineers and 38,500 ground handlers. The huge
manpower short fall cannot be fully addressed, at least in the
short term, with the existing training capacity globally. IATA
report indicates that there will be a short fall of about 3300-
3500 pilots per year between the demand and the present training
capacity can accommodate.
Contributing Factors
In addition to the strong traffic growth, which is the main
driving force behind the high demand, several factors facilitate
the loss of professional and skilled manpower of African
carriers.
Job insecurity resulting from constant changes of senior
management and uncertainty created by heavy government involvement
in the day to day affairs of the airlines are some of the
contributing
factors. The endless and protracted privatisation and
restructuring
LOSS OF SKILLED MANPOWER A Crisis in the Making-Tewodros
Tamrat
processes that have become the hallmark of carriers across the
continent have added fuel to the sense of insecurity and
frustration pushing professional and skilled employees to seek jobs
outside their own country and the continent.
On top of this, many African carriers have not been able to
offer a package that is competitive or at least provide adequate
incentives to encourage employees to stay. This in some cases is
due to the precarious financial situation of many of the airlines.
Others have been hindered by the fact that being closely controlled
by their
governments, they lack the flexibility to adjust their salary
scale to reflect changes in the market.
Additionally, with increasing opening up of the economies of
many countries, airline jobs in African airlines have lost some of
their glamour. The indirect benefits such as access to foreign
currency and importation of foreign goods which airline employees
traditionally used to benefit from no longer exist or have been
reduced substantially. Despite this, many airlines have not found
ways of rebalancing the packages they offer to ensure that
employment in the airlines remains attractive.
Another contributing factor is poaching by foreign airlines.
Some airlines, particularly those from the Gulf as well as the Asia
Pacific, use poaching as a strategy to supplement their manpower
requirement instead of training the required manpower to cater for
their anticipated growth needs. Utilizing the services of highly
skilled
and aggressive agencies and assisted by regulatory and policy
environment in their countries such as, exemptions from income
taxes, duty free privileges and selective immigration policies,
which are geared towards encouraging the importation of skilled
manpower, these agencies have been able to recruit and take away
the best and the most experienced pilots and technicians from
African carriers.
The Adverse Effect
The significant upward increase in the loss of professional and
skilled manpower especially pilots and aircraft technicians has
reached a point where it is causing disruption of air transport
services and forcing some airlines to scale down operations and/or
put on hold their plans for expansion. More worryingly, the current
effort for a safer African sky could be greatly jeopardised, due to
the shortage of well trained and experienced aviation personnel in
critical safety areas. This will affect the capacity of many
countries to effectively shoulder their safety oversight
responsibilities. Airlines may also be forced to make do with
relatively less experienced pilots as the shortage becomes acute.
The situation will get worse as traffic growth continues and
airlines increase their capacity to meet demand.
Meeting the Challenges
Considering the serious adverse effect that continued loss of
highly skilled manpower has on their operation, growth and
ultimately viability, African airlines need to put in place a
comprehensive strategy that minimize such losses and mitigate its
impact. Such strategy should take into account the global, regional
and national dimension of brain drain as well as the specific
situation of the individual airline concerned. The strategy may
include among others, blocking strategy, retention incentives, end
payment schemes, tax exposure reduction schemes, adequate notice
and cost recovery agreements. These are but a few examples.
However, airlines need to be careful not to violate local and
international law in implementing their strategies
African governments also cannot afford to ignore this great
challenge facing the air transport industry, which if not properly
addressed may have disastrous effects on African carriers and civil
aviation. Unless
Pilots in the cockpit of an aircraft
Feature
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Feature
they individually and collectively together with the industry
take concrete and urgent actions to stem the flight of trained
manpower from the industry, the already fragile air transport
industry may suffer a great setback.
Governments need to take urgent regulatory and policy measures
that encourage and support the retention of skilled manpower in the
continent while discouraging poaching. They should also put
diplomatic and political pressure through the Regional Economic
Communities (RECs) and the AU on recipient countries to desist from
deliberately poaching skilled aviation manpower from African
airlines and other critical sectors and remove policies and
regulations that encourage such poaching.
Enhancing Training Capacity
African airlines and governments, individually and collectively,
need to work together to enhance the training capacity of existing
training institutions as well as
establish new ones. Like all adversities the current and
anticipated manpower shortage offers great opportunities for the
continent to train manpower not only for its own needs, but also
cater to the needs of airlines outside the region thereby opening
up job opportunities for many Africans. This requires concerted
effort, and collaboration between the industry, governments,
regional organizations and financial institutions. Countries of
airlines who are currently engaged in poaching could also team up
with the continent in this endeavour.
Many African airlines, such as Ethiopian Airlines, EgyptAir,
Royal Air Maroc, South African Airways, Kenya Airways among others
have training facilities and offer training that is of high quality
and meets international standards. African carriers need to partner
with these airlines and take advantage of their facilities to
ensure a steady supply of trained manpower at a reasonable
cost.
These facilities are however, not adequate to meet the growing
demand within the continent. There is therefore an urgent need to
strengthen and expand their capacity. To do so funding will be
required. Financial institutions such the ADB are well advised to
step in and extend financing facilities to airlines and civil
aviation authorities to assist them enhance their existing training
facilities as well as the establishment of new ones. There is also
great opportunity for private sector participation in this
area.
However increased training alone particularly in the short term
does not address the problem fully as employees that leave as a
result of poaching or otherwise are the most senior and experienced
pilots and technicians. Robust and proactive employee retention
programs coupled with measures that discourage poachers must also
be put in place.
The African Airlines Association at its 39th AGA made an urgent
appeal to all major stakeholders to address this critical challenge
faced by the industry. We hope all, particularly African
governments, will positively respond to the airlines call to
action.
A Team of Nasair Cabin Crew. Professionals such as these,
pilots, Engineers and Administrators are fleeing the continent for
greener pastures elsewhere.
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The various air disasters we have witnessed on the continent
clearly point to a need for aviation stakeholders to have
an emergency response plan that meets international standards.
As the regulatory regimes continue to come up with stringent
requirements in this field, it is crucial that operators deal with
the experts and be prepared for the worst. In a situation of
disaster our clientele expects us to show case tested
professionalism. More importantly, a major disaster should not
signal the death knell of our organisations.
For this reason, AFRAA, in collaboration with Kenyon, a leading
world organisation in emergency planning and response management,
held a workshop for airlines and other stakeholders of the aviation
industry on 14 15 July 2008 in Nairobi. The workshop is in response
to inadequate responses following a number of accidents on the
continent. The workshop was well attended by 36 participants from
14 airlines and other stakeholders of the industry.
Major Areas Covered
An emergency is destabilizing by its nature and represents a
threat to the future of an airline. The workshop was an important
forum for the sharing of ideas and expertise particularly in the
critical area of family and survivor assistance following an
airline disaster.
EMERGENCY PLANNING AND RESPONSE MANAGEMENT-By Dr Elijah
Chingosho
Among the areas covered during the workshop were as follows:
The need for an emergency response plans as well the aviation
disaster response planning industry standards. Also covered were
modalities of setting the goals of successful response plan The
regulations pertaining to family assistance and survivor issues
including ICAO stipulations particularly the Montreal Convention,
European Regulations and regulations in certain countries Producing
Emergency Procedures Manual including the drawing up of the
emergency procedure organisation and the roles and job descriptions
of post holders. The command structure of an airline emergency
response organisation including the command centre responsibilities
Accident investigation and technical support Airport response
including accident station responsibilities and airport response
family and survivor assistance Family assistance (manifests, call
centres and notification) and family assistance site response.
Family assistance briefings, events and services and special
assistance teams Media relations and corporate response issues.
Insurance, legal and finance issues The required exercises, drills,
crisis leadership and thriving in chaos.
Kenyon and AFRAA Partnership
Following the successful workshop, AFRAA and Kenyon have already
opened discussions on coming up with a partnership arrangement
which will enable airlines to benefit from discounts when receiving
services from Kenyon. Some two airlines will be holding free
courses on handling an emergency following a draw conducted at the
end of the workshop and it is planned that more such collaboration
will enable African carriers handle disasters better than they have
done in the past..
Conclusion
The workshop was very important in highlighting the critical
areas that stakeholders need to deal with concerning a possible
emergency. The importance of planning, training and exercises and
drills and the need to professionally deal with family assistance
was highlighted as these issues could determine if an airline could
survive an emergency or collapse as has been the case with some
carriers on the continent.
The relatively small size of our airlines does not meet the
standards for economies of scale and bargaining power in the
Industry. We therefore need to cooperate to compensate for our
small sizes, achieve economies of scale and optimum costs.Robert
Jensen, CEO of Kenyon International
Executives of AFRAA and Kenyon after the Workshop in
Nairobi.
Safety & Security
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A
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Safety & Security
The Accounting Treatment of Aircraft Maintenance cost has posed
some challenges to Finance Managers, it is
therefore important to review how various Airlines account for
this cost and come up with some guidelines.
Airlines normally schedule their maintenance work based on their
operating requirements, Fleet disposition, and requirements of
aviation regulatory authorities or manufacturers specification.
Types of maintenanceChecks can be classified into the following
categories based on the level of service required: A checks These
are short cycle engineering checks, component checks
Monthly checks,
Annual Airframe Checks,
C Check is a periodic heavy maintenance check which is required
every 6000 hours or 1 year whichever comes earliest
D checks is also a heavy maintenance check where structured
checks of airframes is done every 6 years, 16 years or 30,000 hours
depending on aircraft type
There are also Engine Checks and Wing Repairs
There is replacement of Life limited parts which depends on
useful life of part.
Accounting TreatmentThere are Three Guiding Principals or
Standards on the Accounting Treatment of Aircraft Maintenance :
IATA Airline GuidelineIFRSUSGAPP
The IATA airline guideline on the treatment of maintenance cost
is in conflict with IFRS - IAS 37. The IATA guideline is also not
an accepted accounting guideline. The USGAPP accommodates accruals
which is the building up an accrual for maintenance liabilities in
advance of the maintenance event. It was recommended that Airlines
adopt the IFRS guideline which is the recognized accounting
treatment.IFRSIAS 37- Provisions, contingent liabilities
Accounting Treatment of Aircraft Maintenance Cost- Juliet
Indetie
Members of the AFRAA Economic and Finance Comittee
and contingent assets, treatment ensues from the matching
concept. Provisions are only permitted where there is a current
obligation, a current obligation occurs from either a current event
or a past event which must have a legal obligation ,current means
the prevailing financial year.
Accounting methods used by carries
a) Direct expensing method b) Built-in overhaul method c)
Deferral methodd) Accrual method
Airlines should ensure that whichever method they use, they must
ensure that they are in line with International Accounting
Standards. Maintenance policy adopted should ensure that costs are
expensed to the profit and loss account in a manner which fulfils
the matching concept. Short cycle maintenance costs, including
annual airframe checks, should be expensed as incurred. It may not
be wholly appropriate for smaller airlines to adopt such a
treatment during the start up phase in order to avoid potentially
significant fluctuation in reported results as a result of the
incidence of annual checks. In such cases heavy maintenance and
engine checks should be expensed on a basis which ensures that the
charge to the profit and loss account is evenly matched with the
associated revenue.
The approach of expensing heavy maintenance and engine check
costs
as incurred is appropriate where there is an even incidence of
maintenance expenditure. For other airlines the matching principle
will mean adopting either the capitalize and depreciate approach,
or the accruals approach.
It is important for the Airlines to ensure adherence to IAS 37
in determining in what circumstances an accruals basis should be
employed. If the maintenance agreement gives rise to a present
obligation at balance date, it would be permissible to use the
accrual method, maintenance obligations under operating leases will
also fall into this category but for owned or financed leased
aircraft the accruals basis would not be permissible except where
there is a contract in place involving non-refundable payments to a
maintenance provider (for example a charge per hour flown).
Balance sheet accounting will depend entirely on which approach
to accounting for cyclical maintenance is adopted. Where the
accruals method is still used, the airlines balance sheet will hold
a provision or accrual to reflect the cost charged to the profit
and loss but not yet paid. This can be shown either as an accrual
or as a provision.
Where the capitalize and depreciate approach is adopted the
airline will hold an asset relating to the deferred maintenance
expenditure. This should be shown as part of the fixed asset
balance to which the maintenance expenditure
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africawings 11
relates, as envisaged under IAS 37. Any initial maintenance
incurred to bring the aircraft acquired to serviceable condition
should be dealt with as an adjustment to the acquisition cost and
amortized over the period until the next maintenance check.
Airlines normally seek to manage their fleet in such a way as to
minimize the requirement to carry out additional maintenance at the
end of the lease term. However, where there is evidence that
additional costs will be incurred, it is recommended that the
anticipated cost is provided for on the accruals basis.
In the acquisition of Second hand aircraft the heavy maintenance
expenditure is incurred as part of the acquisition of the second
hand aircraft such expenditure should be dealt with as part of the
asset cost and depreciated.
summaryThe plane should be split into its major components and
each component amortized and depreciated over its useful life. This
is the alternative to building up provisions and in
the event that a part wears out and needs to be replaced before
its useful life, the residual amount should be written off in the
current years profit and loss account. It is not a prior period
adjustment but a change in estimate. The new part should be
amortized and depreciated over the useful life. If the components
need constant replacement before the expiry of their useful lives
then a review of the policy needs to be carried out on the
estimation process i.e. the definition of the useful life.
Maintenance Costs that do not add to the useful life of the
asset should be expensed and the default should always be to
expense. Provision can not be made for the D_Checks even though the
Airline knows the exact period the check needs to be undertaken as
the obligation has to be current and if it was a past event there
has to be a legal obligation.
In a case where the Aircraft is on lease, payments to the
lessors arise from commercial regulations and on going maintenance
should be scheduled to avoid incremental return to lessor costs.
Where a deposit is
paid for maintenance, the amount should be amortized as a
prepayment over the lease term.
Disclosure in the accountsAirlines should, where material, and
subject to any further requirements of local law or standard,
disclose the following:
. The Accounting Treatment of all Maintenance Expenditure;
. The Nature of Heavy Maintenance Expenditure;
. The Accounting Basis used for different types of Heavy
Maintenance;
. The Accounting Treatment of Maintenance Liabilities arising on
the acquisition of Second Hand Aircraft;
. Where Significant, the Impact of Return to Lessor
Conditions.
. The Rates used in amortizing the Capitalized Maintenance
Costs.
Accounting Treatment of Aircraft Maintenance Cost.
Afraa Magazine august 2008.indd 11 11/11/2008 11:20:43 AM
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12 africawings
Afraa Magazine august 2008.indd 12 11/11/2008 11:21:10 AM
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africawings 13
Profile
Capt. Tawfik Assy is the new Chairman and CEO of EgyptAir
Holding Company. He took over from Eng. Atef Abd Elhamid on 16th
April, 2008.
Prior to his appointment as Chairman and CEO, Capt Tawfik Assy
served EgyptAir for over 38 years in various senior management
capacities. Before ascending to the helm of the airline he was
Chairman and CEO of the EgyptAir Tourism and Duty Free Shops
Company, a position he occupied from June 2003 to April 2008.
Between 2007 and April 2008, Capt. Tawfik oversaw the development
and growth of an air taxi company Smart Airline, as its
Chairman.
Capt Tawfik achieved significant successes for the tourism
industry in Egypt during his reign as Chairman and CEO. He also
redefined and expanded the concept of duty free shopping at all the
major Egyptian Airports. Through his innovative leadership, he
quadrupled the total revenue of the company in four years.
During EgyptAirs restructuring, Capt. Tawfik was instrumental in
the airlines key businesses modernization. He earned credit for his
role in the airlines membership of the Star Alliance, IT systems
integration and enhancement, safety and quality assurance and
environmental initiatives.
Capt. Tawfik joined EgyptAir on December, 1970 as maintenance
engineer. Since then, he has worked as a pilot, captain and
instructor on B707, Fokker, B737, A320/330//340. Today, he is still
a licensed captian on the A330/340. His diverse industry knowledge
and experience is attributable to his almost four decades of
service in various senior technical and management positions in
EgyptAir.
Capt. Tawfik Assy Chairman and CEO
EgyptAir Holding Company
New Chairman and CEO of EgyptAir Group - Capt. Taw k Assy
He is a member of the IATA Board of Governors and also serves on
the Executive Committees of the African Airline Association (AFRAA)
and the Arab Air Carriers Organization (AACO). Capt. Tawfik holds
various academic qualifications including a BSC degree in
Electrical Engineering from Alexandria University and a Diploma in
Administration Management.
The dynamic and fast growing Libyan carrier, Afriqiyah Airways
has announced the appointment of Eng. Rammah Ettir as the new
Chief
Executive Officer (CEO). He takes over from Capt. Sabri S.
Abdallah who has been elevated to the higher office of Chairman of
the Libyan Aviation Holding Company, the parent company of
Afriqiyah and other aviation related parastatals of Libya.
Eng. Rammah comes with a wealth of aviation experience having
previously held the positions of Planning Manager and Commercial
Director in the airline.
Eng. Khaled Swessi has also been appointed Commercial Director
of the airline. Prior to his appointment, he was the Sales Manager
of Afriqiyah Airways.
Afriqiyah Appoints New CEO & Commercial Director
Eng. Rammah Ettir - CEOAfriqiyah
Afraa Magazine august 2008.indd 13 11/11/2008 11:21:49 AM
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14 africawings
Airlines Update
Ethiopian Airlines and ASKY, a newly established airline based
in Lome-Togo, signed a Memorandum of
Understanding (MoU) at the Ethiopian Airlines Head Office in
Addis Ababa to establish a strategic partnership between the two
carriers in the areas of marketing, operations, maintenance,
training, financing and management contracts. Mr. Girma Wake, CEO
of Ethiopian, and Mr. Gervais Koffi Djondo, ASKYs Chairman of the
board signed the MoU in the presence of
Ethiopian and ASKY Airlines Sign MoU on Strategic
Partnership
Mr. Christian E. Folly-Kossi, Secretary General of African
Airlines Association (AFRAA) and other executives of the two
airlines. The MoU includes a detailed roadmap that will culminate
in ASKY starting of operations by December, 2008.Mr. Girma revealed
that Following Ethiopians successful operations and management of
the Addis Ababa Hub, it was now determined to build Lome as the
second largest hub in Africa for Ethiopian. This MoU is an
important move marking an historic intra-African co-operation in
the airline business. The MoU will pave the way for the two
carriers to develop a West African hub for the regional and
inter-continental routes. The West African region is one of the
fastest growing economies in the world due to the prevailing high
commodity prices. ASKY is a multinational private airline
initiative geared to meet the growing demands for safe, reliable
and competitive air transportation services in Central and West
Africa. Its equity ownership includes the private multinational
ECOBANK and the two major development banks of the region, namely
EBID, the Economic Community of West African States, (ECOWAS) Bank
of
Investment and Development, and BOAD, West African Development
Bank. Ethiopian Airlines will own a 20% stake in the start-up
airline. In 1960 Ethiopian, for the first time and single-handedly,
pioneered air services to Ghana, thereby cementing the cornerstone
for Africas uninterrupted East-West connections. The establishment
of a hub in West Africa through the signing of this partnership
agreement marks the beginning of yet another milestone in the
history of commercial aviation in Africa. It is also a proud
testimony of Ethiopians dedication and commitment to its customers
and Africa.
The Chief Executive Officer of Air Namibia Kosmus Heinrich
Egumbo accompanied by his Business Development
Executive, Xavier Masule, paid a working visit to the AFRAA
Headquarters in Nairobi on 20th September, 2008 as part of their
East African business opportunities exploration tour.
Welcoming the duo, the Secretary General of AFRAA, Christian
Folly-Kossi expressed his delight in their visit to AFRAA and
wished them fruitful deliberations in their meetings with other
business partners and airlines in the sub-region. He briefed them
about the current projects being pursued by AFRAA and solicited Air
Namibias active participation.
On his part, Mr. Kosmus Heinrich Egumbo thanked the Secretary
General and his team of Directors for making time to meet with
them.The teams from Air Namibia and AFRAA
Air Namibia CEO visits AFRAA
discussed various value added services and projects that AFRAA
could add to its portfolio of services it currently renders to its
members. At the end of the meeting, the CEO of Air Namibia
reaffirmed his airlines commitment to AFRAA and assured the AFRAA
team of the active participation of Air Namibia in all AFRAAs
activities.
Air Namibia CEO, Kosmos Egumbo(c) with Secretary General &
Directors of Afraa 2nd from Left is Xavier Masule, Business
Development Executive of Air Nambia
Mr. Girma Wake, CEO of Ethiopian Airlines
Gervais Koffi Djondo, ASKYs board Chairman
Afraa Magazine august 2008.indd 14 11/11/2008 11:22:05 AM
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africawings 15
Forum
The 10th SITA and Airline Business Airline IT Trends Survey
results were announced by SITA with a call to the industry to reap
the full benefits of the internet for cost reductions and ancillary
revenues in order to compensate for the soaring cost of fuel.Paul
Coby, SITA Chairman, said: Airlines were the first industry to
fully automate all parts of their business. The Air Transport
Industry has now become the worlds first truly web-enabled
industry. IT enabled airlines to make both major savings and
improve customer service after 9/11. But in these challenging times
with oil at over $130 a barrel, there is now an even more urgent
need to deploy technology to serve airline customers, save costs
and to equip airline staff with effective technology to do their
jobs better. Among the record 121 airlines responding to this years
survey, the online sales average is only 24% with their own
website. This varies from 43% in North America to just under 10% in
Africa and the Middle East. A very important source of revenues is
clearly being lost to those airlines not using web selling at a
time when everyone in the industry needs to maximize returns on
their
FIGHT OIL PRICE RISE WITH E-COMMERCE - SAYS SITA
IT spend. Selling online has already massively helped to drive
down distribution costs, saving airlines in the region of $2
billion.Coby added the adoption of the new generation Web 2.0
technology can deliver greater sales and greater savings across the
industry, and better returns from the $11bn invested
annually.Francesco Violante, SITA CEO, said: The price of fuel is
providing the economic incentive for the airlines to tap further
into ancillary revenues by acting not as traditional airlines but
e-commerce companies offering every type of service to their global
consumer market of 2.3 billion passengers SITA CEO, Francesco
Violante
African Wings is a Pan-African journal on air transport. It is
dedicated to the dissemination of reliable and accurate
African aviation developments and communicating the African
Airlines Associations (AFRAA) positions and views on topical global
air transport issues that affect the African aviation
industry.
It is published quarterly by AFRAA and circulated widely to
airlines, industry partners, aviation service providers, airports,
civil aviation authorities,
regional and sub-regional air transport organisations,
government institutions,
universities, tour operators, hotels, among others.
To advertise in Africa Wings, please contact the Commer-cial
Department of AFRAA on
+254 20 2320144/2320148 or [email protected].
ADVERTISE IN AFRICA WINGS
21%.Self-Service Adoption Airlines are forecasting that while
only 1% of passengers use mobile phones for check-in today, this
will rise to 6% next year by which time more than half of airlines
will offer the service. This forecast suggests an evolution of
self-service to mobile devices.The following airline self-service
initiatives are already in place: web check-in, 56%; mobile phone
check-in, 21%; self-boarding kiosks, 21%; online trip-change
service, 25%; and lost baggage self-service, 12%.Passenger Security
85% of the airlines responding to this years survey now provide
passenger data to the worlds governments, up 4% from last year. Of
those providing data, 73% provide to less than five governments and
the remaining 26% to six governments or more.
Onboard Technology The majority of airlines expect to have
deployed at least one of these services onboard aircraft within a
three to four year time frame: SMS via mobile phone; GPRS for
Blackberry; Voice calls via mobile phone; Internet access via
laptop; email access via laptop; and IM via laptop. More than half
of respondents indicate they are planning to charge for these
services or to finance them through advertising.
using state of the art technologies such as Web 2.0 and Travel
2.0 applications. This can greatly help to withstand predicted
airline losses of $2.3 billion this year .He pointed to the example
of Ryanair which now sells 98% of its tickets online and gains over
17% of its revenues online from ancillary sources while for many
established airlines the figure is less than 5%. Since the first
Airline IT Trends survey in 1999, airlines have invested around
$100 billion in IT and communications. As a percentage of revenues
the average airline IT spend is now 2.2%. At the industry level,
this equates to around $11 billion this year which represents an
increase of 5% on last year. This increase is seen as recognition
that IT plays a strategic role, generating revenue as well as
helping deliver cost reductions and customer service improvements
through self-service and smoother passenger management.Other key
highlights from the surveyManagement and Strategic IssuesThe main
drivers for IT investment cited by survey respondents were reducing
costs, 62%; improving customer service, 54%; enabling new market
offerings and revenue opportunities, 45%; and improving workforce
productivity, 40%.Top investment areas included passenger
processing and services, 63%; aircraft management /operations, 44%;
passenger security, 34%; and employee security,
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16 africawings
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africawings 17
Special Report
The Rwanda Civil Aviation Authority (CAA) and SITA have
announced the introduction of digital-based data link services at
Kigali International Airport which will eliminate total reliance on
voice communications for digitally equipped aircraft.
The Digital-ATIS (Air Traffic Information System) system and an
air-ground data link service will be in place by years end and is
in line with ICAOs (International Civil Aviation Organization)
Comprehensive Regional Implementation Plan for Aviation Safety in
Africa agreed at the last ICAO General Assembly in September
2007.
Joshua Mbaraga, General Director, Rwanda CAA, said: The
Digital-ATIS system to be installed at Kigali International Airport
will enable data link equipped aircraft to receive ATIS information
via SITAs AIRCOM VHF and satellite data link service so that the
information will be displayed on cockpit screens or printed on
cockpit printers.
SITA AND RWANDA TAKE THE FIRST DIGITAL STEP TOWARDS IMPROVING
AVIATION SAFETY IN AFRICA
This will obviate the need for pilots to tune into dedicated
voice ATIS frequencies in the approach phase and having to write
down what can be often lengthy messages during the critical phases
of the approach. In addition to the obvious safety benefit of
avoiding mistakes in listening to the traditional voice ATIS
broadcasts in the approach phase, the Digital-ATIS service for
Kigali International Airport can be accessed from almost anywhere
in the globe due to SITA AIRCOMs global coverage which allows
information to be picked up anywhere en route.
He added: The Rwanda Civil Aviation Authority fully recognizes
the safety and efficiency benefits that data link technology can
bring to air navigation service delivery and D-ATIS is just the
first element of our plans to implement ICAO recommendations.
SITA delivers air/ground and ground/ground data communications
services across Africa to support airline and air navigation
service provider requirements and has almost completed the
migration to IP service availability across the continent.
Akhil Sharma, SITA Director, Air Traffic Management, said: SITA
is committed to supporting air navigation infrastructure
improvements across the African continent in line with ICAOs
airspace safety plan strategy. We applaud the Rwanda Civil Aviation
Authoritys initiative and foresight to implement D-ATIS and are
confident that the service will deliver safety and efficiency
benefits as increasing numbers of data link equipped aircraft start
to serve Kigali International Airport.
SITA which is owned by the air transport community operates over
1,000 VHF data radios across the globe and delivers a satellite
service via two Ground Earth Stations that provide access to
INMARSAT geostationary satellites; the combined service is used on
a daily basis by over 6,000 aircraft, over 180 airlines and 40 air
navigation service providers around the world.
A Sectional view of Kigali International Airport
Afraa Magazine august 2008.indd 17 11/11/2008 11:22:19 AM
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18 africawings
THE FUTURE OF TRAVEL AGENCIES-by Raphael Kuuchi
The liberalization of the airline industry, growing competition,
falling yields and high operating costs over the years have forced
airlines to rethink their business model and takes step to reduce
costs.
In the process, travel agencies that historically have played an
important role in the airline product distribution and sales have
become a casualty. Airlines in the last two decades have either
reduced agents commission or eliminated it altogether to minimizing
travel intermediaries cost component on their overall costs.
While some airlines have terminated travel agents commission
entirely others have adopted the less painful practice of gradually
reducing the commission paid to agents. What is certain though, is
that, in the long-run, airlines will stop paying agencies
commission for their role in facilitating the passenger travel
process. Will that be the end of the travel agency business? Will
this industry mutate and make itself even more relevant to its
customers?
In North America and Europe, where the practice of reducing or
eliminating agency commission started earlier, same travel agencies
have changed their business model from commission-based order
taking entities to service fee-based travel management
businesses.
The end of commissionBy cutting agents commission, airlines
reduce their dependence on travel agencies as a distribution
channel. This has become possible because of the wide spread
availability and use of the internet to distribute airlines
products. Besides the lower cost of internet distribution, travel
information which hitherto was in the possession of airlines and
travel agents is now readily available on the web and accessible to
everyone. Today, airlines do not fear that travel agents will
boycott the distribution of their product since alternatives are
available through the airlines offices and the internet.
According to a survey conducted by Amadeus, 34% of travel
agencies consider reduced revenue from commission as their biggest
challenge. In fact, the decision by airlines to reduce or eliminate
commission has compelled many travel agencies to use technology and
web-based sales systems to stay in business.
Growing independence of airlinesConfronted with ever increasing
operating costs and losses, airlines are forced to cut distribution
expenses in different areas. The strategies being pursued are aimed
at:
reducing GDSs fees bypass established distribution chains by
developing own websites (disintermediation) reducing or removing
commission paid to travel agencies empowering passengers to perform
their own travel transactions
The decision to cut/eliminate travel agencies commission does
not imply that airlines agents are no longer relevant. Instead, it
is aimed at reducing airlines sales and distribution costs and
decreasing
their dependence on this channel of distribution.
The role of the internetThe internet has completely transformed
travel distribution and sales. It has enabled airlines to directly
reach potential customers through their websites and thereby cut
back on the commission paid. It has also enabled control of the
market by airlines.
As the internet is more and more being used as the main travel
planning resource, online travel agencies are competing head-on
with traditional GDS based travel agencies. Many travelers are
using the internet to make informed travel decisions and purchases.
According to Forester Research, 40% of European travelers, book
their trips online while 27% buy from offline points of sale.
The internet has also facilitated easy access to more
information by travel consumers and therefore given them greater
opportunity to make informed travel choices. The success of travel
agents in the future will depend on their ability to react to
customer expectations and meet the needs of the new generation of
sophisticated dotcom consumers.
The internet as a source of abundant information can complicate
decision making. In fact, too much information can be confusing for
customers. The more travelers have access to information (prices,
travel suppliers policies, types of packages, etc), the more they
will need advice and assistance to make a choice. The boom of the
internet and easy access to information could therefore be to the
advantage of the travel agent who are best placed to avail the
right information and give unbiased consultancy. The competitive
advantage of the travel agent of the future lies in its ability to
provide expertise and experience consultancy to meet the diverse
and sometimes complicated needs of travelers.
Adopting to the changing travel environmentThe evolving travel
product distribution and sales regime presents some threats but
also enormous opportunities to travel agencies. While many travel
agencies especially in Africa are unsure how to adopt to the
changing environment, their counterparts elsewhere are mutating to
a fee-based model to meet the needs of the customers and remain
relevant.As commissions are cut, it is important that travel
agencies maximize every other revenue opportunity available to
them. This means a shift away from dependence on airlines
commission to a fee-based service delivery to their clients. It has
been noted that, some travel agents do not feel comfortable
charging their clients service fees for a number of
reasons.Firstly, they fear customers may refuse to pay and divert
business to their competitors. Secondly, travel agents find it
difficult to process and collect service fees (no basis for
calculating the fees). There is also the issue of staff resistance
or unwillingness to levy a fee for their service because it is new.
Staff are not sure how to implement the service fees model.
Feature
cont. to pg 20
Afraa Magazine august 2008.indd 18 11/11/2008 11:22:21 AM
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africawings 19
Airlines Update
Virgin Nigeria is best airline in West Africa
Virgin Nigeria Airways Limited emerged the Best Airline in West
Africa at the 2008 Africa Travel Awards organized by the Africa
Travel Quarterly.
The awards are a key highlight of the annual Akwaaba Travel
Market, instituted to celebrate outstanding contributions of
recipients to the development of tourism and the travel industry in
West Africa and beyond.
Whilst receiving the award in her office, the Head Corporate
Communications of the airline, Mrs. Nkiru Olumide-Ojo, thanked the
organizers for their consistent efforts at recognizing
organizations that are building a credible image for Africa,
especially the sub-region, as a tourism destination.Olumide-Ojo
reiterated that Virgin Nigeria remains committed to its vision of
building a world class airline
Virgin Nigeria Dorcas Oketch(L) & Nkiru Olumide-Ojo(C)
receiving the plaque.
based in Nigeria. Our dream is to provide a seamless network
that aids transportation across West Africa and beyond. Winning yet
another prestigious award has further convinced all of us at Virgin
Nigeria that we are on the right path in raising the bar of
performance.
Virgin Nigeria has in the last one month raised standards in the
domestic and regional travel patterns through the introduction of
its E-190 jet that has individual In-Flight Entertainment (IFE)
system the first in the sub-region
The company is currently rolling out an aggressive route plan in
the region targeted at opening trade relationships between Nigeria
and other nations as well as consolidating on existing route
networks.
The Chairman of the Libyan Aviation Holding Company and former
Chairman and CEO of Afriqiyah, Capt. Sabri S. Abdallah has been
honoured with the African Aviation Award for 2007. The Award was in
recognition of his outstanding service and contribution to the
development of African aviation. The African Aviation Award is one
of the most prestigious in civil aviation circles.
The award was conferred on Capt. Sabri during the 17th
Maintenance Repair and Overhaul (MRO) conference held in Cairo,
Egypt earlier this year. The MRO conferences are organized by the
African Aviation Magazine.
Capt. Sabri Wins African Aviation Award
Capt. Sabri S. Abdallah-Chairman of Libyan Aviation Holding
Company
Afraa Magazine august 2008.indd 19 11/11/2008 11:22:26 AM
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20 africawings
Feature
Some travel agents have changed their business
model from commission-based order taking
entities to service fee-based travel management
businesses.
In practice, corporate clients find it easier to accept service
fees because they are aware of the need for travel agents to manage
their travel budget. They also appreciate the value of a
professional travel management company. However, such corporate
clients tend to expect high standards of service, necessitating
excellent staff training and investments in top level
technology.
Elsewhere the loss of commission has forced some small and
medium size agencies to consolidate in order to deliver the
sophisticated services demanded and to better leverage competitive
fares and incentive deals from airlines.
In response to the loss of business on leisure travelers and
point-to-point clients who book directly through the internet,
agencies are finding it necessary to educate their staff on the
value they deliver in terms of finding the best fares and saving
clients valuable time. The result of such training has been more
professional, confident and skilled sales force. Such skilled
workforce then focuses on delivering the sort of products and
services consumers find difficult to locate and book on the
web.
Increasingly, agents are spending less time on low-margin fares
and more time on complex travel itineraries, holiday packages and
group travel. Some travel agents have even specialized in specific
products and destinations, thus developing niches that gives them
competitive advantage.
The loss of commission has also encouraged agents to increase
sales of non-air products such as cruise and hotel booking and car
rental. Through their own e-commerce sites, where they pose
competitive deals and discounts, some travel agents have been able
to attract consumers.
Service feesService fees charged by travel agencies can vary
considerably but often they relate to the complexity of the
transaction. An agent may apply fees to each stage of the booking
process such as charging for constructing an itinerary and quote,
initial ticketing, issuing refunds, reissue, name or itinerary
change. In addition, fees can also be charged for ticketing rail
journeys, hotel and car rental reservations. In a service fees
environment, time is money and the travel agent charges clients for
the time spend on processing their travel request.
In calculating and collecting service fees, travel agents should
avoid doing it manually. They should invest in service management
solutions to automate the process.
Justifying service feesResearch has proven that many customers
are willing to pay a fee for an agent to help them plan a trip. In
fact, the most important service travel agents could provide for a
fee is getting the lowest ticket prices according to the
research.
Travel Agents must however make sure that the service fees they
charge are reasonable, given the time and effort required to
deliver the service. Most customers will be willing to pay for the
convenience of
having a professional complete their travel arrangements but not
at an outrageous cost.
Agents must also ensure that they possess a high level of
knowledge and excellent research skills. This requires good
training and the ability to access relevant information for travel
decision making.
Communicating service feesGood communication is important in
ensuring that your charges are accepted by the clients. Therefore
agents must always notify clients of service fees upfront. It is a
good idea to create detailed descriptions of every service the
agency provides and the associated charges. Communicate these
clearly to the client before service delivery.
Travel agents will need to emphasize to their clients that they
offer professional travel management services using well-trained
professionals who are dedicated to providing outstanding service
and delivering a great travel experience while minimizing client
costs. Where practicable, agencies should list all services and
charges on a simple contract,
which customers are requested to sign before transactions are
undertaken.
Supporting technology Travel solution providers such as Galileo,
Amedeus and Sabre offer suites of solutions designed to help travel
agents move to a service fee pricing model.
These solutions use a single interface, saving time, increasing
efficiency, improving accuracy and supporting back-end accounting
and reporting. The system automatically calculates the fees and
mark-ups applicable to the booking.
Equipped with pre-loaded service fees rules, the system can be
customized to calculate services fees taking into consideration the
specific peculiarities of the agency or fees build-up. The benefits
of using a fee manager system include:
- Time saving, efficiency and increased productivity- Reduce
errors and loss of income and- Enhance customer confidence that
fees are calculated correctly
ConclusionTravel agents have found declining commission, a major
challenge to their survival and growth. This is compelling agents
to rise up to the challenge by reengineering their businesses and
broadening their revenue base, by focusing on new markets and
services. Among others, agencies are moving away from order taking
and ticketing to providing professional travel management services
for a fee. There is a conscious shift by forward-looking agents
from the traditional commission-revenue model to a service-fee
revenue model. This means that, travel agents that embrace change
will emerge stronger and be better placed to benefit from the
changes in the travel and tourism industry.
African travel agents should overcome their hesitation to charge
service fees and adopt the business model that will sustain their
revenue streams in the future. Experience elsewhere has shown that
charging service fees does not result in significant loss of
clients. If the service-fees model is effectively implemented, it
will result in increased customer loyalty and satisfaction. But the
change will require investments in staff training, new technology
systems and the adoption of cost efficient service fee management
systems to meet the business needs and customer expectations.
THE FUTURE OF TRAVEL AGENCIEScont. from pg 18
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africawings 21
Afraa Magazine august 2008.indd 21 11/11/2008 11:22:51 AM
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22 africawings
Feature
The 14th Aviation & Allied Business Leadership Conference
was held in Johannesburg, South Africa from 25-26 August 2008
under
the theme: Aviation in Africa: Changing Times, Changing
Strategies. The theme and timing of this years conference could not
have been more appropriate, as they coincided with the period in
aviation history characterised by unprecedented high oil price,
global credit crunch and the anticipated impact on liquidity and
air travel.
Against the background of many aviation challenges, the 14th
leadership conference sought to refocus strategies of the industry
in Africa towards sustainability and viability of the business. The
conference encouraged airlines and other industry players in Africa
to embrace innovations in order to grow their businesses bearing in
mind the global harmonization of regulations and standards by the
EU an USA and their potential consequences for Africa.
The conference urged the continental aviation bodies; AFRAA,
AFCAC, ACI-Africa and the African Union Commission for
Infrastructure & Energy to pioneer the change the industry need
to respond to global challenges. The meeting noted AUs close
working relationship with the African Minister of responsible for
civil aviation which is gradually leading to harmonized roles in
aviation, and called for support in addressing the manpower
shortage and funding needs of AFCAC to enable it live up to its
responsibilities as the Executing Agency of the Yamoussoukro
Decision.
African Aviation:Changing with the Times- by Raphael Kuuchi
Addressing the conference, the Minister for Transport of Kenya,
Hon. Amb. Chirau Ali Mwakwere, noted the shift in political support
to air transport liberalization in Africa and said, We need to do
more to achieve the aspirations of our people and to improve
integration across the continent. I believe that the best way to do
this is to have individual states liberalise the air transport
sectors within their respective regions.
In this regard, I wish to state that within the East African
Community (comprising of Kenya, Tanzania, Uganda, Rwanda and
Burundi) we have begun to align our Bilateral Air Services
agreements to conform with the provisions of the YD. We are
confident that we shall have a liberal air transport market in East
Africa by January 2009.
For airlines and airports, the conference highlighted capacity
building and retention as needing top priority attention and called
for functionally innovative measures to arrest the deteriorating
trend. Courting private sector management and funding according to
the Nigerian Minister, Mrs. Diezani Alison-Madueke, could be a
better way of enhancing the capacity and capabilities of airports
as government funding is largely inadequate.
New generation aircraft provide maximum efficiencies low
maintenance costs, low fuel burn and environmental friendliness and
therefore African States must embrace the Cape Town Convention to
facilitate fleet modernize at competitive cost. Already, a number
of airlines are braving the odds and investing in new equipment.
The 14th leadership conference called on States to
support airlines by adopting the Cape Town Convention and
Protocols to ease aircraft acquisition cost.
The conference considered the low application of IT in aviation
in Africa and recommended that in view of the overwhelming benefits
IT brings to airlines, airports and their customers, significant
resources should be channeled into upgrading and adapting
technology based solutions to improve Africas competitiveness. The
conference further urged airlines and airports to make e-ticketing,
e-freight, CUSS and other aviation technology-based solutions an
integral part of their operations so as to remain competitive and
meet global standards.
As in previous conferences, the 14th Aviation & Allied
Leadership conference also provided a forum for intercontinental
bonding. The federal Aviation Authority (FAA) signed a MoU with the
Ghana Civil Aviation Authority to enhance cooperation and
collaboration of the two entities. Besides, South African Civil
Aviation Authority also offered to support other African CAAs that
need help to project aviation safety in Africa.
It emerged that the poor safety record in Africa may have been
grossly exaggerated in recent times inspite of significant
improvements have been attained. The conference noted that most of
the fatal accidents that occurred in the last two years involved
largely airlines from other continents. African aviation accidents
are in most cases traceable to strive-ridden countries where safety
oversight has been hampered by lack of skilled manpower and
resources. The conference noted that most scheduled regional and
intercontinental carriers of Africa such as Afriqiyah, Air
Mauritius, Air Seychelles, Air Senegal, Ethiopian Airlines, Kenya
Airways, Precision Air, Royal Air Maroc, South African Airways and
Virgin Nigeria strictly adhere to international safety standards
and boast of safety records equal to or better than any reputable
airline anywhere in the world.
Though consensus was not reached on this issue, participants
were agreed that the safety rating in peaceful regions and
countries in Africa is far better than what is portrayed by global
statistics.
The final resolutions of the conference noted the existing gaps
that must be closed to facilitate air transport development in
Africa. They also called for innovative strategies in such areas as
safety, cost management, environmental sustainability, and capacity
building among others.
Capt. Boyo(L) and some distinguished guests during the opening
session of the 14th leadership Conference in johannesburg.
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africawings 23
The national carrier of Mozambique, Linhas Aereas de Mocambique
(LAM) has gained a foothold in the tightly
contested aviation market in Africa. The airline is one of
Africas finest and prides itself in commercial agreements with
international partners such as TAP Portugal, South African Airways,
KLM and Kenya Airways through code sharing agreements on various
regional and intercontinental routes.
In terms of performance, revenue and safety, LAM is among the
best and most reliable airlines in Africa. LAM experienced its
fastest successive growth in the last three years, notwithstanding
the stiff competition on the routes it operates. The success
attained by the airline over the years is aptly captured in its
slogan Sempre a Subir, loosely translated Always Climbing
higher.
The sterling performance of LAM is credited to Africas longest
serving airline Chief Executive Officer, Jos Viegas, who has been
at the helm of LAM for the past 21 years.
Under the leadership of Jos Viegas, LAM recorded tremendous
achievements in the areas of safety, security, traffic growth,
profitability and positioning of the airline as an international
brand. Under the reign of Viegas, the airline attained the
ISO9001:2000 Certification in 2006. LAM also achieved IOSA
certification in
LAM Mozambique: A Giant in the Making
September 2008 thanks to the dedication and commitment to safety
by Viegas and his able team. In the last two years, independent
customer satisfaction survey rating of LAM has shown improvement
from 76% in 2007 to 82% in the first half of 2008. Similarly, the
airline boasts of the best punctuality rating in Africa.
To keep up with global developments in the industry, the airline
has embarked on a number of initiatives to modernise its equipment,
systems and processes. Since 2007, LAM complied with the
requirements for E-ticketing and has been issuing electronic
tickets. It has also revamped and upgraded its Departure Control
System (DCS) to support automated check-in. 99.6% of all LAM
tickets are currently electronic tickets resulting in significant
financial savings to the airline and efficiency gains to
passengers.
In the view of Viegas, LAM focus is modernisation-oriented; to
exploit new technologies to support business development,
particularly the use of web platforms. The airline is at the final
phase of implementing its online booking engine which will enable
passengers to buy tickets and transact other travel related
business using the internet.
In September 2008, LAM met all the rigorous safety audit
requirements of the IATA Operations Safety Audit (IOSA) and was
registered as an IOSA certified carrier. In appreciation of the
amount of effort that LAM put in to attain the IOSA registration,
the Regional Vice President of IATA, Lance Brogden, noted at the
certificate handing over ceremony in Maputo that the audit
thoroughly scrutinise to the smallest detail; from technical to
staff rating and LAM made it with flying colours.
LAM is one of six airlines within the 15 member Southern African
Development Community (SADC) to attain IOSA certification and the
only one of all the five Portuguese-speaking African countries to
achieve this global safety recognition.
The IOSA certificate handling over ceremony was attended by
important aviation personalities including Mozambique Transport and
Communications Minister, Paulo Zucula and the Secretary General of
the African Airlines Association (AFRAA), Christian Folly-Kossi.In
anticipation of future traffic growth, LAM is investing in new,
modern and fuel efficient aircraft. Our objective is to replace the
larger aircraft in our fleet with newer ones, thus enabling us to
increase frequencies, open new routes, and better serve our
customers says CEO, Jos Viegas. The airline will invest over U$100
million in the acquisition of three Bombardier Q400 Turbo and three
Embraer 190 aircraft and training of technical staff. Deliveries of
the new aircraft will start at the end of this year with final
delivery expected in 2010.
On receipt of the new aircraft, LAM plans to expand its domestic
and regional network to other destinations in Africa and offer a
superior product through improved customer service, reliability and
overall efficient service delivery. Already, the airline plans to
launch new services to Launda from Maputo beginning next January.
Operations will initially be done using a Boeing B737-200 which
will be replaced by Embraer 190 in mid 2009. After 27 years of
providing safe, reliable and convenient air transport services, LAM
believes that a client is a friend um cliente, um amigo. And this
belief fits perfectly with its new image as a modern airline poised
to exceed the expectations of its customers.
LAM is a joint venture between the government of Mozambique,
which owns 89% and the airlines 677 strong workforce 11%. Through
modernisation of its equipment, systems and resources, LAM intends
to achieve technology driven competitiveness and become the leading
airline within the Southern African Development Community
(SADC).
Jos Viegas- CEO LAM Mozambique
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24 africawings
Afraa Magazine august 2008.indd 24 11/11/2008 11:27:52 AM
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africawings 25
At last, a comprehensive solution to the lack or inadequacy of
aviation statistics in Africa seems to be in sight following
the conclusion of an Aviation Statistics Workshop in Addis
Ababa, Ethiopia recently. The 3-day AFRAA/ICAO sponsored workshop
was hosted by Ethiopian Airlines and facilitated by experts from
AFRAA and ICAO.
The workshop attracted 92 delegates from 22 African countries.
Participants were from airlines, airports, civil aviation
authorities, air navigation service providers and States
departments responsible for Aviation statistics. Also in attendance
were representatives from the African Union Commission (AU) and the
Economic Commission for Africa.
Aim and content of the workshop
The workshop was aimed at identifying and addressing the
challenges of accessing reliable African aviation statistics
through the sharing of experience, knowledge, skills and resources
necessary to collect, analyze, disseminate and use aviation
data.
Through a series of presentations, participants at the workshop
were taken through airline economics, role of statistics in
improving competitiveness and efficiency, airlines competition and
pricing practices, variance and profitability analysis, best
practices in aviation data collection and analysis, accidents
analysis, trends and probability and air travel demand and factors
impacting demand. Participants were also enlightened on how to
complete the standardized ICAO aviation data collection sheets,
forecasting
AFRAA/ICAO AVIATION STATISTICS WORKSHOP-By Raphael Kuuchi
techniques and aviation incidents reporting systems.
At the opening session of the workshop on 7th October 2008, the
Chief Executive Officer of Ethiopian Airlines, Ato Girma Wake
decried the lack of reliable aviation data for planning and
decision making and urged participants to cease the opportunities
offered by the workshop to improve their internal data
mobilization.
On his part, the Chief, Regional Integration at the ECA, Joseph
Atta-Mensah, noted that good statistics constitute the basis for
good decision making and helps aviation stakeholders to identify
the best courses of action in addressing problems. Statistics also
provide a sound basis for the design, management, monitoring and
evaluation of national policy framework, said Atta-Mensah. The ECA
urged the workshop delegates to come up with concrete solutions on
how to collect and use aviation data for the advancement of the
African aviation industry.
Role of Aviation in Development
The workshop discussed the role of aviation in the development
of the continent. It emerged that aviation contributes
significantly to economic development through the movement of
people and goods, business, tourism and trade facilitation as well
as job creation. Air transport is a driving force in regional
integration and development and contributes to mitigating the
transport problems faced by landlocked countries, connects Africa
to global markets, boost tourism and trade and enhance the movement
of people and
investment across boarders. according to the Secretary General
of AFRAA, Christian Folly-Kossi.
Underscoring the importance of aviation, the Secretary General
of AFRAA further observed that there are principally three pillars
of development in any country or continent; Transport, Energy and
Telecommunications. In the peculiar situation of Africa where air
transport infrastructure is better developed compared to the other
modes, if it is given the necessary support air transport could be
the catalyst for trade, business, jobs creation and
integration.
Misrepresentation of Africa Aviation
Among the numerous disadvantages of not having reliable
statistics is the fact that Africa aviation is often negatively
represented at the global stage. The continent is portrayed as
having the highest accidents rates and the EU has blacklisted many
African airlines from flying into its air space for that
reason.
But in fairness to African aviation says Folly-Kossi, most of
the accidents in Africa involve domestic carriers with no
international operations whatsoever. These accident prone airlines
are largely located in countries emerging from war or political
instability. In fact, the safety record of the African
intercontinental airlines is comparable if not better than the
global average.
Better statistics in the future
To effectively respond to the negative portrayal of African
aviation, the workshop concluded with a resolve to work assiduously
towards improving aviation statistics collection, analysis and
dissemination. Participant undertook to mobilize data from their
respective organizations collate them and submit to their States
for onward submission to ICAO.
It is the hope of AFRAA that this ground breaking workshop will
serve to improve the quality and quantity of data in its data base
to assist the industry in decision making.
Group photo of Statistics Workshop.
Delegates at the StatisticsWorkshop, Addis Ababa.
Forum
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26 africawings
In the current challenging operating environment characterized
by fierce competition, credit crunch, brain drain, high operating
costs
and others, it is tempting to forget the importance of training
and human resource development. It is critical that this aspect be
given top priority as it is through talented and highly trained
people that our organizations will be able to weather the current
and future storms. It is therefore important to remind ourselves
why human resource development is critical for the survival and
viability of our organizations.Training and human resource
development is critical in increasing the expertise of employees at
all organizational levels. It facilitates the expansion of the
horizons of human intellect and an overall character of the people.
It also helps in inculcating the culture of team work, team spirit,
and inter-team collaborations. It helps to develop a learning
culture within the employees. We need to develop a learning culture
in our organizations as the rate of change is so rapid that unless
we keep up or we are ahead, we lose our competitive edge. Training
should facilitate the development of a culture of continuous
improvement, customer focus, safety culture and high productivity.
Training also facilitates the development of a safety and security
culture and a healthy working environment through building
self-motivated employees, and relationships which are particularly
critical in the aviation industry.
Through training and development, an organization should be able
to develop leadership skills, motivation, loyalty, better
attitudes, and other aspects that successful workers and managers
typically exhibit. Good leaders will ensure that individual goals
align with organizational goals. Through effective and relevant
training, an organization gets more effective decision making and
problem solving capabilities. Training helps in understanding the
vision, mission and values of an organization and carrying out its
policiesVisionary leadership arising from training and development
improves the morale of the workforce, hence their productivity and
ultimately profitability of the organization. The current
challenges are such that it is not surprising to see people very
demoralized and pessimistic about their
Training and Human Resource Development by Dr Elijah
Chingosho
future and that of their organizations, which is a recipe for
poor performance. Training and development helps to build the
upbeat perception and feeling about the organization.
Training and development facilitate the optimal utilization of
human resource thereby also helping the employee to achieve the
organizational goals as well as their individual goals. Leaders
should help employees in attaining personal growth.
In its tireless efforts to strive for high quality service in
human resource development, AFRAA will continue to develop the
skills of member airlines employees as well as the know-how and
expertise of airline managers.
With globalisation, liberalisation, consolidation, partnerships
and the like being the current buzz words coupled with breathtaking
advances in the electronic field, it has become essential to equip
the airline manager with appropriate skills, know-how and expertise
to be able to effectively manage the complex challenges which
confront the industry.
AFRAA will continue to work closely with the International
Airline Training Fund (IATF) to offer courses for free on topical
subjects. IATF has a pool of highly qualified instructors whose
expertise has
been of immense benefits to participants of member airlines. In
this regard, collaboration will continue with the IATF to offer
joint programmes. The Association will also organise workshops,
seminars and conferences where prominent speakers will be invited
to lead discussions on topical issues.
To assist airlines in their restructuring programmes as well as
improving their operational efficiency and productivity, AFRAA has
a number of highly experienced and capable consultants with
proficiency in all areas of airline activities.
The Association also offers customised training on request. This
entails offering courses at an airlines base and tailored to its
specific needs. This makes the training very competitive especially
where an airline is training a large number of its personnel.
The venues for the courses have been carefully selected for ease
of accessi