The Gulf region's carriers have established an exceptionally strong and ever more powerful hold on the fast growing Africa-China market. ASM's Gordon Bevan, vice president Asia-Pacific and Indian Ocean shared his insights on this trend during the Routes Africa Route Development Workshop. Routes News was there.
Five years ago it seemed unlikely that the combination of Africa and China would prove to be Gulf airlines' trump card, in many ways replacing vital Europe-Asia traffic that the Gulf hub airlines lost during the economic slowdown.
However, traffic flows from Africa to China have effectively saved these Gulf carriers during the recession and the big three airlines - Emirates, Qatar and Etihad - are reaping the benefits of China's keen interest in Africa, said Gordon Bevan, ASM's vice president, Asia pacific and Indian Ocean on May 30 while delivering an exclusive route development workshop at Routes Africa.
In case you are in any doubt about this assertion, read on.
Gulf airlines' African expansion has seen them grow from 10 country markets to 17 country markets between 2005 and 2010.
"In 2005 there were six African countries with direct connections to China. There were 7,700 weekly seats to China with the biggest originators being Ethiopian, Kenya and South African Airways. In 2010 there were 16,000 weekly seats with services to many African countries that didn't previously have any, including to Sudan, Angola and Madagascar," said Bevan.
Unsurprisingly, Emirates has grabbed the largest share of Africa-China traffic. Up to the year ending March 2010, 912,000 passengers travelled between Africa and China and Emirates carried about a fifth of these passengers, or around 210,000 people.
While Emirates remains the clear frontrunner, Qatar continues to grow steadily in this market, while Etihad's growth was described as "explosive".
Growing Importance: Turkish and Ethiopian
Other players who show a keen interest in seizing some of this Africa-China traffic include Turkish Airlines and Ethiopian. "TKY will become more aggressive. It is getting more planes and is looking for more African destinations," said Bevan. He added that Ethiopian has traditionally been a significant player in the market, carrying 155,000 annual passengers.
Other airlines in the market include Egyptair, Cathay Pacific, Kenya Airways and Air France - the only European airline to achieve market share. Plus, AF also records the highest yields at $1,100; followed by Hainan Airlines.
Interestingly, there is a large mixture of yields, with the average being $770. Qatar and Egyptair currently achieve the lowest yields.
Importantly for Gulf airlines is that much of the contract labour between Africa and China will fly on them, with the majority of bookings originating from two or three government travel agencies. For instance, between Lagos and Guangzhou, over 80% of the total 35,000 passenger market is controlled by Emirates and Qatar, with a staggering 22,000 choosing Doha's hub airline.
Where Are the Chinese and African Airlines?
So far most African airlines have been unable to compete with these massive network players. However, where there is a strong and reliable African airline on the scene, they have been able to achieve success - the clearest example being Ethiopian. Another one is Air Algerie, which enjoys a 75% hold on the total market between Algiers and China.
Chinese airlines have, however, been far slower to move into the market and their network decisions in Africa are largely based on destinations or routes that are of strategic importance to the Chinese government. They are also focused on point-to-point traffic with high volumes and low frequency flights.
Driving Traffic Flows
For African airports or destinations hoping to benefit from these strong traffic flows between Africa and China, don't be fooled by the belief that all Chinese investment involves mining or retail. In fact, according to Bevan, financial services and leasing are the two biggest contributors to Chinese Foreign Direct Investment (FDI) in Africa today. These two industries are the tools facilitating the deals and subsequent developments in Africa. Meanwhile, the top exporters to Africa from China are companies involved in heavy industry and the shipment of heavy industries, including: oil, fuel, shipping and drilling.
And these exports and FDI is largely originating in the Pearl River Delta area, with 50% of all trade to Africa coming from the PRD and around Shanghai. It therefore stands to reason that the majority of services from Africa to China are to Hong Kong, Guangzhou and Shanghai, although Bevan believes it won't be too long before the Gulf carriers expand this to secondary regional destinations such as Wuhan or Chengdu.
Unsurprisingly, Bevan's insightful presentation created a lot of discussion at Routes Africa and proved to be the perfect way for the event to get underway. For the full presentation, including Bevan's guide for African airports trying to attract new China services from Gulf-based or Chinese airlines, Click Here.
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