Investing in National Airlines in Africa is a cockroach idea

Bravious Kahyoza

New Member
Nov 18, 2021
0
45
Paul Krugman, 2008 economics Nobel Laureate and prolific New York Times columnist narrates how as a young man he went to work for Government and an old hand; presumably a senior Government economist, explained to him their job was mostly about fighting bad ideas. The bad ideas, the old hand went on to explain, are like cockroaches; "No matter how many times you flushed them down the toilet, they keep coming back"

One of such cockroach idea is that if we invest in National Airlines, we will improve economic value and speed up growth.

But whenever this argument is actualized, it always gets chewed into pulp. The question is why do we keep it?

African countries seem to have found a way to turn back the hands of time. In the early 1960s, newly independent African states established national airlines as a matter of asserting their newly acquired status. Fifty years later, African countries are at it again.

The past five years have seen Ghana, Mali, Senegal, Zimbabwe, Zambia, Rwanda, Cote d'Ivoure, Uganda and Tanzania relaunching flag-carriers.

But, is establishing national airlines good economics?

No, it's bad economics.

First, economist Alfred Kahn who led airline deregulation in the US in the late 1970s under the Carter Administration described airlines as marginal costs with wings and saw the sector as societal aspiration for the rich people to fly around the world.

In Africa, out of a population of around 1.2 billion people African air travellers only from a paltry 12 percent of the world's total air travellers, so any government establishing a national carrier as a public policy intervention is using an elitist approach.

Second, African countries are also launching national carriers in the name of nationalism.

When Nigeria announced it's intended takeover of Arik Air- the country's biggest airline, it claimed that it can't allow the airline to collapse because it closely represents a flag- carrier.

Also, the late President Magufuli when launching Tanzania Airlines claimed that Tanzanians are spending a lot of money annually on air travel and so the national carrier will help stop the hemorrhage.

The success of Gulf carriers - known as ME3, Emirates, Etihad and Qatar- that also tops into economic nationalism have been the aspirations of many national airlines. But the opulence inverted in these carriers cannot be afforded by any African country. They have new long-range fuel-efficient aircraft, they have access to cheap fuel, they are able to provide better success at highly competitive fares and have state-of-the-art airports and aviation infrastructures.

It is estimated that the ME3 gulf carriers in the past 10 years have been subsidized by their governments in the amount of $42 billion dollars.

This should inform African airlines that nationalism in the airline industry is grossly opulent affair, well over their punching weight. A look at three of the top four leading African airlines, South African Airways, Kenya Airways and Rwanda Air are all bleeding from heavy debts and annual losses.

Lastly, since the US Airline, Deregulation Act-1978 which has become a pillar in the history of economic policy- the experiment that broke the deregulation ground in all sectors, countries continue to deregulate their domestic airline markets through open skies agreement.

In Africa, we have the memorandum of implementation of the Yamoussoukro Decision- a multilateral open skies agreements among 44 countries.

Though few countries have ratified it, that is where the future of airlines industry lies.

The multilateral open skies will initiate unfettered airline access and fights within the continent across countries treated as domestic and not international flight. Basically, the open skies will reward the most efficient carrier while the least efficient lose market share.

So, with these proliferation of national carriers, it is expected that countries launching national airlines will be opposed to the Yamoussoukro Decision.

What that means for Africa air passengers and freight shippers since both are governed by some regulatory environment, air travel will become expensive. Ticket prices always rise due to restrictions on international competition, forced connection flights through strict regulations increase prices, air traffic growth will shrink and air safety is always compromised.

Unless the national airlines chose to be low-cost carriers which national pride will not allow them when that is the most economically viable option for airlines to serve the continent, national carriers don't stand a chance in the sky.

It is just a cockroach idea.
 

Companero

Platinum Member
Jul 12, 2008
5,605
2,000
Paul Krugman, 2008 economics Nobel Laureate and prolific New York Times columnist narrates how as a young man he went to work for Government and an old hand; presumably a senior Government economist, explained to him their job was mostly about fighting bad ideas. The bad ideas, the old hand went on to explain, are like cockroaches; "No matter how many times you flushed them down the toilet, they keep coming back"

"Paul Krugman, 2008 economics Nobel Laureate and prolific New York Times columnist narrates how as a young man he went to work for Government and an old hand, presumably a senior government economist, explained to him that their job was mostly about fighting bad ideas. The bad ideas, the old hand went on to explain, are like cockroaches, “No matter how many times you flushed them down the toilet, they keep coming back” - DAVID NDII, Memo to Political Busybodies: There Is No Value Addition in Processing Coffee. It Is a Cockroach Idea
The Elephant - Speaking truth to power.
 

Companero

Platinum Member
Jul 12, 2008
5,605
2,000
First, economist Alfred Kahn who led airline deregulation in the US in the late 1970s under the Carter Administration described airlines as marginal costs with wings and saw the sector as societal aspiration for the rich people to fly around the world.
"First, economist Alfred Kahn who led airline deregulation in the US in the late 1970s under the Carter administration described airlines as marginal costs with wings and saw the sector as a societal aspiration for the rich people to fly around the world" - Africa’s national airlines have no chance – Genghis Capital
 

Companero

Platinum Member
Jul 12, 2008
5,605
2,000
In Africa, out of a population of around 1.2 billion people African air travellers only from a paltry 12 percent of the world's total air travellers, so any government establishing a national carrier as a public policy intervention is using an elitist approach.

Second, African countries are also launching national carriers in the name of nationalism.

When Nigeria announced it's intended takeover of Arik Air- the country's biggest airline, it claimed that it can't allow the airline to collapse because it closely represents a flag- carrier.

Also, the late President Magufuli when launching Tanzania Airlines claimed that Tanzanians are spending a lot of money annually on air travel and so the national carrier will help stop the hemorrhage.

"In Africa, out of a population of around 1.2 billion people African air travellers only form a paltry 12 percent of the world’s total air travellers, so any government establishing a national carrier as a public policy intervention is using an elitist approach. Second, African countries are also launching national carriers in the name of nationalism.When Nigeria announced its intended takeover of Arik Air – the country’s biggest airline— it claimed that it can’t allow the airline to collapse because it closely represents a flag-carrier.Also, President Museveni when launching Uganda Airlines claimed that Ugandans spent $11.3 million annually on air travel and so the national carrier will help stop the hemorrhage" - Africa’s national airlines have no chance – Genghis Capital
 

Companero

Platinum Member
Jul 12, 2008
5,605
2,000
Lastly, since the US Airline, Deregulation Act-1978 which has become a pillar in the history of economic policy- the experiment that broke the deregulation ground in all sectors, countries continue to deregulate their domestic airline markets through open skies agreement.

In Africa, we have the memorandum of implementation of the Yamoussoukro Decision- a multilateral open skies agreements among 44 countries.

Though few countries have ratified it, that is where the future of airlines industry lies.

The multilateral open skies will initiate unfettered airline access and fights within the continent across countries treated as domestic and not international flight. Basically, the open skies will reward the most efficient carrier while the least efficient lose market share.

So, with these proliferation of national carriers, it is expected that countries launching national airlines will be opposed to the Yamoussoukro Decision.

What that means for Africa air passengers and freight shippers since both are governed by some regulatory environment, air travel will become expensive. Ticket prices always rise due to restrictions on international competition, forced connection flights through strict regulations increase prices, air traffic growth will shrink and air safety is always compromised.

Unless the national airlines chose to be low-cost carriers which national pride will not allow them when that is the most economically viable option for airlines to serve the continent, national carriers don't stand a chance in the sky.
"Lastly, since the US Airline Deregulation Act 1978 which has become a pillar in the history of economy policy — the experiment that broke the deregulation ground in all sectors, countries continue to deregulate their domestic airline markets through open skies agreement.In Africa, we have the memorandum of implementation of the Yamoussoukro Decision – a multilateral open skies agreements among 44 countries.Though few countries have ratified it, that is where the future of airlines industry lies.The multilateral open skies will initiate unfettered airline access and flights within the continent across countries treated as domestic and not international flight. Basically, the open skies will reward the most efficient carriers while the least efficient lose market share.So, with this proliferation of national carriers, it is expected that countries launching national airlines will be opposed to the Yamoussoukro Decision.What that means for Africa’s air passengers and air freight shippers since both are governed by same regulatory environment, air travel will become expensive. Ticket prices always rise due to restrictions on international competition, forced connection flights through strict regulations increase prices, air traffic growth will shrink and air safety is also compromised.Unless the national airlines choose to be low-cost carriers which national pride will not allow them when that is the most economically viable option for airlines to serve the continent, national carriers don’t a stand chance in the sky" - Africa’s national airlines have no chance – Genghis Capital
 

Teknologist

JF-Expert Member
Oct 20, 2018
1,215
2,000
Inaonekana ni mada ya kutupinga na kutuharibia Legacy...:rolleyes:
Sema hatujui hiyo lugha umetumia kuandika, tungekuwa tunaelewa, tusingekuacha mpweke hivi.... ....🤣🤣😂😂😂
 

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