Tuesday, August 12, 2025

Harmonizing the Skies

The global aviation industry is often seen as a barometer of economic interconnectedness and growth potential, but nowhere are its challenges and opportunities as pronounced as in Africa. At the 81st International Air Transport Association (IATA) Annual General Meeting and World Air Transport Summit in New Delhi, India, Marie Owens Thomsen—Senior Vice President Sustainability & Chief Economist of IATA—sat down with Capital’s Groum Abate to dissect Africa’s prospects for air transport, sustainable growth, and economic integration. Excerpts;

Capital: You mentioned that Africa has a wide profit margin per passenger, and the profit forecast for the region looks promising. What is the reason behind this?

Marie Owens Thomsen: That’s certainly better than having a negative outlook, which is a positive sign. However, African airlines aren’t as profitable as those in other regions. To understand this, we need to examine the market structure and the regulatory framework. As we discussed yesterday, fragmentation is a key issue. By fragmentation, I mean the tendency for countries or organizations to establish their own rules within this global market. The airline industry is one of the few sectors that is as globally interconnected as the internet. To make this global market function effectively, we need harmonized regulations where all players adhere to the same standards. This was the original intent of the Chicago Convention when civil aviation was established.

The Chicago Convention was signed by its founding countries in 1944, during a time of war. Those leaders recognized that a global airline industry could foster peace and prosperity. They understood that for this global market to succeed, we needed uniform rules and harmonization. Yet, almost immediately after signing the Convention, countries began to introduce their own regulations, leading to fragmentation.

For example, Africa pays, on average, 20% more for jet fuel than other regions. While I understand that African countries need to generate fiscal revenue despite a limited tax base, taxing jet fuel and complicating the distribution system for airlines puts them at a disadvantage compared to their global counterparts. This hinders the potential economic growth that air transportation can facilitate.

Additionally, visa requirements within Africa make it difficult for travelers from other African nations to move freely. This is another form of fragmentation. Every country-level rule and regulation further complicates the market and stifles growth. Furthermore, the quality of infrastructure—both the number and condition of airports, as well as bureaucratic processes for certifications and permits—is often more complex and fragmented in Africa than in other regions.

Capital: Does this also affect the growth of traffic?

Marie: Absolutely. If you look at how Africa trades with itself and with other countries, it’s important to note that Africa has the world’s largest trade union. That’s impressive. However, Africa only trades about 14% of its total trade with itself, while most of its trade is with Europe and Asia. The connectivity between Africa and those regions is significantly better than intra-African connectivity, which is quite concerning.

I don’t believe Africa will fully benefit from the trade union unless it creates a more harmonized intra-African air transportation market. I once spoke with someone from the African Union who said they would first increase trade numbers before developing air transportation. I argued that if that were true, the trade numbers would already reflect that progress. The fact that trade numbers have not changed indicates there is another underlying issue, which I believe is intra-African connectivity. This issue extends beyond airlines; it also affects roads, railways, and ports. We know that landlocked countries in central Africa are among the poorest in the world, and they share a common problem: a lack of connectivity. Without roads, railways, ports, and air travel, they struggle to grow.

Another example is North and South Korea, which provides a rare economic control group for comparison. At one point, they were the same, but one half chose to connect with the rest of the world while the other remained isolated.

The stark economic consequences of these policies are now evident.

The energy transition presents a unique opportunity for Africa to fulfill its potential in terms of land, resources, and human capital. By engaging in the energy transition, Africa can improve soil health, enhance agricultural industries, and grow the energy sector. Producing fuel for aviation also leads to increased fuel production for other sectors. Currently, only 8% of output from oil refineries worldwide is jet fuel. By addressing the needs of airlines, 90% of the benefits can flow to other areas of the economy.

Governments need to adopt this mindset to realize the growth multiplier effect of these developments and support the industry.

Unfortunately, there is often a tendency to hinder progress as soon as profits begin to materialize. The temptation to impose taxes can stifle growth. As a result, Africa still represents only 2% of global air traffic, and that figure hasn’t changed. Meanwhile, countries like China and India are experiencing significant growth.

Africa’s situation is more complex because it is not a single country. Unlike China and India, which benefit from a unified regulatory system, Africa requires the cooperation of many countries to achieve similar goals. This complexity is well understood, especially from a European perspective.

We admire Ethiopia for its success in handling a significant amount of transit traffic through its airport. This achievement highlights both the potential of African airports and the fact that only one airport currently serves as a hub for the continent. This situation underscores the challenges that have prevented the establishment of additional hubs elsewhere in Africa.

Ethiopia’s model is one that other countries should emulate. We would also like to see increased production of Sustainable Aviation Fuel (SAF) in Africa, particularly in Ethiopia. Among African nations, Ethiopia seems to recognize best the potential of air transportation for economic development.

Capital: Are you optimistic that SAF production will be available in Africa within the next three years?

Marie: Yes, I am optimistic. For example, I recently spoke with the Vice Minister for Transportation from Zimbabwe, who mentioned that Zimbabwe is cultivating energy crops that cannot be used for food. These crops can grow on less-than-ideal soil, and by planting them, the soil quality can improve over time, eventually allowing for food production. Their plan is to use these energy crops to produce SAF.

This approach not only enhances soil quality but also advances agriculture and energy development for the entire economy. While I’m not sure how far they have progressed with this initiative, it represents the promise of an energy transition. No other economic policy today offers the same potential for transforming the economy and reducing Africa’s reliance on external sources.

Capital: What if Africa fails to produce its own SAF in the next 20 years?

Marie: That would be detrimental for everyone, as we are all interdependent in this global industry. The success of Africa is crucial for the rest of the world, especially since Europe and the U.S. cannot produce enough SAF to meet global demand. We need other continents to engage in this effort.

It’s difficult for me to dictate what wealthy nations should do, but I believe that mature economies should actively support and promote the development of industries like SAF production in regions such as Africa.

Capital: Importing SAF requires a clear definition of its intended use. If they fail to meet these requirements, do they have to import SAF?

Marie: No, they don’t have to. We have established a SAF registry through the Civil Aviation Decarbonization Organization, known as CEDO, which was launched by Ayatah. IATA’s IT and Data Division developed the platform for this registry. Airlines create accounts in the registry and receive documentation detailing the specific SAF they have purchased. They can then use this documentation to meet their obligations under schemes like CORSIA or EU RED. Additionally, airlines can transfer the environmental attributes to business customers—large companies that frequently fly and wish to account for their Scope 3 emissions.

This process can now be conducted in an orderly manner. If the world accepts the book-and-claim principle, the physical location of the product becomes irrelevant. For example, an African airline can purchase SAF in Singapore and claim it in the SAF registry, even if Singapore Airlines transports the actual fuel.

The atmosphere doesn’t care who burns the fuel; it only matters that someone buys it and someone else flies it, and these do not have to be the same airline.

Capital: Your report also mentioned the impact of aircraft delivery delays. How might this affect African airlines?

Marie: It could have severe consequences for Africa. While the rest of the world struggles to acquire new aircraft, they are left with older models that require more maintenance.

Maintaining these older aircraft is costlier, and they are often more expensive to purchase if available at all. Moreover, Africa lacks sufficient maintenance centers and capabilities, complicating matters further for African airlines.

What we need in Africa is significant investment in airports, maintenance facilities, aircraft, and the administrative processes and certification capabilities necessary to support a global industry. This might sound overwhelming, but the positive outcome is that not only does this industry grow, but it also enables growth in other sectors.

Quantifying this economic impact is challenging. We know that global air transportation contributes about 4% to GDP, but it’s difficult to estimate the additional growth generated by other industries leveraging our services.

So, while I can only speculate, it seems there are very few industries with a comparable multiplier effect.

We understand that the differences in air transportation accessibility may be less pronounced in Africa, where fewer people have access to flights. However, in more developed countries, the impact of COVID-19 clearly demonstrated how the world economy suffers when air travel ceases. I admire the mindset of the Indian government, which has chosen to leverage air transportation as a means of fostering economic development. I hope more African nations adopt a similar perspective.

Capital: How do you envision African airlines in the next five years?

Marie: I believe they will survive. Naturally, I am an optimist and cannot envision a scenario in which they do not. However, the same challenges persist. We need peace; war and conflict zones severely hinder connectivity. Additionally, we require sound economic policies and capable bureaucracies, which necessitate an educated workforce. Crucially, there must be a conviction at the highest levels of government that air transportation is a vital strategy for economic development.

In conversations with political leaders in Africa, I often sense that they view air transportation as a luxury good. Yet, it only remains so if we allow it to. If we aim to make it a public good as part of an economic development strategy, that choice is within our reach. Treating air transportation as a luxury is a shortsighted policy. Instead, we should ask ourselves how to implement the most effective economic policies to enhance the welfare of the entire population. Clearly, air transportation, along with the energy transition, represents two avenues for significant transformation.

This is the radical change we all wish to see in Africa. Ethiopia stands out as a leader in this regard, and we commend your airline and your country for achieving so much under challenging circumstances. This success deserves immense respect. We look forward to continuing our support for initiatives in your country and across the continent.

Related Stories