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Aviation: Protectionism hurts liberalisation bid



Personal Finance

Barriers should be erected cautiously lest they lead to retaliation, including trade wars. FILE PHOTO | NMG 

Earlier this year, 23 countries signed the Single African Air Transport Market (SAATM) agreement with the aim of liberalising the aviation sector.

Liberalisation would mean that each signatory would open its domestic market to foreign competition, for example by facilitating external airlines to participate in the local market without the need for stringent requirements.

East Africa Community (EAC) signatories to this agreement include Kenya and Rwanda. In the wider eastern Africa region, Ethiopia and Congo are signatories.

It is notable that Rwanda, Kenya and Ethiopia have operational national airlines.

Some EAC members including Tanzania, Uganda, Burundi and South Sudan have not signed this agreement with some citing the need to grow their national airlines.

The SAATM agreement appreciates the need to unify the transport sector in Africa, more so the aviation sector.

The reason for this is to liberalise the African aviation sector. It is hoped that the liberalisation and unification will enable African countries to integrate economically.

As a result, some countries like Kenya have done away with stringent visa requirements to facilitate free movement of people. The SAATM agreement was signed pursuant to several previous declarations, the Yamoussoukro Declaration of 1999 being one of the most directional on African aviation.

This declaration set the pace for liberalisation of African skies and proposed a unified dispute resolution mechanism through the African Aviation Tribunal for Settlement of Disputes. Indeed, there are advantages and disadvantages of liberalisation not just in the aviation sector but any other sector.

Countries with national airlines, including South Africa which operates a successful national carrier, did not hesitate to sign the SAATM agreement.

It is therefore safe to conclude that countries with successful national airlines are supportive of liberalisation.

When a country liberalises its skies the main winner is the consumer who enjoys lower fare, access to more routes and increased quality.

These benefits accrue due to increased competition. The countries’ GDP stands to also gain from liberalisation though it is not very clear how.

One publication says Kenya will gain an additional Sh8 billion from the liberalisation of its skies. An expanded aviation sector would create more jobs. However, despite the 1999 declaration some countries are reluctant to pursue an open sky policy.

Three EAC countries recently made it difficult for Kenya Airways to operate in their jurisdictions. These include Burundi, Djibouti and South Sudan.

It is notable that none of the countries are signatories to SAATM. According to media reports, Kenya Airways said the move could be politically motivated.

Kenya also declined to grant Ethiopian Airlines a licence to operate passenger flights on the Johannesburg-Nairobi-Brussels route. Could the reason be protectionism?

It is unclear as the reasons have not been made public. A country may opt to resort to protectionism in order to preserve, protect and grow its domestic airlines.

In such a case, the country would put in place stringent rules before allowing foreign competitors to operate in its jurisdiction yet apply less stringent rules on its national airlines. While protectionism may make sense for infant national airlines, it needs to be approached cautiously as it may expose a country to retaliation, including trade wars. There’s a need to balance between liberalisation and protectionism considering the global liberalisation trend.