Regional Market South America
Since the opening of the first intercontinental flight from Europe to Rio de Janeiro in 1956, aviation has become an important part of the economy of South America.
Although it has faced many challenges, the aviation industry in South America has been growing constantly during the last years. The numbers of passengers travelling within the continent are increasing rapidly, thus demanding more from airlines. Economic stability and higher income allow an increasing number of South Americans to travel for leisure and business purposes. The necessity for improvements in security measures leads to better decision making by airlines and airport companies, as well as by the highest authority in aviation-the Civil Aviation Authority.
The demand derived from international events, such as the World Soccer Championship 2014 and the Olympic Games 2016, speed up growth and create the necessity for detailed planning and appropriate solution finding. Lufthansa Consulting supports the effective, fast and transparent development of such projects.
Air transport plays a fundamental role in Africa’s socio-economic development. The sector is a catalyst for promoting tourism and fostering trade and regional development. However, Africa represents less than 3% of global air traffic and over the past 15 years, the continent has had the lowest level of market consolidation compared to the other regions in the globe.
The African Airlines Association (AFRAA), Lufthansa Consulting and Kenya Airways staged a high level workshop on 14th September 2021 on African airlines consolidation to discuss the reasons for few partnerships and limited airline consolidation, the challenges and benefits of consolidation and measures for action by industry stakeholders to address the situation.
Mr Abdérahmane Berthé – AFRAA Secretary General, in his remarks stated: “The aviation sector is reeling from the impacts of Covid-19 pandemic. We need to devise new approaches of doing business in the face of increasing concerns on the sustainability of African Airlines. A crucial element in the success of the African airlines is consolidation and collaboration. The engagement of States, airlines and all the relevant stakeholders is necessary to effectively achieve the required outcomes on airline consolidation in Africa.”
Speaking during the workshop, Kenya Airways CEO Allan Kilavuka said: ”It is crucial to retrace and learn from the footprints of consolidation from different parts of the world as we reset Africa’s aviation towards our collective dream for flying to a better future. Consolidation and collaboration are essential ingredients for resilience and sustainable business operations of airlines. The ripple effect of strengthened collaboration amongst airlines will be an increase in the industry’s contribution to the sustainable development of Africa and therefore we must elevate the tenor of discourse and make the airline industry matter in and for Africa”.
Ms. Catrin Drawer - Head of Market Africa, Lufthansa Consulting stated: “We require to meet the challenges of the “New Normal”, a reset in our thinking and approach. We require new business models, meaningful innovations in operations, adaptive management open to change, a growing true synergistic relationship between airlines and other relevant stakeholders. New challenges need new solutions now and in future to bring both resilience, and sustained success. Thus, synergy and meaningful partnering, whether through existing contracts and alliances or new agreements, will be essential. We cannot bring back yesterday but we may together shape the future.“
Lufthansa Consulting experts provided an in-depth analysis and background of consolidation of airlines from a global to an African perspective. The impacts of consolidation for African airlines, passengers, cargo, air transport growth and connectivity were discussed. Case studies were presented at C-level by Kenya Airways, Air Afrique and Ethiopian Airlines to enrich the discussions with first-hand experiences on the challenges, benefits of consolidation as well as the lessons learnt.
The forum articulated the following recommendations for action by the industry:
i. Consideration of various models of consolidation including equity partnerships between two airlines or across a group of investments, cooperation between two or more well-matched airlines, or the formation of a new common airline. The concept of “Air Afrique” remains a valid consideration for Africa.
ii. Implementation of appropriate corporate governance structure is necessary for consolidation. Political interference in the airline management is to be avoided.
iii. Call to Development Finance Institutions (DFIs) to finance the feasibility study of consolidation models.
iv. Call for uniform implementation of harmonized regulations and the establishment of an enabling working relationship between regulators, airlines and Regional Economic Communities (RECs).
v. Enhancement of cooperation among African airlines (alliance of airlines, pooling resources, code sharing and interlining).
vi. Call for support and commitment from Governments for airline consolidation in Africa.
vii. Urge airlines to carry out careful evaluation of potential consolidation/partnerships based on factual data.
viii. Exploration of cargo opportunities for air cargo consolidation.
ix. Call for government and private sector collaboration to achieve concrete steps in airline consolidation.
x. “Walk the Talk” - translate ongoing discussions into action in the interest of delivering accelerated benefits to the aviation ecosystem
The important workshop brought together over 200 participants comprising airline CEOs, C-level representatives from airports, CAAs and other African air transport decision makers as well as the media.
The African Airlines Association, also known by its acronym AFRAA, is a trade association of airlines from the member states of the African Union (AU). Founded in Accra, Ghana, in April 1968, and headquartered in Nairobi, Kenya, AFRAA’s mission is to promote, serve African Airlines and champion Africa’s aviation industry. The Association envisions a sustainable, interconnected and affordable Air Transport industry in Africa where African Airlines become key players and drivers to African economic development.
AFRAA membership of 46 airlines cuts across the entire continent and includes all the major intercontinental African operators. The Association members represent over 85% of total international traffic carried by African airlines. Follow us on Facebook, LinkedIn, Twitter and YouTube.
About Kenya Airways
Kenya Airways, a member of the Sky Team Alliance, is a leading African airline flying to 41 destinations worldwide, 34 of which are in Africa and carries over four million passengers annually. In 2020 KQ was named Africa’s Leading Airline by the World Travel Awards. It continues to modernize its fleet with its 32 aircraft being some of the youngest in Africa. This includes its flagship B787 Dreamliner aircraft. Kenya Airways services cargo flights including London, Amsterdam, Guangzhou, Sharjah, Mumbai and over 25 intra-Africa routes in addition to its passenger network. The on-board service is renowned and the lie-flat business class seat on the wide-body aircraft is consistently voted among the world’s top 10. Kenya Airways takes pride in being at the forefront of connecting Africa to the World and the World to Africa through its hub at the new ultra-modern Terminal 1A at the Jomo Kenyatta International Airport in Nairobi. For more information visit www.kenya-airways.com Follow us on Twitter, Facebook, LinkedIn and Instagram
About Lufthansa Consulting
Comprehensive advisory services - Aviation is our business
Lufthansa Consulting is an aviation and management consulting company, which is dedicated to assist international clients from the aviation sector and related industries to meet the challenges of the future successfully. Since 1988 the company has provided services and solutions to the air transportation industry in more than 3500 projects worldwide and is an independent subsidiary of the Lufthansa Aviation Group (Deutsche Lufthansa AG).
Lufthansa Consulting is in the unique position of offering comprehensive consultancy and expertise to aviation specific client groups: air carriers, airport authorities, civil aviation authorities, governments, investors, financial institutions, manufacturers, other industries and service related entities. We know the aviation business and we take pride in implementing our solutions.
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Ground Operations resembles one of the key pillars in aviation. Lufthansa Consulting’s initiative “GO 2030 – Ground Operations 2030”, is the umbrella for various deep dives into five focus topics of Ground Operations. In this podcast episode, our expert Eric Kuhn presents the identified focus topics, major challenges of Ground Operations, as well as solutions to those challenges. Together with the new podcast host, Sebastian Kaiser, he also gives an outlook on how aviation mega trends will affect the future of Ground Operations.
Listen to the podcast on Spotify, Apple Podcast and Amazon Music
You can also listen to the podcast here
Sebastian Kaiser – Consultant in the Solution Group Customer Experience
Eric Kuhn – Consultant in the Solution Group Infrastructure & Operations
Besides this podcast episode you can also read the lead article of GO2030 which has been published already.
Throughout the upcoming months, Lufthansa Consulting will share various deep dive articles reflecting the focus areas of GO2030. The series of articles and the podcast episode aim at answering the core questions outlined in the article as well as giving a solid base for preparing for the future Ground Operations.
Ground operations and the interaction of the parties involved are essential for a hassle-free journey. Low performance and low collaboration lead to additional cost and jeopardize the success of the overall operations. A close look into solving the current problems, combined with an assessment of future trends enable companies to prepare for the changes in aviation.
Introducing the “GOMT”
To discuss the way forward in aviation ground operations, we first need to find a common understanding of what Ground Operations (GO) stands for. Ground Operations involves all aspects of aircraft handling at airports as well as aircraft movement around the aerodrome, except on active runways. These aspects are usually handled by three big players – the airport operator, the airline and the ground handler – which together form the Ground Operations Magic Triangle, the GOMT
Clustering the core problems
As the (three) parties of the GOMT tend to have different focal points in their development, challenges within the collaboration are inevitable. Several problems need to be solved in the near future to enable smoother operations. Lufthansa Consulting has categorized the core problems in five action areas for future ground operations:
- need for a new way of innovative stakeholder collaboration,
- future requirements of the right infrastructure at an airport,
- what the customer journey will look like and how it can be integrated and implemented in the current operating system,
- how the GOMT will actively prevent disruptions – and how in the worst-case irregularity management 2.0 can be conducted and
- how ramp operations are carried out without any direct human interaction.
In addition, these problems need to be solved with a focus on global trends. But what are the global mega trends in aviation? What are the questions that need to be answered for future aviation operations?
Ground Operations 2030 by Lufthansa Consulting
Now the tricky part starts – answering those questions above. This includes matching the clustered core problems with the identified mega trends and turning them into successful and tailored solutions. Lufthansa Consulting has accepted this challenge and our experts have performed an in-depth analysis into how an airport of the future and especially Ground Operations in 2030 can and should look in order to achieve pole position in successful aviation operations.
Ground Operations 2030 by Lufthansa Consulting provides a high-level overview with different action fields clustered into the five core areas. In this series further articles will cover deep dives into each of the core fields of GO2030.
If we fade out the corona pandemic for a moment and recall the news about pilot shortage from two years ago, the picture was clear and transparent:
Pilots urgently needed!
The two main rivals at the aircraft manufacturer market, Airbus and Boeing were united in their forecast: In September 2019, so just before the pandemic hit, Airbus and Boeing predicted that the number of aircraft would more than double within the next twenty years. The biggest growth would be in Asia Pacific, second would be in Europe. New airlines were projected and corresponding traffic growth. As these aircraft orders are the key indicator for airline resource planning, the demand for pilots can roughly be derived.
Then came Corona…
Passenger traffic basically came to a stand-still overnight in most parts of the world. Just cargo flights ensured the remaining flow of goods to transport health and safety equipment in the first weeks and months and keep a minimum value chain alive for the global economy. Thousands of pilots were laid off. This process is still ongoing and also in 2022 it can be expected that airlines in Europe will furlough cockpit staff.
The current disruption in commercial aviation will push forward current airline fleet strategies for fleet renewal, not for growth. The trend to phase out four-engine aircraft was obvious already before the pandemic, but now there are fast decisions and executions. In average years, 2-3% of the aircraft fleet retires annually. In past industry downturns this rate has risen to 4-5%, so this can be expected for the pandemic as well. The overarching airline strategy will focus on versatile fleets that provide network flexibility with an improved efficiency and sustainability.
In this joint article by Lufthansa Consulting and M2P Consulting the aviation experts analyze the impact on pilot demand in the short, medium and long-term using data from projected growth trends in the aviation industry in the different areas of the world and other mega trends that could counteract the situation.
The year 2020 brought significant change to the airline industry. As airlines struggle to survive due to the COVID-19 pandemic and the resulting economic crisis, they are increasingly finding that there is strength in numbers and that it is better to join forces than to go it alone. To protect themselves from slack market conditions and ongoing financial challenges, they are turning to partnerships and cooperative agreements - even with former rivals.
However, in the case of traditional alliances - Star Alliance, SkyTeam or oneworld - which have already shown stagnant development over the past five years, this trend can be observed only to a limited extent. Instead, in many cases airlines are opting for cooperation on a bilateral basis, even with competitors from other alliances. This course has been significantly accelerated by the current situation, but is not necessarily permanent. For example, LATAM and Azul have been working more closely together in the Brazilian domestic market since August 2020 during the height of the crisis, but announced the agreement would expire after just one year.
Airlines will continue to find that unity makes them strong in the difficult years ahead
While the COVID-19 pandemic appears increasingly under control, the accompanying crisis will continue through the middle of the decade. Faced with this forecast of a slow recovery, airlines will evaluate and adopt different strategies. Many airlines have already opted to permanently downsize their fleets, demonstrating flexibility in their own business models and route networks. Therefore, in order to maintain connectivity, cooperations are essential, but not necessarily to be found within their own traditional alliances. Thus, we will see more partnerships in the near future - from simple codeshares to acquisitions within or outside the own alliance. Whether these collaborations are long-lasting depends on the individual market situation. Being able to rely on partners, whether through existing contracts and alliances or new agreements, will nevertheless be of great importance for the future in a post-COVID era.
Read the full article by Arvind Chandrasekhar, Johann Peter Gies and Luisa Grasshoff in German in airliners.de
Discuss with the experts: webinar featuring Johann Peter Gies in German
On August 17, 2021, airliners.de will host a live webinar with the authors of the series "Airline Business Models" at 2pm (CET). Watching is free of charge. The video will start automatically on Youtube. As an airliners+ member, you can also actively participate and ask questions to the panel of experts.
New technical possibilities, changing requirements, social change. Business models in aviation have always adapted to the general conditions - sometimes more slowly and sometimes suddenly and quickly. The airliners.de series "Airline Business Models" in cooperation with the German Aviation Research Society (GARS) analyzes the current changes against the background of climate change and Corona.
For information about airline business models in English please contact us
To secure the future viability and growth of the airline, Lufthansa Consulting optimized the route network and identified new potential markets. Recommendations for short and long term fleet planning were defined to support the network optimization.
The efficiency of the existing cargo terminal facilities was improved to handle the future cargo demand until at least 2018. The client is the number one freight airport in Brazil with a terminal area of 96,000sqm handling 439,000t of cargo per year.
Full support for operational readiness of a new terminal. The objective of the ORAT project was the coordinated approach to prepare all airport stakeholders for the operations in and at the new terminal. Preparation and execution of different operational trial scenarios to fully test and prove all aspects and to ensure a seamless transition into the operations.