Top 5 factors to watch out for as Zambia revives its national airline

Zambia’s aviation sector is at a crossroads. Zambian government plans to revive the national airline through a partnership with Ethiopian Airlines is poised to shake up the sector in a way not seen for years. If implemented well, this could deliver greater connectivity and competition to drive lower prices. But lessons from other countries as well as several other local commentators suggest that there is the risk of a national airline becoming a drain. This perhaps should be of uppermost concern in the government’s mind.

The United Kingdom in Zambia recognize that if the aviation market is failing to provide the capacity that the country needs, then direct government intervention is one option. It is certainly true that for a country that is land-locked and has high ambitions for increasing tourism and foreign investment, high quality air connectivity is an important enabler. For many UK and Zambian citizens, the ending of the direct British Airways link to London a few years ago, has provided a clear indication of the costs and inconvenience resulting from lesser connectivity – one which many of us would gladly reverse if we could!

But the aviation sector is highly competitive and cost sensitive, so to make it truly customer-centric and successful, it is important that government focuses on a number of wider aspects to ensure that investment in air capacity is aligned to increasing economic growth. In parallel, this will help manage the risks that airline investment will not produce the economic returns hoped for.

Liberialise Zambian skies
Firstly, a key barrier to airline services remains the slow progress across Africa to liberalise the air sector. Liberalization reduces the costs and complexity that airlines face in developing their businesses and networks. It has been the means of rapidly expanding air travel in all other parts of the world. Zambia can therefore go further in joining with other nations to reduce unnecessary barriers and give wings to airline expansion. This might include reviewing tax policies and the charges different actors face to ensure they are equitable and create the right investment incentives. But this might also include freeing up restrictions on certain routes to allow airlines to expand. Government giving further consideration to joining the 23 other African states already signed up to creating a single aviation market would be a key step.

Optimize regulation
Secondly, while air capacity is one factor holding back tourism growth in Zambia, our analysis suggests it is the overall tourism offer, and some of the regulation and costs involved in that sector, that is the most important single factor. A priority for government and industry should be to develop a strategy that links aviation and tourism. One which also focuses on reducing regulation so the tourism industry can better respond to the wide variety of demand it faces, this would help open up Zambia as a tourist destination to a far wider range of potential customers hence maximizing income and jobs for the country as a result. With Zambia recognized as a safe and stable holiday destination, it would be a real missed opportunity not to make this happen.

Avoid crowding out existing players
Thirdly, the revival of a national airline needs to be handled carefully to introduce greater competition to expand access and reduce costs. However priority must be to avoid crowding out existing private sector players  as it will be counter-productive if existing private sector players, both domestic and international, reduce their offer as a result. This is in no one’s interest.

Cut industry cost of doing business
Fourthly, some basic aviation costs remain too high in Zambia. This was one of the reasons cited by European airlines previously suspending services to Zambia, as pressure to serve other routes grew. For example, whilst new airport capacity is welcome, ensuring this is managed efficiently, possibly through greater involvement of the private sector and greater corroboration with international specialists in service delivery, will provide a better experience for passengers and improve the bottom line for airlines – both of which will increase viability of the sector.

Train and deepen local skills
Finally, to take advantage of and enable aviation growth, government and industry need to focus on training and up -skilling. This extends into the associated service sectors too. Certainly, a positive side-effect of a tie-up with Ethiopian Airlines would be a focus on developing skills of the workforce in Zambia and enabling Zambia to become a regional hub for the aviation sector.

It would be good to see a vibrant aviation sector that can be an enabler of economic development and poverty reduction. Investing in new airline capacity is one step the Zambian Government has already prioritized. Ensuring the overall economic benefits are clearly understood and that there is a clear exit strategy in case things do not go the way envisaged, are both vital to mitigate the very real risks involved. However, focusing equally on the broader business operating environment will help ensure the entire aviation sector is better able to deliver the services that Zambia needs, whilst also helping to mitigate the downside risks that other national airline projects have been exposed to.

Steve Beel is currently the Head of Economic Growth, at DFID Zambia