Report No. 49194 africa infrastructure country diagnostic

Figure 1.11 Regional growth zones in seats offered, all travel. The Banjul Accord Group (BAG) countries have seen the highest increase, surrounded by neighbors with very little, if not negative, growth. East Africa and North Africa both showed high, if not very high, growth.

Source: Analysis on data provided by Seabury ADG

The total number of carriers providing international service within Sub-Saharan Africa has been fluctuating between 67 and 78 in the last six years, with 76 being the number for 2007, serving roughly 206 county pairs (down from 238 country pairs in 2001). The decline in country pairs served follows hand-in-hand with an increase in market concentration by dominant players; 16 of the top 60 routes today are served by only one carrier, up from 10 in 2001. The remainder of the market has seen an even further concentration; 50 of those have a complete monopoly with one carrier, up from 24 in 2001. On the positive note, 25 of those routes are new routes that did not exist in 2001, where an airline has decided to take a risk and start serving a country pair not served before. Dominant in these new markets are Ethiopian Airlines and Kenya Airways.

Of the total estimated 14.3 million seats⁷ flown within the 206 country pairs, 80 percent of the seats are in the top 60 city pairs. Of these top 60 routes, 30 are again dominated by the three major carriers—South African Airways, Kenya Airways, and Ethiopian Airlines. The remaining markets have smaller and more scattered carriers as the leader. The fastest growing markets include links to South Africa. But, the growth of travel with Sudan is significant, as well as travel to and from Nigeria.

In terms of overall competitive standings between airlines, 15 airlines provide over 82 percent of all international travel within Sub-Saharan Africa, with the top three (South African, Ethiopian, and Kenyan) providing over 57 percent (see table 7 ).

In terms of routes with only one carrier, the total number of seats has only increased by 6 percent annually—a reasonable rate. But, today one carrier stands out—45 percent of all seats in markets having only one carrier are served by Ethiopian Airlines, with nearly 1.2 million seats. Kenya Airways, with 22 percent, is a distant second. South African Airways, by comparison, has only about 1 percent of the sole-carrier market. One could conclude from the data that Ethiopian Airlines is intentionally seeking markets where it can dominate significantly. Indeed the 1.2 million seats mentioned above have grown from 327,400 in 2001 to 1.2 million, at an annual rate of 27 percent. Ethiopian’s monopolies are not necessarily new routes. Of the 21 country pairs where Ethiopian has a monopoly, only six are new routes that did not exist in 2001. Two are routes that a competitor left, and the remainder are routes that already were monopolies. Kenyan has followed a similar strategy with even higher growth rates, albeit at lower numbers, often by beating out existing competitors. Table 1.8 in Appendix I summarizes the airlines in sole-carrier markets.

Using traditional methods of measure market concentration, intercountry pairs tend to be oligopolistic, as would be expected in less-dense markets. For example, using the Hirfendahl index, any market with a measured value of 1,800 (computed by summing the squares of the percentage of each market participant) would indicate concentrated market raising competitiveness concerns. In the case of the international markets in Sub-Saharan Africa, excluding the monopolies, the index in general fluctuates between 2,000 and 5,000, indicating very tight concentration.