From nationalism to globalism: The evolution of African airline ownership
International aviation is one of the most regulated industries in the world. From safety regulations to security protocols to bilateral agreements about traffic rights, every small detail is usually subject to Government scrutiny and approval. Most notably however, even in the globalised economy of the 21st century, the airline industry’s access to capital has more often than not been hampered by restrictive ownership regulations. This is particularly true in Africa where many small countries simply don’t have the capital resources needed to fund a business the size of an airline.
However, recent developments indicate a shift towards more liberalized frameworks, aimed at attracting foreign investment and fostering growth. Historically, an airline needed to demonstrate “substantial ownership and effective control” by citizens of a country in order to be eligible for designation by that country to fly international routes. The Yamoussoukro Declaration of 1988 and its successor, the Yamoussoukro Decision of 1999 took the first steps towards liberalising this. Instead, these documents advocated for a “principal place of business” test, which would allow for greater cross-border ownership and investment as far as intra-African air transport was concerned.
This shift in focus was designed to encourage the pooling of resources across borders, enabling airlines to benefit from economies of scale and improved efficiency. While the implementation of the Yamoussoukro Decision has been slow despite initiatives like the Single African Air Transport Market (SAATM), it laid the groundwork for more flexible ownership regulations in several African countries and even across regional blocs.
Most recently, Qatar Airways has been at the forefront of foreign investments into African airlines, leveraging varying degrees of openness in ownership regulations across the continent. In South Africa, Qatar Airways recently acquired a 25% stake in Airlink, reflecting the country’s relatively restrictive foreign ownership laws. South African regulations effectively limit foreign ownership and control of airlines to 25%, thus constraining the level of investment and control that foreign entities can exercise. In contrast, Rwanda’s more liberal approach to foreign ownership has allowed Qatar Airways to negotiate for a more significant stake in RwandAir. The Gulf carrier is expected to hold a 49% share in the Rwandan national airline when that deal is finalised, reflecting Rwanda’s strategic decision to attract more substantial foreign investment. This flexibility not only boosts the perennially loss-making RwandAir’s financial strength, but also positions otherwise tiny Rwanda as a key player in African aviation.
Ethiopian Airlines serves as a prime example of how strategic foreign partnerships can drive growth and expand market reach across Africa. The airline has established a network of joint ventures and strategic investments in several African countries, including its flagship investment in ASKY Airlines based in Togo. Other investments include current partnerships with the Governments of Malawi and Zambia for national airlines in those countries, as well as less successful ones in Chad and Mozambique that terminated operations. These partnerships however allowed Ethiopian Airlines to extend its operational footprint and influence across the continent, while also supporting the development of local aviation sectors in countries where independent airlines, often state backed, were unable to realise economies of scale and wound up failing at great expense to taxpayers.
The Aga Khan Fund for Economic Development (AKFED) also played a significant role in shaping the African aviation landscape through its investments in Groupe Celestair, which operated airlines in Mali, Burkina Faso and Uganda in the early part of the 21st century. Unfortunately, a combination of political interference and other issues didn’t allow these investments to succeed in the long term, but it demonstrated the nascent potential for foreign capital injections to revitalize struggling national carriers and enhance regional connectivity.
Similarly, Chinese investment in Africa’s aviation sector has been noteworthy, particularly through the involvement of the HNA Group in Africa World Airlines (AWA) in Ghana. Ghana’s liberal investment rules allowed HNA Group and other Chinese partners to take a substantial stake in AWA, which in turn benefited financially from the foreign direct investment (FDI), as well as operationally from the technical expertise that HNA brought to the table. The result of this liberal policy in Ghana was a profitable airline based in Accra, which has helped drive the growth of Ghanaian aviation as one of the best performing countries on the continent.
Foreign investment and partnerships in the aviation sector are a catalyst for growth. While challenges remain, particularly in aligning national interests with regional integration goals, the direction is clear. Countries that embrace more flexible ownership rules are likely to attract greater investment, leading to stronger, more competitive aviation sectors and the corresponding benefits those bring to the wider economy. Those that instead choose to hide behind jingoism, protectionism and nationalism, do so at the expense of their own local industry. It is not difficult to guess which nations will likely be the winners in the long term.
