1. AFRICAN AVIATION c SEMINAR AVIATION IN TRANSITION CHALLENGES & OPPORTUNITIES OF LIBERALISATION 22 nd – 23 rd March, 2003 - Montreal, Canada PRIOR TO THE 5 TH ICAO WORLDWIDE AIR TRANSPORT CONFERENCE Presentation by Nick Fadugba CEO, African Aviation Services Limited Publisher, AFRICAN AVIATION Magazine AFRICAN AVIATION c

2. c AFRICAN AVIATION SERVICES LTD AFRICAN AVIATION c Company Profile 1. Aviation Publishing 2. Aviation Conferences 3. Aviation Consultancy With A Special Emphasis On: * Aviation Finance * Aircraft Leasing & Maintenance * Aviation Safety & Security

3. AFRICAN AVIATION c MAXIM Aviation Can Be A Vital Catalyst For Africas Economic & Social Development - Company raison d'etre AFRICAN AVIATION c

4. c c Air Transport Liberalisation The Underlying Theme of the 5 th ICAO Worldwide Air Transport Conference is Not WHETHER to Liberalise but HOW to Liberalisation is said to be Inevitable

5. AFRICAN AVIATION c c Africas Share of Global Air Traffic Today, African Airlines have only an approximately 2% Market Share of Global Air Traffic If International Air Transport is further Liberalised Will Africas Global Market Share be Increased or be Reduced?

6. AFRICAN AVIATION c c Challenges & Opportunities of Liberalisation Further Air Transport Liberalisation could provide several benefits, such as enhanced air travel, economic trade and tourism But the Key Challenges are: How Air Transport Liberalisation can be Structured and Implemented so as to ensure that African airlines are not disadvantaged and put out business and their staff put out of work?

7. AFRICAN AVIATION c c Africa: Socio-Economic Environment Large & Growing Population Mainly Small & Weak National Economies Low Per Capita Income Little Disposable Income for Air Travel & Tourism, etc. Political Instability & Conflicts in Several Countries

8. AFRICAN AVIATION c c Key Challenges Facing Regulators in Africa Implementing & Monitoring the 1999 Yamoussoukro Decision on Air Transport Liberalisation in Africa Providing Effective Aviation Safety Oversight Ensuring Equitable Economic Regulations Harmonising Civil Aviation Regulations Enhancing Aviation Security Funding Modern Aviation Facilities & Expanding Aviation Training & Education

9. AFRICAN AVIATION c c Air Transport Liberalisation in Africa Is Any Progress Being Made? Yes, Slowly but Steadily. Thanks to the Efforts of Organisations Like: The UN Economic Commission for Africa ( ECA) The AU, The African Civil Aviation Commission (AFCAC) ICAO, COMESA, SADC, ECOWAS & AFRAA, etc Notably, Some African Governments Have Been More Supportive Than Others

10. AFRICAN AVIATION c c Obstacles & Dilemmas Some African Governments Are Reluctant to Cede Control to Truly Autonomous National Civil Aviation Authorities Who Will Benefit Most From Liberalisation in Africa - African Airlines or Foreign Carriers? Can A Developing Country Promote Open Skies & Still Protect its Own Airline Industry?

11. AFRICAN AVIATION c c African Position on Liberalisation It Must Be Consistent With the Yamoussoukro Decision of 1999 Foreign Investment – National Legislation Should Determine the Level of Such Investment Market Access Should Continue to Be Based on Bilateral and Multilateral Agreements Must Be F air Competition & Safeguards

12. AFRICAN AVIATION c c African Position on Airline Franchising African Governments Should Require Prior Authorisation & Verification of Any Franchise Agreement Franchising Between African Carriers Should Be Authorised Subject To The Airlines Meeting the Designation & Eligibility Criteria of The Yamoussoukro Decision Third Party Franchising Should Not Be Supported As it Adversely Impacts Competitive Position of African Carriers

13. AFRICAN AVIATION c c High Operating & Capital Costs Insurance-High Premiums Aviation Fuel-Up to 50% Higher Lease Rates-15%-30% Higher Air Navigation-Most Expensive Handling Fees-Very Expensive Maintenance-Little Co-operation Source: The World Bank

14. AFRICAN AVIATION c c Internal Pressures Mainly Small Domestic Air Traffic Markets Low Load F actors Higher Operating Costs than Other Regions Government-Regulated Air Fares Political Interference in Airline Decision-Making Management Instability & Lack of Continuity

15. AFRICAN AVIATION c c External Pressures Air Transport Liberalisation & Globalisation Increasing Competition from Larger Foreign Carriers World Bank/IMF Strictures on Government Subsidies to National Flag-Carriers

16. AFRICAN AVIATION c c External Pressures (2) African Market is Dominated by European Airlines - BA, Lufthansa, Air France, KLM, etc Asian Airlines Are Now Showing Greater Interest in Africa - Especially South Africa Threat By European Charter Airlines - Countries at Risk: Egypt, Namibia, Kenya, South Africa, Mauritius, Tunisia, Morocco, etc North American Airlines Have Minimal Presence in Africa - Previous Attempts by USAfrica Airways & World Airways Failed

17. AFRICAN AVIATION c c Cape Town Convention Gives Aircraft Lessors and Lenders the ability to repossess their assets worldwide in the event of default Provides Aircraft Collateral Assurance 60 Day Repossession / With Support of Governments Should Expand The Sources of Asset-based Finance

18. AFRICAN AVIATION c c Airline Industry – Key Regulatory Issues Airline Ownership & Control – Local or Foreign? Airline Market Access – Free for All? Airline Product Distribution Fair Competition Versus Protectionism The Provision of Essential Air Transport Services Vital To National Economic Development

19. AFRICAN AVIATION c c Airline Growth Strategies Strategic Investment By Foreign Airline Partner – Kenya Airways / KLM Airline Franchising – BA/Comair, South Africa; BA/Regional Air, Kenya Low-Cost Carriers – Kulula.com, South Africa Joint Ventures – Royal Air Maroc/Air Senegal International

20. AFRICAN AVIATION c c Summary Africa Has Made Some Headway in Implementing Air Transport Liberalisation, But Still Has Much To Achieve Air Transport Liberalisation in Africa Must Directly Benefit The African Aviation Industry

21. AFRICAN AVIATION c SEMINAR AVIATION IN TRANSITION CHALLENGES & OPPORTUNITIES OF LIBERALISATION 22 nd – 23 rd March, 2003 - Montreal, Canada PRIOR TO THE 5 TH ICAO WORLDWIDE AIR TRANSPORT CONFERENCE Presentation by Nick Fadugba Email: nickfadugba@africanaviation.com AFRICAN AVIATION c