PASSENGER POTENTIAL:
                            US - AFRICA MARKETS


                              Presented by:
       ...
Agenda




    1. Market Characteristics, Drivers and Trends

    2. Direct Service Characteristics and Trends

    3. The...
Agenda




    1. Market Characteristics, Drivers and Trends

    2. Direct Service Characteristics and Trends

    3. The...
The US-Africa Passenger Market is a Fraction of the
                        Size of Most Other US-International Markets

 ...
However, the Market Has Been Growing Rapidly
                         and Has Considerable Upside Potential

             ...
Propensity to Travel in Africa is Well Below
                         That in Other World Regions


                      ...
10 Countries Account for 90% of Reported Origin-
                          Destination Traffic Between the US and Africa

...
The US-Africa Market is Projected to Grow at a Rate
                            That Surpasses Most Other US-International...
Key Growth Drivers



                                                                                     Year/Year Perce...
Load Factors on Direct US-Africa Services
                        Have Been Reasonably Healthy


                 Load Fac...
US-Africa Yields are on a Par With the US-Far East
                                             Market, and Higher Than US...
Who is Flying? Nearly Two-Thirds of Passengers
                           on US-Africa Direct Services are U.S. Citizens

...
Nearly 80% of the US-Africa Market is Estimated to Connect
                        in Another Region, Most Likely at a Eur...
US-Africa Travelers Have Numerous On-Line Travel
     Options on European Hub Carriers



               via CDG          ...
European Airlines Offer US-Africa Travelers Hundreds of
                         Weekly On-Line Connecting Opportunities a...
Agenda




     1. Market Characteristics, Drivers and Trends

     2. Direct Service Characteristics and Trends

     3. ...
Current US-Africa Direct Service, June 2007


                               Total: 47 Weekly Nonstops + 7 One-Stops (via ...
8 African Countries Currently Receive Direct
                            Service from the US


               African Coun...
Historically, Non-U.S. Airlines Have Carried the
                          Lion’s Share of Direct US-Africa Passengers



...
With the Exception of a Few Markets, Service
                          Between the US and Africa Has Been Spotty
         ...
However, in Recent Years, There Has Been Renewed
     Interest in the US-Africa Market Among African Airlines . . .




  ...
. . . as Well as US Carriers




     North American Airlines Launched Services to West Africa in July 2005,
     After Gh...
Capacity in the US-Africa Market is Well on its Way
                           to Surpassing Pre-September 11 Levels

    ...
US Carrier Code-Sharing to African Destinations
                           Has Grown Enormously Over the Past 10 Years



...
Six of the US Major Carriers Now Sell Seats to 36
                          Destinations Throughout the Continent via Code...
Current US Carrier Code-Shares to Africa
                            June, 2007

               US Major:                 ...
Since 1999, the U.S. Government Has Signed “Open Skies”
                         Bilateral Air Service Agreements With 17 ...
Agenda




     1. Market Characteristics, Drivers and Trends

     2. Direct Service Characteristics and Trends

     3. ...
US Carriers’ View of the US-Africa Market



     Pros:
       Growing Very Rapidly, Certain Key Markets in Particular
   ...
Prerequisites for Service


     Sufficient Traffic Must be Generated on “Local”, “Behind”, “Beyond”
     and/or “Bridge” ...
Prerequisites for Service, Cont’d.




     Sufficient Information Must be Available to Enable Accurate
     Market Sizing...
What do US Carriers Evaluate Before Committing a
     Scarce Aircraft Resource to a Particular Service?


      Market Cha...
African Governments and Airport Stakeholders are
        Now Actively Marketing Themselves to US Carriers




     It Appe...
What Can Airports, Governments and Stakeholders
       in Africa do to Help Stimulate US Carrier Service?



     Pro-Acti...
THANK YOU


                                                                                      mdiamond@sh-e.com
      ...
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Air Transport Market Potential: US-Africa Air Transportation Summit, Miami, 2007

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Market characteristics, drivers and trends; direct service characteristics; the view of U.S. carriers – and what African airport stakeholders can do to shape that perception

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Air Transport Market Potential: US-Africa Air Transportation Summit, Miami, 2007

  1. 1. PASSENGER POTENTIAL: US - AFRICA MARKETS Presented by: Presented by: Mark Diamond Director, SH&E, Inc. USAfrica Air Transportation Summit June 7, 2007
  2. 2. Agenda 1. Market Characteristics, Drivers and Trends 2. Direct Service Characteristics and Trends 3. The View of US Carriers – and What African Airport Stakeholders Can do to Shape Their Perception 1
  3. 3. Agenda 1. Market Characteristics, Drivers and Trends 2. Direct Service Characteristics and Trends 3. The View of US Carriers – and What African Airport Stakeholders Can do to Shape Their Perception 2
  4. 4. The US-Africa Passenger Market is a Fraction of the Size of Most Other US-International Markets US-International Passenger Flows (Millions) CY 2005 Western Europe 47.7 Central America 23.5 North America 21.8 Caribbean 19.8 Northeast Asia 14.8 Southwest Pacific 11.9 Upper South America 4.6 Lower South America 3.8 Southeast Asia 2.2 Middle East 1.3 Eastern/Central Europe 1.1 South Asia 0.7 Southern Africa 0.4 Northern Africa 0.2 Eastern Africa 0.0 0 5 10 15 20 25 30 35 40 45 50 3 Source: IATA Passenger Forecast CY 2005
  5. 5. However, the Market Has Been Growing Rapidly and Has Considerable Upside Potential North America-Overseas Markets: Historic Growth and Percentage Share by Partner Region 1995-2005 Average Annual 2005 Percentage Share of RPKs RPK Growth by Region 8% 7.3% Africa 7% 0.5% SW Asia 6% Europe Middle East 0.2% 48% 5% 2% 4.4% 4.0% 3.9% 4% Oceania 3.4% 3.3% 4% 3% 2.6% SE Asia 2.0% 5% 2% S America 1% 0.5% 5% China 0% 5% NE Asia Central 16% America as i ca a st a a Eu st S o O pe S o l A i na or Am ia dl ica ea ic si si Ea h an 14% ro r tA A th er M Af r t r Ch ut me u t ce e id he a en N C 4 Source: Boeing Current Market Outlook 2006. Data excludes intra-North America market intra
  6. 6. Propensity to Travel in Africa is Well Below That in Other World Regions Annual Passengers per Thousand Population, 2005 70 62.2 60 50.6 50 40 30 20 16.2 10 8.3 5.3 0 Europe North America Latin American Asia Africa Africa & Carribean 5 Sources: Population – United Nations Department of Social and Economic Affairs: Air Passengers - IATA
  7. 7. 10 Countries Account for 90% of Reported Origin- Destination Traffic Between the US and Africa Percentage Distribution of Reported US-Africa O&D Passengers by Country, 2006 Senegal Other 1% 10% Uganda 2% South Africa Tanzania 23% 4% Kenya 6% Morocco 6% Egypt Ethiopia 17% 8% Nigeria 10% Ghana 13% 6 Sources: US Department of Transportation Origin-Destination Survey. Excludes passengers traveling exclusively on non-U.S. carriers
  8. 8. The US-Africa Market is Projected to Grow at a Rate That Surpasses Most Other US-International Markets Projected 20-Year Average Annual Growth for US Traffic, by Partner Region Boeing Forecast: North America RPK’s, 2005-2025 16% 12.8% 12% 7.4% 6.6% 8% 6.5% 6.3% 6.0% 5.8% 4.5% 4.1% 4.1% 3.6% 4% 0% ia a ia Am ia e m Am na t ia as p ric As As As an A ro i Ch e Af -N C S id ce Eu SE NE SW tra M O In Airbus Forecast: US RPK’s, 2006-2025 10% 8% 7.6% 7.4% 6.9% 6.7% 6.3% 6.2% 6.2% 6.2% 6.1% 6.0% 5.4% 5.2% 6% 4.8% 4.5% 4.3% 4.3% 3.8% 4% 2.7% 2% 0% Z a a ia S ca na pe S t e ca n a da b o a N as si ric op ic U CI ic Su ic pa As s/ fri ro i fri s na Ch e er er ex t ic Af Ru ur Ja Au id A Eu A an m Am Ca M tE es M N S h A di nt Sa m es C In S Ce Do b- W Su 7 Sources: Boeing Current Market Outlook, 2006; Airbus Global Market Forecast, 2006-2025.
  9. 9. Key Growth Drivers Year/Year Percentage Growth in GDP, Rapid Growth of GDP Africa vs. Total World, 2004-2007E 7% Burgeoning Trade in Natural 5.7% 5.8% Resources 6% 5.2% 5.3% 5.3% 5.3% 5% 4.7% 4.5% Rapid Growth in Foreign Direct Investment, Particularly in the 4% Energy Sector 3% Expansion in the Construction 2% Sector 1% Development of Tourist 0% Infrastructure & Initiatives to 2004 2005 2006 2007E Increase Tourism Africa World 8 Sources: UN Economic Commission for Africa (Africa GDP), CPB Netherlands Bureau for Economic Policy Analysis
  10. 10. Load Factors on Direct US-Africa Services Have Been Reasonably Healthy Load Factors on Each of the Top 5 Routes Exceeded 72% in 2006 Average Load Factors on US-Africa Nonstops, 1997-2006 100% 70.0% 70.8% 66.8% 75% 66.1% 62.7% 63.0% 65.9% 63.8% 60.5% 61.7% 50% 25% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Average Load Factors on Top 5 Routes, 2006 100% 72.8% 73.0% 73.1% 75.3% 74.9% 75% 50% 25% 0% New York-Cairo New York-Dakar New York- Atlanta-Ilho do Sal Washington- 9 Casablanca Dakar Source: US Department of Transportation T100
  11. 11. US-Africa Yields are on a Par With the US-Far East Market, and Higher Than US-Europe Yields in US-International Markets, 2006 US Dollars per RPK $0.12 $0.11 US-Canada Yield, USD $ per RPK $0.10 US-Caribbean $0.09 US-Middle East US-Australia/Pacific US-Central America $0.08 US-South America US-Far East US-Africa $0.07 US-Europe $0.06 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Trip Length, Kilometers 10 Source: Based on US DOT O&D Survey. Note: does not include trips that were exclusively on non-U.S. carriers. trips non-
  12. 12. Who is Flying? Nearly Two-Thirds of Passengers on US-Africa Direct Services are U.S. Citizens This Has Positive Implications for Economic Impact on Africa, and the Ability to Attract U.S. Carrier Service Percentage Breakdown, U.S. Citizens vs. Non-U.S. Citizens, 2004 Non-U.S. Citizens 40% U.S. Citizens 60% 11 Sources: U.S. Immigration and Naturalization Service (INS)
  13. 13. Nearly 80% of the US-Africa Market is Estimated to Connect in Another Region, Most Likely at a European Hub US-Africa Market: Estimated True O&D Passengers and Percentage by Travel Routing -- Flying Direct vs. Connecting in Another Region Flying Direct 24% Connecting @ 600-700k Enroute 76% @ 1.9 - 2.3 mil 12 Sources: Estimates based on data from US Department of Transportation T100 and World Tourism Organization
  14. 14. US-Africa Travelers Have Numerous On-Line Travel Options on European Hub Carriers via CDG via MAD via LHR & LGW via LIS via ZRH via FRA via VIE via MXP & FCO via LHR via AMS 13
  15. 15. European Airlines Offer US-Africa Travelers Hundreds of Weekly On-Line Connecting Opportunities at Their Hubs European Hub Carrier Service Opportunities Between the US and Africa, May 2007 300 250 218 226 Weekly Frequencies from Hub 200 161 150 135 To Africa To US 96 98 100 61 60 57 66 48 37 47 35 34 40 50 14 26 22 21 16 14 14 9 0 AF/CDG BA/LHR AZ/MXP LH/FRA KL/AMS IB/MAD AZ/FCO TP/LIS LX/ZRH BA/LGW OS/VIE VS/LHR 35 29 30 Nonstop Destinations Served from Hub 25 20 17 To Africa To US 15 15 12 14 11 10 8 9 8 10 7 7 6 5 5 5 5 5 4 5 5 1 2 2 2 0 AF/CDG BA/LHR KL/AMS LH/FRA IB/MAD AZ/MXP TP/LIS LX/ZRH AZ/FCO OS/VIE BA/LGW VS/LHR 14 Source: Official Airline Guide, June 2007
  16. 16. Agenda 1. Market Characteristics, Drivers and Trends 2. Direct Service Characteristics and Trends 3. The View of US Carriers – and What African Airport Stakeholders Can do to Shape Their Perception 15
  17. 17. Current US-Africa Direct Service, June 2007 Total: 47 Weekly Nonstops + 7 One-Stops (via Europe) Atlanta-Dakar-Johannesburg (7x/Week) Delta JFK-Accra (4x/Week) Delta JFK-Lagos (3x/Week) North American Baltimore-JFK-Accra (1x/Week) North American JFK-Cairo (7x/Week) Egyptair JFK-Casablanca (9x/Week) Royal Air Maroc Boston-Praia (Cabo Verde) (3x/Week) TACV Washington IAD-Addis Ababa (6x/Week) Ethiopian Washington IAD-Johannesburg (7x/Week) South African JFK-Dakar-Johannesburg (7x/Week) South African 16 Source: Official Airline Guide. Note: Ethiopian Airlines service to Addis Ababa via Rome.
  18. 18. 8 African Countries Currently Receive Direct Service from the US African Countries Served Morocco 17.9% Direct from the US, & Share 12.9% of US-Africa Seat Capacity, Egypt May 2007 Cape Verde Senegal 1.5% 7.3% 13.1% Nigeria Ghana Ethiopia 5.0% 8.2% The Top 4 Countries – South Africa, Egypt, Senegal and Morocco – Receive Nearly 80% of Seat Capacity South 34.0% Africa Source: Official Airline Guide, May 2007. 17 In cases where a single aircraft from the US serves 2 destinations in Africa, seats are allocated 50:50 to each destination.
  19. 19. Historically, Non-U.S. Airlines Have Carried the Lion’s Share of Direct US-Africa Passengers Share of US-Africa Passengers by Carrier Nationality CY 1997 – CY 2006 100% 4% 7% 8% 8% 10% 8% 6% 6% 10% 11% 90% 80% 70% 60% 50% 96% 93% 92% 92% 90% 92% 94% 94% 90% 89% 40% 30% 20% 10% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 U.S. Carrier Non-U.S. Carrier 18 Source: U.S. Department of Transportation T100
  20. 20. With the Exception of a Few Markets, Service Between the US and Africa Has Been Spotty US-Africa Scheduled Direct Passenger Service, CY 1997 – CY 2006 Carrier Route 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Afrinat Int'l New York-Banjul Air Afrique New York-Abidjan New York-Dakar Delta Atlanta-Dakar-Johannesburg New York-Accra New York-Cairo Egyptair New York-Cairo Ethiopian Newark-Addis Ababa* Washington-Addis Ababa* Ghana Airways Baltimore-Accra Baltimore-Banjul Baltimore-Freetown Baltimore-Monrovia New York-Accra New York-Banjul New York-Monrovia Nigeria Airways New York-Lagos North American Baltimore-Banjul Baltimore-New York-Accra New York-Lagos Royal Air Maroc New York-Casablanca South African Airways Atlanta-Cape Town Atlanta-Johannesburg Atlanta-Sal Miami-Cape Town New York-Dakar-Johannesburg New York-Johannesburg New York-Lagos-Johannesburg New York-Sal Washington-Accra Washington-Dakar Washington-Johannesburg TAA Houston-Banjul New York-Banjul New York-Freetown Washington-Dakar Washington-Freetown TACV New York-Sal Boston-Praia* Boston-Sal TWA New York-Cairo 19 Source: Official Airline Guide. * = certain flights have intermediate stops in Europe.
  21. 21. However, in Recent Years, There Has Been Renewed Interest in the US-Africa Market Among African Airlines . . . A Number of African Carriers Have Plans to Launch Service to the United States: 20
  22. 22. . . . as Well as US Carriers North American Airlines Launched Services to West Africa in July 2005, After Ghana Airways’ Shutdown – Currently Offers 3 Weekly Nonstops JFK-LOS, and 1 Weekly Direct Flight BWI-JFK-ACC Continental Had Plans to Launch Daily Nonstop Service to Accra and Lagos from its Newark Hub in 2005 – Plans Were Axed Due to Inability to Gain Authorization for Service, in Wake of Virgin Nigeria Dispute Delta Launched Service to Africa in 2006 and is Growing – In Late 2006, DL Launched Daily ATL-DKR-JNB Service, and JFK-ACC 4 Times per Week – Plans to Launch Daily ATL-LOS Nonstop Service in December 2007 21
  23. 23. Capacity in the US-Africa Market is Well on its Way to Surpassing Pre-September 11 Levels US-Africa Nonstop Capacity and Service, August 1997 – June 2007 Weekly Seats Each Way Weekly Frequencies Thousands Each Way 16 60 14 14 50 48 12 11 12 12 11 42 10 10 38 40 10 9 35 35 9 33 34 9 32 30 30 8 30 6 20 4 10 2 0 0 98 99 00 01 02 03 04 05 06 07 98 99 00 01 02 03 04 05 06 07 19 19 20 20 20 20 20 20 20 20 19 19 20 20 20 20 20 20 20 20 22 Source: Official Airline Guide
  24. 24. US Carrier Code-Sharing to African Destinations Has Grown Enormously Over the Past 10 Years US Carrier Code-Share Service to African Destinations, Weekly Frequencies, Summer 2007 vs. Summer 1997 500 409 400 300 200 100 36 0 1997 2007 23 Source: Official Airline Guide, August 1997 and June 2007
  25. 25. Six of the US Major Carriers Now Sell Seats to 36 Destinations Throughout the Continent via Code-Share US Carrier Code-Share Service to Africa June 2007 Number of African Weekly Frequencies Destinations Served 140 35 123 120 111 30 28 26 25 100 25 80 71 20 56 13 60 15 41 9 40 10 20 7 5 1 0 0 d d tin t tin t ta s ta s an an l l ta ta es es ay ay te te el el ic ic en en w w ni ni rw rw D D er er th th U U Ai Ai m m or or on on A A S S N N U U C C 24 Source: Official Airline Guide, June 2007
  26. 26. Current US Carrier Code-Shares to Africa June, 2007 US Major: American Continental Delta Northwest United US Airways Code-Share Partner: British Brussels Royal Air South Airways Airlines Alitalia KLM Air France Maroc KLM Lufthansa African TAP Lufthansa Abidjan X X Abuja X Accra X X X Addis Ababa X X Asmara X Bamako X Borg El Arab X Brazzaville X Cairo X X X Cape Town X X X Casablanca X X X Conakry X Cotonou X Dakar X X X X X Dar-Es-Salaam X X X Douala X X Entebbe/Kampala X X X Freetown X Ilha Do Sal X Johannesburg X X X X X Kano X X Khartoum X Kinshasa X Lagos X X X X X Libreville X Lome X Lusaka X Maputo X Nairobi X X X X Ndjamena X Niamey X Nouakchott X Ouagadougou X Rabat X Tunis X Yaounde X 25 Source: Official Airline Guide, June 2007
  27. 27. Since 1999, the U.S. Government Has Signed “Open Skies” Bilateral Air Service Agreements With 17 African Nations Mali Cape Verde Senegal Chad Gambia Burkina Faso Nigeria Benin Ethiopia Liberia Ghana Cameroon Uganda Gabon Rwanda African Countries With “Open Skies” Bilateral Air Service Tanzania Agreements With the U.S. Namibia 26 Source: U.S. Department of State.
  28. 28. Agenda 1. Market Characteristics, Drivers and Trends 2. Direct Service Characteristics and Trends 3. The View of US Carriers – and What African Airport Stakeholders Can do to Shape Their Perception 27
  29. 29. US Carriers’ View of the US-Africa Market Pros: Growing Very Rapidly, Certain Key Markets in Particular High O&D Traffic Volumes and High Yields – Oil-Driven Business – “VFR” European Carriers Have Operated Successfully for Years Throughout the Continent Competition is Relatively Limited at Present Cons: Uncertain Environment, Continued Perception of Risk Market Information is Sparse Limited Number of Markets Can Sustain Direct Service 28
  30. 30. Prerequisites for Service Sufficient Traffic Must be Generated on “Local”, “Behind”, “Beyond” and/or “Bridge” Sectors to Sustain Widebody Service – @ 150-200 Passengers per Day Each Way (PDEW) for Daily Widebody Service – Connecting Potential at the African Gateway to “Beyond” Points Elsewhere in the Continent is Not Yet a Key Factor – But May Be in the Future “Local” US Gateway Africa Gateway “Behind” US Gateway Africa Gateway “Beyond” US Gateway Africa Gateway “Bridge” US Gateway Africa Gateway 29
  31. 31. Prerequisites for Service, Cont’d. Sufficient Information Must be Available to Enable Accurate Market Sizing, by City-Pair and by Purpose of Travel – Need to Understand “O&D” Traffic Flows and Yields, at the City-Pair Level if Possible – “MIDT” Booking Data is Insufficient in the US-Africa Market Aircraft Turns at African Airports Should be Quick – Maximum: 2 Hours – Target: 1 Hour 45 Minutes 30
  32. 32. What do US Carriers Evaluate Before Committing a Scarce Aircraft Resource to a Particular Service? Market Characteristics & Potential Profitability – Airlines Estimate a Proposed Service’s Traffic and Revenue Generation Capability – Based on This Information, Airline Will Prepare a Full Pro-Forma P&L for the Proposed Service – The Airline Will Evaluate and Rank These Results Against Other Proposed Markets Operational Feasibility Reliable Local Aircraft Service and Handling Minimum of Red Tape Safety & Security 31
  33. 33. African Governments and Airport Stakeholders are Now Actively Marketing Themselves to US Carriers It Appears That Financial Incentives Have Not Yet Been a Major Factor in Influencing Service Decisions However, Incentives are a Common Component of Airports’ Air Service Development Initiatives in the U.S. and Elsewhere. Examples: – Seat Guarantees – Local Marketing Assistance 32
  34. 34. What Can Airports, Governments and Stakeholders in Africa do to Help Stimulate US Carrier Service? Pro-Active Marketing is Likely to be a Necessity to Attract Service, Particularly for Smaller Markets The Airlines Will be Looking for a Positive Business Case to Justify Committing Aircraft to a Market Airports, Governments and Stakeholders Can Help Airlines in Their Decision Making by: – Helping to Provide the Information Carriers Need to Evaluate and Support a Service Decision – Aiding Carriers in Approvals Process; Minimizing Red Tape – Helping to Ensure That the Carrier Will Face Few Operational Difficulties 33
  35. 35. THANK YOU mdiamond@sh-e.com www.sh-e.com www.sh-e.com LONDON NEW YORK BOSTON WASHINGTON, DC LOS ANGELES Tel: +44.20.7242.9333 Tel: +1.212.656.9200 Tel: +1.617.218.3500 Tel: +1.202.572.9400 Tel: +1.310.471.9118 Fax: +44.20.7242.9334 Fax: +1.212.471.6000 Fax: +1.617.218.3600 Fax: +1.202.572.9500 Fax: +1.310.471.5860 E-mail: london@sh-e.com E-mail: newyork@sh-e.com E-mail: boston@sh-e.com E-mail: washington@sh-e.com E-mail: losangeles@sh-e.com 34

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