As global passenger demand for air travel is set to double by 2035, most analysts predict that Asia-Pacific will lead the way, but the African airline sector will not be far behind. The top ten fastest-growing markets for air travel in percentage terms will be in Africa: Sierra Leone, Guinea, Central African Republic, Benin, Mali, Rwanda, Togo, Uganda, Zambia and Madagascar. They will grow by more than 8% each year on average over the next 20 years, doubling in size each decade.
With that opportunity in mind, CellPoint Mobile had the honor to attend last year’s 49th Annual General Assembly for the African Airlines Association (AFRAA) in Rwanda. As a proud member of AFRAA, we were delighted to meet with representatives from African airlines and discuss the continent’s growing opportunities for mobile commerce.
African Airlines and Revenue Generation
African airlines have an advantage because although they have one of the youngest aviation sectors in the world, they are also “taking off” in a time of rapid growth for the travel sector. Of course, there are headwinds – air travel requires massive capital investment just to keep carriers flying. Adding to that pressure, airlines are competing with online travel agencies and “big tech” companies such as Google for more market share of travelers with mobile devices. To stay competitive (and relevant to the market), airlines are investing in robust mobile booking engines, and adding new alternative payment methods (APMs), such as Apple Pay or Samsung Pay.
This is the mobile-first environment in which the African airline sector will grow over the next 20 years. Countries such as Kenya, Rwanda and South Africa have already built strong aviation industries, and that is a major accomplishment for any country – because it demonstrates a commitment to capital investment, but also to human achievements in science and engineering. This is a credit to Africa’s universities and business culture.
What African airlines will need, going forward, is a similar commitment to travel technology on the demand side. Capital investment is a critical prerequisite, but it ultimately means nothing unless airlines can book more flyers, and incrementally increase ancillary revenue on every transaction. African airlines will need to invest in mobile-first solutions for booking and payments, or they will struggle to stay relevant in a travel market where almost everything – including booking, payments, ticketing, travel management and loyalty – happens on smartphones. According to The Economist, smartphone subscriptions in Africa have risen from about 129 million in 2007 to around 1 billion – particularly concentrated among those with higher levels of income and education, and who tend to live in cities.
Travel Supply Chains and Mobile-First Commerce
With a mobile-first approach, African airlines can increase passenger demand and generate higher revenue, but they also must improve the supply chain by which they distribute travel inventory to mobile users. Ultimately, airlines want to reach the right customer, with the right offer, at the right time, and through the right mobile channel. This means scaling booking engines, payment platforms and other travel systems across billions of mobile transactions, every day. How will African airlines expand globally without the ability to capture more demand and revenue on the digital side of travel?
Around the world, everyone knows the story of M-Pesa in Kenya, who introduced mobile payments to a continent which has no extensive payments infrastructure, making it easier for people across the economic spectrum to make financial transactions and engage in commerce. As the African airline industry grows, carriers will need to make it easier and faster for passengers to book, pay for and manage travel directly from their smartphones. On the operational side, airlines are making the shift to digital procurement because every gain in efficiency has a direct impact on business and revenue. In the next three years, the Middle East and Africa (MEA) region will increase digital travel sales by $17 billion. African airlines have an opportunity to make the transition to mobile-first commerce and to prepare for 2021, when the global digital travel market will reach $855 billion.
With more than 200 airlines in Africa, carriers have critical needs for mobile architecture that can process data more efficiently, increase revenue capture, create better user experiences and turn mobile “lookers” into “bookers.” CellPoint Mobile offers a seamless process for passenger booking and ticket payment, while simultaneously supporting revenue enhancing up-selling and cross-selling opportunities, including loyalty programs. With CellPoint Mobile’s solutions in place, African airlines can capture higher mobile revenues and streamline their path to profits.
For more of our perspectives on the African airline sector, we invite you to check out the speaker presentation we gave at the AFRAA AGA – here’s a link. We also made an appearance on CNBC Africa after the conference to discuss how African airlines can tap into e-commerce for growth (you can watch the interview here).