While each continent and market has its own characteristics and faces its own set of challenges, the African airline market is unique. Africa is the world’s second-fastest growing aviation market, projected to carry 334 million PAX by 2037 (according to IATA). The relatively recent SAATM initiative promises increased liberalization of the aviation market in the decade ahead, yet fraud remains a persistent issue for most airlines operating on the continent, compounding the challenge the region’s airline face operating on negative profit margins. And many African airlines – like their global counterparts – have difficulty in attracting passengers to book through their direct channels, relying primarily on OTAs and aggregators for most of their bookings – and losing margin and customer relationships as a result.
These issues were key talk tracks at the recent AviaDev 2019 conference in Cape Town, with several topics driving many of our discussions:
Fraud is a key challenge in terms of payments – but mobile wallets may offer a solution.
Many airlines we spoke with identified payment fraud as one of their biggest challenges. The cross-border nature of many travel transactions, coupled with differing regulations and standards across borders creates a ripe environment for fraudsters. Some African airlines have even taken the drastic step of shutting down their digital channels, including their websites, in an effort to curb rampant fraud. Needless to say, this is less than ideal.
Accepting alternative forms of payment (AFPs) is one way African carriers can combat payment fraud. Some of the major mobile wallets (Apple Pay, Alipay, WeChat Pay), which African carriers are adapting as they expand their routes to new regions, all use some form of biometric verification, which discourages fraud and reduces chargebacks that are common with traditional card-based payments. The adoption of local African mobile money solutions (M-Pesa, Airtel Money, Tigo Money etc) also help with mitigating the fraud risk due to customer verification processes required at sign up. The more African airlines adopt these payment methods, the more successful they’ll be at reducing costly fraud.
Driving traffic to direct digital channels is a priority – but African airlines need marketing help to do so.
Having a strong direct booking channel (website and mobile), is critical for all airlines not just African carriers. The direct channel allows airlines to maximize the revenue they earn on each booking, by avoiding fees associated with bookings through third parties. When linked with an integrated payment channel with promotional capability and the ability to capture customer data on the back-end, a direct booking engine can be the lifeblood of an airline.
It’s especially important for a carrier in Africa because otherwise they’re contracting with four or five different companies and navigating a technology landscape crowded with disparate systems. Having a “one-stop” booking and payments solution allows African airlines to have more control, not be dictated to by multiple technology companies or limited by outdated technology. With a comprehensive solution that also features promotional capabilities, airlines can effectively attract more passengers to their direct booking channel, increasing their ability to generate revenues and cross or upsell opportunities.
There’s plenty of optimism for Open Skies/SAATM – but wariness too.
Another sentiment at the conference was mixed feelings about the Single African Air Transport Market (SAATM) initiative. Liberalization policies like SAATM – as with the EU-US Open Skies Agreement and ASEAN Open Skies before it – provide obvious benefits to airlines, other travel sector companies, as well as travelers in the region. But they also breed competition, and in some cases distrust.
Some African airlines are still hesitant to join SAATM, which reinforces the fragmentation of airline commerce between countries and continents. Airlines also that fear competition entering from other regions under the SAATM banner (the Middle East, primarily) will cause them to lose domestic market share.
While it’s fair to acknowledge these concerns, we believe that SAATM and liberalization policies in general are positive for airlines. In working with carriers throughout the region, we look at how they can approach digital transactions (especially digital booking and payments) as an area for sales enablement and profitability, by providing a more seamless and consistent passenger experience across all channels. Building relationships with passengers – as well as travel itself – is much easier in an “open skies” environment.
It’s clear the African airline market has plenty of challenges, but they are dwarfed by the opportunities the region represents. Challenges can all be overcome with the right digital payment and commerce solutions; fraud can be combatted with mobile wallets and biometrically-secured alternative forms of payment – something our Velocity payments platform excels at. Underperforming direct channel bookings can be increased by employing a booking and payments platform with marketing and promotional support – our Voyage and Vantage products do exactly that. And airlines can deal with competition arising from SAATM by partnering with a trusted technology partner that creates efficiencies and drives revenue.
To learn more about how we’re helping African carriers, get in touch here.