North African airlines are never going to be able to match the profits attained by their peers in the Gulf. The economies of the Maghreb simply do not have the finances that are readily available to the oil-rich nations of the GCC.

However, the region’s airlines and airports are expanding, and there are captive, mature markets in Africa and Europe to service. The crucial link between sub-Saharan Africa and the huge expatriate communities of Europe and the tourism hotspots on the Mediterranean coast is well serviced by the national carriers and a burgeoning low-cost aviation network.

Building from this base, many airlines are looking to expand east and west. They may not be able to create international business hubs on the scale of Dubai, Abu Dhabi or Qatar, but there is growing competition as the gateway to Africa.

Liberalisation has progressed at markedly different rates across North Africa. Morocco signed an open-skies agreement with the EU in December 2005, the first non-European country to do so, but Tunis is set to follow suit within two years. These two economies have been the quickest to open up to international tourism.

Libya is still recovering from its prolonged time in the political wilderness under sanctions, while Algeria’s oil and gas reserves have not yet been converted into substantial tourism infrastructure.

Passenger numbers

  • Houari Boumedienne Airport, Algiers (2006): 3.5 million
  • Tripoli International Airport: 2.6 million
  • Mohammed V International Airport, Casablanca: 5.8 million
  • Tunis-Carthage International Airport (2004): 3.4 million

Figures for 2007 unless stated.

Source: MEED

Modest growth

Economic growth across the Maghreb is more modest than the massive growth in the sector to the east, and national flag carriers have not been placed at the centre of development, as has been the case with the petro-economies of the Gulf.

“The North African market has its own dynamic that is distinct from the explosion in the market seen in the Gulf,” says Abdul Teffaha, secretary general of the Arab Air Carriers Organisation.

“The market relies on the demand in both directions for traffic between Africa and the expatriate populations in Europe. Around this demand, Morocco and Tunisia have opened up their leisure markets, focusing on the late-spring and summer seasons.”

With the largest tourism sector in the Maghreb, Morocco is closest to the integrated transport and tourism model practised in the Gulf, and has the most developed transport infrastructure. Under the country’s national tourism strategy, Vision 2010, also known as the Azur Programme, the kingdom aims to raise the number of tourist visitors to the country to 10 million a year by 2010 from almost 2.5 million in 2000. The government also wants to bring tourism up to 20 per cent of gross domestic product.

The open-skies agreement with the EU is a calculated risk on Morocco’s part to realise the 2010 strategy. Political stability is the country’s strongest advantage as far as attracting tourism is concerned, and foreign airlines have been quick to sign up.

This in turn has exposed Moroccan airlines to direct competition from European carriers. In particular, Morocco’s fledgling low-cost carriers are finding it tough to compete with the established budget operators from the north. This pressure has been exacerbated by the recent spike in fuel prices

European competition

“The main problem for the sector in North Africa, and particularly Morocco because of the open-skies agreement, is not competition from the Gulf but from Europe,” says Majdi Sabri, regional vice-president for the Middle East and North Africa at the International Air Transport Association (IATA). “They want to bring in tourists so they have agreed to liberalise and expand, but this puts a lot of pressure on the domestic carriers.”

Gulf airlines are also targeting the Moroccan market. Air Arabia will open its third hub in Rabat by the end of 2008, launching a joint venture with local carrier Regional Airlines. The move will enable the Gulf company to link the European and African markets, previously the preserve of local carriers.

In a further effort to boost the sector, Mor-occo’s government is investing heavily in the country’s airport infrastructure to cater to the rising numbers of tourists. Morocco’s national carrier, Royal Air Maroc, is also boosting capacity to compete with the increasing foreign competition.

The airline was one of the first in the region to place an order for the Boeing 787 Dreamliner and will buy five of the fuel-efficient long-haul aircraft for $650m. To correspond with this, the kingdom’s main aviation hub, King Mohammed V International Airport in Casablanca, is undergoing a $565m redevelopment to expand Terminal 1 at the site.

“Morocco is buying up new capacity,” says Sabri. “Royal Air Maroc is buying capacity to compete with the incoming airlines and the airports in the country are expanding to create room for increasing numbers of tourists.”

Like Morocco, Tunisia has latched onto the tourism market as a means of boosting GDP as the nation’s natural resources diminish. Indeed, Tunis appears to be following Rabat’s lead almost to the letter as it increases its aviation capacity. Discussions are under way with the EU to put an open-skies agreement in place as soon as 2010, while national flag carrier Tunisair and the country’s airports are enjoying significant investment.

Increasing traffic

Tunisair has 16 new aircraft on order with Airbus, which will begin to arrive from 2011. “The plan is to increase traffic to Europe and then expand into North America and China,” says one official at the airline.

“We are studying flying to New York, Montreal and Shanghai or Beijing. We also need the new technology because fuel efficiency is critical to all airlines today and some of our current planes are quite old.”

The airline is under no illusions about taking on the big Gulf carriers, which have set out specifically to dominate the long-haul market. “There is certainly a difference between the politics of the market here and in the Gulf,” says the Tunisair official. “They are much richer than we are and competitive on a global scale. They are not direct competitors. Libyan Airlines has bought new planes and Royal Air Maroc is performing well. We are trying to face them.”

Correspondingly, Tunis is building new airport capacity. Plans are under way to overhaul capacity at Tunis-Carthage International Airport in the capital. Meanwhile, the first phase of the completely new airport at Enfidha is scheduled to open in March 2009. Built by Turkish contractor TAV and serving a major tourist region south of Tunis, the airport will open with capacity for 10 million passengers a year, which is scheduled to increase to 30 million in time.

Libya too is building new airport capacity, although the circumstances of its economic expansion are different.

The years of US-imposed sanctions have taken their toll and the country’s aviation infrastructure has crumbled. Now, with the nation readmitted to the international community, the rebuilding has begun, albeit from a low base.

About $2bn is being spent on improvements in airport infrastructure, including a $1.3bn refit of Tripoli International Airport undertaken by France’s Aeroports de Paris. Meanwhile, the country’s two carriers, Libyan Airlines and Afriqiyah Airways, have been grouped together under the Libyan African Aviation Holding Company. Along with the two airlines, the state-owned aircraft maintenance and cargo-handling companies have been brought into the group, which will be privatised when the businesses return to profitability, which is expected within five years.

Libyan Airlines, like its peers across the Maghreb, has been buying new planes and has 15 aircraft from Airbus on order. It too is aiming for a cautious entry into the long-haul market and is seeking a code-share agreement with a European airline to link its network to the US.

Relations with Washington have not thawed so dramatically as to permit direct flights to the US yet – indeed, the company does not currently have the aircraft – but it is a measure of Libya’s recent step forward that the possibility is openly discussed in Tripoli.

Strategic location

The airline wants to begin flights to the Far East soon and, like its neighbours, is concentrating on establishing a hub between Africa, Europe and eventually Asia.

“There is great competition from airlines in the Gulf and North Africa, but Libya has an excellent strategic location to act as a hub,” says Taffiq Tajouri, director for international affairs at Libyan Airlines.

“We are rebuilding but we have a long way to go. Sanctions had a severe effect. It is much easier and quicker to knock a building down than it is to build it up again.”

Algeria, conversely, is struggling to fill the available capacity at its airports. The country’s main hub, Houari Boumedienne Airport outside Algiers, has capacity for 8.5 million passengers a year, but traffic remains less than half that, at about 4 million a year.

However, the national carrier, Air Algerie, has one of the largest fleets in the region and an impressive order book of new aircraft set to arrive. The delivery of 10 Boeing 777-200s will start in 2009 and they will be deployed on the existing route to Montreal, and on forthcoming flights to New York and Beijing, which have been authorised.

Further destinations in the US and Far East are in the process of receiving clearance, and the company is expected to complete its accession into the SkyTeam international aviation alliance by 2009.

The competition to become the gateway to Africa will be intense. However, Teffaha does not see the current expansion as the start of a new battle for supremacy akin to that in the GCC, where many have raised concerns about whether all the emerging hubs can survive side by side in the long term.

“This is not speculative expansion, the new capacity is only being added to cater for normal organic growth,” he says. “The future prospects suggest continual growth but no sudden jumps. The countries will look to move into the underdeveloped African market.

“The region is not growing as fast as other markets, particularly the Gulf, but there is potential. The region’s main market has always been as a gateway to Africa and will remain that way.”