Open skies: Air traffic stands to benefit from a number of new incentives, partnerships and infrastructure developments

The air transport sector in Morocco has evolved significantly in the last decade. Following the launch of market liberalisation in 2004 and the signing of an open skies agreement with the EU in 2006, a number of new air carriers have entered the market and passenger numbers have seen marked growth. The National Airports Office (Office National des Aéroports, ONDA), recorded an average of 12.5% annual growth in passenger numbers between 2004 and 2010. As passenger traffic grew, the state has invested considerable resources to improve infrastructure at the country’s 25 domestic and international airports, with the goal of cementing Morocco’s position as a touristic destination and a transit hub between Europe, Africa and Asia.

PASSENGER GROWTH: Following double-digit annual passenger growth since 2005, visitor arrivals have been sluggish in the past two years as the global economic downturn, and particularly the recession in Europe, has impacted the tourism industry. Passenger numbers increased by 15% year-on-year (y-o-y) to reach 15.4m passengers in 2010, only to slow to 2% growth in 2011, with 15.7m passengers. However, ONDA projects that passenger numbers will continue to show steady growth in the next two decades. Conservative estimates suggest that passenger arrivals could climb to 24.4m by 2020 and to 51.8m by 2030, particularly as Morocco increases flight connections with key markets in the Middle East, Asia and sub-Saharan Africa.

In order to prepare for this growth, ONDA has been investing an estimated Dh1.6bn (€142.24m) per year since 2006. Several projects launched in 2012 also stand to significantly boost air traffic in the medium term. Renovation and expansion work began on Terminal I of the Casablanca airport in 2012, which ultimately aims to triple capacity at the country’s primary air hub from 6.5m to 21m passengers. In particular, ONDA is focusing on improving airport infrastructure in key tourist centres. Work began in 2012 to extend the main terminal of the Marrakech airport and increase passenger capacity from 4.5m to 9m annually. A new terminal is also under construction in Fez, which will ultimately boost capacity from 500,000 to 2.6m passengers. In addition, ONDA has outlined a Dh860m (€76.45m) long-term investment plan to develop and expand freight terminals in four of the five freight centres: Rabat, Casablanca, Agadir and Tangier. Overall freight traffic in the country decreased from 67,100 tonnes in 2007 to only some 55,000 tonnes in 2010.

Lahcen Farhat, ONDA’s director of strategy and planning, told OBG “on a strategic level, the development of industrial and logistics zones will introduce a new way of conducting freight transport. For the first time, the full spectrum of logistics services will be concentrated in these zones. This should streamline the value chain and allow Morocco to greatly increase freight traffic in the medium term.”

NEW CONNECTIONS: The number of air carriers operating regular connections in Morocco has grown from 31 in 2005 to 45 in 2011, pushing the quantity of regular routes from 140 to 240. A number of new factors stand to stimulate further growth in the industry today.

Tourism arrivals from the EU are likely to remain lower in the near term as European economies struggle to rebound, although the news from Europe is not all bad.

“Casablanca has become an international crossroads, with a good network of connections. But only 20% of African transit passengers get off in Casablanca. This number can be increased,” Driss Benhima, president director-general for Royal Air Maroc (RAM) told OBG.

In 2012 RAM opened several new routes with high potential for regular traffic, including from Moroccans residing abroad, and stand to solidify the kingdom’s position as an air travel hub between Europe, Africa and beyond. RAM will resume three direct weekly flights from Casablanca to London Gatwick in March 2013.

However, while Morocco’s air transport sector remains exposed to the economic troubles in Europe, which accounts for roughly 83% of global passengers, traffic to other regions has helped to raise the tide of overall arrivals. In order to meet the projected level of 51.8m passengers by 2030, ONDA is targeting new markets in the Middle East, Africa, Asia and the Americas.

NEW AGREEMENTS: In August 2012 Morocco signed a bilateral air services agreement with Mauritania, which will permit Mauritania Airlines International and RAM to operate seven weekly flights each between Nouakchott and Casablanca. Traffic has been increasing between the two countries, with estimated growth of 36% between 2009 and 2010. The deal modified a previous agreement under which RAM operated the majority of flights between Morocco and Mauritania, and added a component for professional training with Mauritania Airlines International. Morocco also signed an interline agreement with JetBlue Airways on October 5, which will connect the two airlines’ networks and create new options for travellers between Africa and the Americas. Under the agreement, the airlines will integrate baggage handling and allow passengers to book single-ticket travel with flights on both carriers.

In another positive move for the sector, Etihad Airways is planning to boost its service to Morocco by launching daily flights in March 2013. The airline has been present in Morocco for seven years and currently operates five weekly flights. Etihad Airways’ president and CEO, James Hogan, noted in August 2012 public remarks that “the Moroccan capital has been a successful destination for us and retains strong volumes of business and leisure passengers throughout the year. We believe there are good prospects for further growth in the region.” Etihad has a codeshare with RAM, and the increase in flight traffic should create more options for passengers to connect to other destinations in Morocco and throughout Africa.

Morocco may also seek to increase partnerships with the Gulf region through RAM. The airline has seen declining profits since 2009 as the downturn in tourism arrivals and competition from low-cost carriers in Europe chipped away at sales. Following a Dh1.6bn (€142.24m) public investment in September 2011 and company-wide restructuring, the airline was on more solid footing in late 2012. Morocco aims to triple its tourism receipts and double tourist arrivals to 20m per year by 2020, and such partnerships would strengthen the national carrier’s presence in Asian markets.

TARIFF INCENTIVES: ONDA has taken several measures in recent months to incentivise the development of new and more frequent routes. In April 2012 ONDA eliminated the airport infrastructure and equipment tax, representing savings of Dh90m (€8m) per year. The authority also reduced tariffs for flights into all Moroccan destinations except for the hub of Casablanca in an effort to make Morocco a more competitive destination, for savings of Dh67m (€5.96m) per year.

In addition, a package of tariff incentives that was scheduled to expire at 2012 year-end was maintained through 2013. These include a 50% decrease in landing taxes for companies operating flights to and from high-potential zones near Morocco, including the Canary Islands and southern France, Spain and Portugal. A 50% reduction in passenger and landing taxes is also offered for new routes. ONDA is building a new incentive scheme to come into effect after 2013 that is meant to be attractive to air carriers but less of a weight on ONDA’s finances. “In the long run, revenues should come more from commercial activities rather than airport taxes,” said Dalil Guendouz, director-general of ONDA. “Now the ratio is 85% versus 15%. The aim is to increase income from commercial activities towards 25%.”

In another move to increase Morocco’s attractiveness, two international firms were awarded a competitive public tender in April to replace the previous second handler as the handling operators for Morocco’s airports beside RAM Handling. As of October 2012, Swiss Ports, a top global freight handling company present in 36 countries, began managing handling in airports nationwide. Meanwhile, Globalia, a smaller Spanish firm, will concentrate on handling operations at the main airport in Casablanca. Much work remains to be done to meet the government’s goal of increasing passenger capacity to 51.8m by 2030. Still, better infrastructure and service quality, as well as plans to create a competitive but sustainable tariff system are positioning the kingdom to capitalise on its location.

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The Report: Morocco 2013

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