Prohibitive costs, taxes frustrate African airlines

The Chronicle

AFRICAN airlines continue to suffer due to high costs and are projected to show a loss of US$200 million (about R2.9 billion) next year, similar to the loss expected for 2019, according to the International Air Transport Association (IATA). 

The industry body said this is largely due to government taxes and fees, as well as low load factors. Furthermore, aviation markets in Africa are seen as “very fragmented and inefficiently served in the absence, so far, of a single African air transport market”, according to IATA.

Data recently released by IATA showed that African carriers posted the fastest cargo growth of any region in October 2019, with an increase in demand of 12.6 percent compared to the same period a year earlier. Strong trade and investment links with Asia contributed to the positive performance. Freight volumes on key Africa-Asia routes were up 23 percent annually in September, according to the latest available data.

Chris Zweigenthal, CEO of the Airlines Association of Southern Africa (AASA), has said South Africa’s domestic air transport market is one of the most robustly competitive in Africa, with local carriers engaged in fierce competition.

Against the backdrop of South African Airways recently having been placed in business rescue, Zweigenthal said AASA would like the business rescue scenario to give the aviation and related industries a chance to adjust and adapt — ensuring that those they serve are provided with sustainable, competitive, capable, reliable and safe services.

He cautioned that the air transport and tourism industry, which governments have identified as a primary strategic sector to create jobs and drive economic growth, is vulnerable to any sudden loss of market confidence and loss of bookings as a result of cancellations.

African airlines allowed foreign companies to “eat their lunch”, Zuks Ramasia, acting CEO of SAA, said at the AASA annual general meeting in October. In her view, the most important thing was for the African aviation industry to open up to intra-Africa travel. At the same event, Wrenelle Stander, CEO of Comair, said that, instead of trying to make African airlines sustainable by trying to copy what was done in Europe and the US in the past to liberate their airspace, it might be time to focus on what consumers want. IATA forecasts that the global airline industry will produce a net profit of $29.3bn in 2020, improved over a net profit of $25.9 billion expected in 2019 — revised downward from a $28 billion forecast in June. Airlines are expected to contribute a total of $136 billion to government coffers in tax revenues in 2020 — a 5.2 percent increase over 2019. Global passenger numbers are expected to reach 4.72 billion — up 4.0 percent from 4.54 billion in 2019. Freight tonnes carried are expected to recover to 62.4 million, a 2.0 percent increase over 61.2 million tonnes carried in 2019, which was the lowest figure in three years. The average net profit per departing passenger is globally is expected to be $6.20 in 2020, compared to $5.70 in 2019.

“The big question for 2020 is how capacity will develop, particularly when, as expected, the grounded 737 MAX aircraft return to service and delayed deliveries arrive,” says Alexandre de Juniac, IATA’s director general and CEO. — Fin24