AFRICAN AIRLINES TO LAND INTO DEEPER LOSSES IN 2018

Planes at Kigali International airport. Many African airlines have been struggling to make profit.

The aviation industry in Africa is projected to continue making losses this year, largely due to the failure by governments to open up skies for competition.

The International Air Transport Association (IATA) says that while globally the aviation industry is expected to make significant profits, in Africa the industry will post a cumulative loss of $100 million, after posting a collective net loss of $100 million in 2017.

IATA attributes the losses to the failure by governments to liberalise the continent’s airspace, slow economic recovery and high operating costs.

The association which brings together the world’s airlines contends that while economic growth in Africa is expected to rebound — which will push demand for air transport to eight per cent — most airlines will continue making losses.

Despite the projected growth in traffic, most of the continent’s carriers fly at 70 per cent capacity against an 80 per cent industry average.

“Stronger economic growth will help in 2018, but governments need a concerted effort to further liberalise to promote growth of intra-Africa connectivity,” says IATA in its Industry Economic Performance 2017 report.

Struggling airlines

It adds that regional conflict and the impact of low commodity prices are other factors contributing to airlines in Africa making losses while breakeven load factors are relatively low as yields are a little higher than average and costs are lower.

Across the continent, the majority of airlines are surviving on government bailouts. Ethiopian Airlines, sub-Saharan Africa’s largest carrier, is an exception. It posted a massive 70 per cent increase in net profits in 2016 to $261.9 million, from $150.9 million the previous year.

In 2017, Kenya Airways remained in the negative territory despite cutting its losses by 51 per cent to $97.6 million compared with $249.7 million posted the previous year while South Africa Airways recorded a loss of $153.3 million for the year ended March 2017.

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Liberalise the skies

According to aviation experts, the failure by African governments to liberalise the skies ostensibly to protect struggling national airlines from competition, has greatly impeded growth of the aviation sector.

“There is clear and robust evidence that air service liberalisation leads to increased air service levels and lower fares, which in turn stimulates additional traffic volumes and can bring about increased economic growth and employment,” states a report by consulting firm InterVISTAS.

The African Union has promised to spearhead the agenda of opening up the continent’s airspace under the Single African Air Transport Market that is part of the Agenda 2063 flagship project. This initiative is expected to be launched later this month on the margins of the African Union Summit.

The East African