African airlines set to make almost R3bn loss in 2020

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

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% 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% annually in September, according to the latest available data.

According to Chris Zweigenthal, CEO of the Airlines Association of Southern Africa (AASA), 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 government has 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 before it went into business rescue, 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 rather focus on what consumers actually want.

Iata forecasts that the global airline industry will produce a net profit of $29.3bn in 2020, improved over a net profit of $25.9bn expected in 2019 - revised downward from a $28 billion forecast in June. Airlines are expected to contribute a total of $136bn to government coffers in tax revenues in 2020 - a 5.2% increase over 2019.

Global passenger numbers are expected to reach 4.72 billion - up 4.0% from 4.54 billion in 2019. Freight tonnes carried are expected to recover to 62.4 million, a 2.0% 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.

According to Alexandre de Juniac, Iata's director general and CEO, slowing economic growth, trade wars, geopolitical tensions and social unrest, plus continuing uncertainty over Brexit all came together to create a tougher than anticipated business environment for airlines.

"Yet the industry managed to achieve a decade in the black, as restructuring and cost-cutting continued to pay dividends. It appears that 2019 will be the bottom of the current economic cycle and the forecast for 2020 is somewhat brighter," he said in a statement.

"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."

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Yes. We need the money.
11% - 1501 votes
It depends on how the funds are used.
73% - 9705 votes
No. We should have gotten the loan elsewhere.
16% - 2155 votes