African airlines set to lose $500m in 2016

(Pic: www.safair.co.za)
(Pic: www.safair.co.za)

Dublin - African airlines are expected to post a $500m loss in 2016, according to the International Air Transport Association (Iata).

This would actually be an improvement on the $700m the continent's airlines lost in 2015. Whereas net profits per passenger for North American airlines in 2016 is forecast to be about $25, it is forecast to be $8 in Europe and a loss of almost $6 for every passenger flown by African airlines. 

READ: More than $1.4bn airline funds blocked in Africa

A report released at Iata's annual general meeting in Dublin on Thursday, forecasts that capacity growth for African airlines could be 5.3% in 2016, while demand growth will be 4.5%.

"Carriers in the region continue to confront a plethora of challenges including intense competition on long-haul routes, political barriers to growing intra-Africa traffic, high costs and infrastructure deficiencies," according to the report.

"In addition, many major economies on the continent have been hit by the collapse of commodity prices, and the impact that it has had on revenues and the inflow of hard currencies.

Unresolved foreign exchange crises are adding to the economic difficulties facing airlines in this region."

Brian Pearce, chief economist of Iata, pointed out in his report on the outlook for global airline markets and industry performance that air transport remains closely linked to the economic cycle.

"When the world economy is strong, so is travel and the airline industry. It is, however, hard for the industry to prosper during an economic downturn. So the recent signs of a slowdown in various economic cycle indicators is worrying."

An important area of weakness, in Pearce's view, has been world trade, which is critical for the air cargo business. He even expects global cargo revenues in 2016 to fall back to where they were 10 years ago.

* Fin24 is a guest of Iata at its AGM.

ZAR/USD
16.83
(+0.41)
ZAR/GBP
21.27
(+0.35)
ZAR/EUR
19.08
(+0.57)
ZAR/AUD
11.77
(+0.44)
ZAR/JPY
0.16
(+0.52)
Gold
1814.86
(+0.38)
Silver
19.00
(+1.74)
Platinum
857.00
(+1.18)
Brent Crude
43.32
(+0.49)
Palladium
1943.00
(+2.03)
All Share
56174.23
(+0.54)
Top 40
51857.22
(+0.58)
Financial 15
10260.34
(-0.15)
Industrial 25
78062.36
(+0.72)
Resource 10
53107.83
(+0.60)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1824 votes
I am taking a hit, but should be able to recover in the next year
23% - 2391 votes
My finances have been devastated
34% - 3563 votes
It's still too early to know what the full effect will be
25% - 2556 votes
Vote