African airlines are likely to close next year with a $100 million (Sh10.3 billion) net loss as sluggish economies across the continent continue to impact the industry, the International Air Transport Association (IATA) has said.
The association, which is made up of 275 airlines including Kenya Airways #ticker:KQ, has also said that, while passenger numbers among African carriers are growing, their sustained failure to fill their planes will continue eating into revenues.
Following this economic slowdown, and coupled with poor infrastructure, high taxes and protectionist policies by some governments, IATA projects that African airlines will in 2018 remain at a similar net loss position as 2017.
IATA’s projection does not bode well for carriers such as Kenya Airways and South African Airlines which are struggling to bounce back from the brink of insolvency to profitability.
“While traffic is growing, passenger load factors for African airlines are just over 70 per cent, which is 10 percentage points lower than the industry average,” IATA said during an industry briefing in Geneva, Switzerland.
“With high fixed costs, this low utilisation makes it very difficult to make a profit.”
Cabin or load factor is a measure of how efficiently capacity offered by public transporters -- such as airlines -- is utilised.
KQ ‘s net loss for the six months to September improved 20.5 per cent to Sh3.8 billion on lower costs while revenues during the period dropped 0.4 per cent to Sh54.52 billion compared to Sh54.75 billion the previous year. Currency fluctuations and market capacity pressures dampened the sales benefit for KQ.