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African airlines projected to book Sh864bn loss on Covid

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A Kenya Airways plane at the JKIA in Nairobi. FILE PHOTO | NMG

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Summary

  • The African Airlines Association (AFRAA) says the losses will be 47.2 percent of the full year 2019 airlines’ revenue with the industry income expected to be hit as the Covid-19 cases continue to rise globally.
  • The losses, however, will be $2 billion less what was recorded in 2020, indicating that there have been a marginal improvement when compared with the year when the Covid-19 pandemic first hit the continent.

African airlines are projected to make a combined loss of Sh864 billion ($8 billion) at the end of this year as the emerging variants of Covid-19 and travel restrictions continue to take their toll on aviation sector.

The African Airlines Association (AFRAA) says the losses will be 47.2 percent of the full year 2019 airlines’ revenue with the industry income expected to be hit as the Covid-19 cases continue to rise globally.

The losses, however, will be $2 billion less what was recorded in 2020, indicating that there have been a marginal improvement when compared with the year when the Covid-19 pandemic first hit the continent.

“Full year revenue loss for African airlines in 2021 according to AFRAA is forecast at $8.2b, approximately 47.2 percent of the full year 2019 airlines’ revenue. In 2020, African airlines made a cumulative loss of $10.21 billion, representing 58.8 percent of 2019 revenues,” said AFRAA.

AFRAA says the poor revenue performance coupled with slow response to calls for support to African aviation and tourism sectors by governments is a major threat to the survival of the African aviation industry.

“Governments should heed the calls by the African Union, AFCAC, AFRAA and other organisations to provide financial relief and support to the industry players most impacted by Covid-19 to avoid the collapse of the aviation industry,” it said.

Locally, Kenya Airways said last month that it is seeking a fresh bailout from the government to steady its operations in the wake of low demand for passenger numbers.

The airline said it was in a precarious financial position and that the recovery of revenues to pre-coronavirus levels looks set to delay up to 2024, especially given that Africa lags in the vaccination against the disease.

The airline posted a Sh11.49 billion net loss in the six months ended June— a 19.8 percent cut from the Sh14.33 billion loss it incurred in the preceding similar period, taking its accumulated losses over the years to above Sh127 billion.

Airlines have been banking on the rollout of vaccines to ease the current lockdowns and other travel restrictions imposed by government across the world.

In Africa, just about 1.85 percent of the population has been fully vaccinated according to data available on the Africa CD.

Worldwide, the numbers of infected cases reached 200 million of which 7 million are in Africa. The global recovery rate stands at 97.7 percent compared to 97.3 percent in Africa.

Re-start of operations on intercontinental routes by African airlines reached 77.8 percent in August 2021, though frequency and capacity remained constrained.

This represents a month-on-month increase in intercontinental operations of 3.1 percent. Airlines which added new intercontinental routes to their operations in August include Ethiopian Airlines, Royal Air Maroc and Kenya Airways.

AFRAA says general passenger traffic continues to be low across Africa due to the ravaging impact of COVID-19, inconsistencies in the messaging regarding border closures and failure to align health protocols in some countries and across regions.

Globally, airlines are expected to make significant losses this year as International Air Transport Association (IATA) revised the figure that it had issued in December because of challenges in containing Coronavirus variants and slower vaccination in some regions.

IATA is projecting a post-tax losses of $47.7 billion in 2021 from their initial forecast of $38 billion in December.

“Financial performance will be worse and more varied this year than we expected in our December forecast, because of difficulties in controlling the virus variants and slower vaccination in some regions,” said IATA.

According to IATA large airlines have raised sufficient cash to cover for these losses with the aviation sector expecting a cash burn of $81 billion.

“Many smaller airlines haven’t and will need government aid or to raise more cash from the banks or capital markets – adding to the industry’s debt burden and balance sheet leverage problem,” the agency said.