African airlines to lose $ 100m in 2018 * IATA says outlook encouraging
Africa’s airlines are expected to continue making a combined loss of $100 million in 2018, which is going to be a repeat of this year’s performance.
However, the International Air Transport Association (IATA) allayed fears, stating that stronger forecast economic growth in the region (excluding South Africa, which remains weak), is expected to support demand growth of 8.0 per cent in 2018, slightly outpacing the announced capacity expansion of 7.5 per cent.
The IATA forecasts global industry net profit to rise to $38.4 billion in 2018, an improvement from the $34.5bn expected net profit in 2017 (revised from a $31.4bn forecast in June).
The clearing house for over 280 global airline said the slow pace of wider economic improvement in Africa is hampering the financial performance of the continent’s airlines.
Director-General of IATA, Alexandre de Juniac disclosed that Nigeria is only just out of recession and growth in South Africa remains extremely weak, adding that as a result, although traffic is growing, the passenger load factors, that is, the measure of utilised capacity) are just over 70 per cent.
This, he said is more than 10 ten per cent lower than the global industry average.
The combination of low utilisation and high fixed costs, he added, make it difficult for airlines to make a profit.
“Stronger economic growth will help in 2018, but Africa’s governments need to make a concerted effort to free up intra-African access to their markets as the increased connectivity will stimulate wider economic growth”, he stated.
Strong demand, efficiency and reduced interest payments, the group stated would help airlines improve net profitability in 2018 despite rising costs, with 2018 expected to be the fourth consecutive year of sustainable profits with a return on invested capital (9.4%) exceeding the industry’s average cost of capital (7.4%).
His words, “”These are good times for the global air transport industry. Safety performance is solid. We have a clear strategy that is delivering results on environmental performance. More people than ever are traveling”.
The demand for air cargo he reiterated is at its strongest level in over a decade, adding that employment is growing.
“More routes are being opened. Airlines are achieving sustainable levels of profitability. It’s still, however, a tough business, and we are being challenged on the cost front by rising fuel, labour and infrastructure expenses.”
“The industry also faces longer-term challenges. Many of them are in the hands of governments. Aviation is the business of freedom and a catalyst for growth and development. To continue to deliver on our full potential, governments need to raise their game—implementing global standards on security, finding a reasonable level of taxation, delivering smarter regulation and building the cost-efficient infrastructure to accommodate growing demand.”
“The benefits of aviation are compelling—2.7 million direct jobs and critical support for 3.5% of global economic activity. And the industry is ready to partner with governments to reinforce the foundations for global connectivity that are vital to modern life,” said de Juniac.
