African airlines lost Sh200bn in 2020 - IATA

The International Air Transport Associations (IATA) wants African governments to bail out airlines to forestall their collapse occasioned by the Covid-19 pandemic..

The global airline association said this  as the continental airlines posted a combined $2 billion (over Sh200 billion) loss in 2020.

''This year we expect only a slight improvement ($1.7  billion loss) as the struggle with Covid-19 continues,'' IATA said.

It said it is unlikely that traffic will return to post coronavirus until 2023.  Financial relief measures are still desperately needed, particularly those that do not increase the industry’s debt burden

In Kenya, the national carrier known by its international code KQ  reported a net loss of  Sh36.2 billion, the worst ever in the history of the airline, on account of Covid-19 disruptions that led to a sharp decline in passenger numbers.

According to the IATA, a handful of African airlines secured $ 2.04 billion in government aid which was mostly was distributed through direct government loans, equity financing, and cash injections.

Locally, Kenya Airways received Sh10 billion from the exchequer which holds at least a 48 per cent stake in the airline. It is expected to pump in more cash to keep the airline that has projected its revenue to drop by Sh70 billion. 

Even so, most of the relief is yet to reach the airlines and other aviation stakeholders in need. 

''At least $601 million in airline funds remains blocked in Africa across 17 countries,'' IATA said in a statement. 

Algeria, Angola, Benin, Burundi, Central African Republic, Eritrea, Ethiopia, Equatorial Guinea, Malawi, Mozambique, Nigeria, Sudan, Gabon, Cameroon, Chad, Congo and Zimbabwe) putting further pressure on airlines as they struggle for survival.

Apart from pledges from local governments, over $30 billion has been pledged by continental and International finance agencies.

They include the African Development Bank, African Export-Import Bank, African Union and the International Monetary Fund (IMF).

Despite this, eight airlines in Africa filed for bankruptcy or entered business administration over the past 12 months.

Financial relief measures are still desperately needed, particularly those that do not increase the industry’s debt burden. Additional relief measures and activating existing pledges are essential,” IATA vice president for Africa and Middle East  Kamil Al Awadhi said. 

Government relief comes in many forms. Cost reductions in terms of taxes and charges will help.

Governments will need a financially viable air transport sector to energize economic recovery from Covid-19.

Al Awadhi added that many of Africa’s airlines were weak even before the crisis.

''Reducing costs and freeing blocked cash has long been a priority for African aviation. If ever there was a time for decisive government action on these issues, it is now,” said Al Awadhi.

According to the IATA report, African airlines have lost severely to the virus compared to other regions, with a 69 per cent drop in passenger demand in Africa compared to 66 per cent globally.

Passenger demand is back to 1998 levels with a  61 per cent drop in capacity in the year ended December 2020 compared to Africa compared to 57 per cent globally. 

According to the report, airlines in Africa lost $49.63 for every passenger in 2020 compared to a global loss of $66.04.

Connectivity fell by 90 per cent at the low point of the crisis. Before the crisis there were 970 unique international routes at the low point of the crisis there were 100. And the density of those connections has become much thinner.

It said that job losses could grow to 4.5 million in Africa in aviation and related industries and the continent's GDP supported by the aviation sector to fall by up to $37billion supported by aviation in the region.

Air cargo was a bright spot for African carriers, with volumes rising by 100 basis points. This translates into high cargo revenues, which provided needed support to airlines.