Tough times continue for African airlines

The airline sector has been one of the most vulnerable to both the impact of the Covid- 19 pandemic and the various lockdown restrictions put in place to counter it. Passenger numbers and revenues plummeted, with some airlines forced to mothball their entire operations.

Africa’s biggest carriers have responded in very different ways and there is a growing feeling that the crisis has speeded up ongoing developments in the industry, with struggling airlines forced to take desperate measures and the few success stories becoming increasingly dominant.

Many airlines were completely grounded from April to August 2020 during the early months of the pandemic. Although some services have been reintroduced since then, the operating environment remains very difficult. While cafés, restaurants and hotels can find it difficult to make a profit with lower customer numbers, the same limitations make it almost impossible for airlines to operate profitably because they have virtually the same fuel and staff costs with a fraction of the passenger numbers.

According to the African Airlines Association ( AFRAA), airlines based in Africa lost a combined $ 10.2bn in passenger revenue alone in 2020. Big losses are also expected this year, as many restrictions have remained in place and many potential travellers have been reluctant to return to the sector because of fears over transmission. AFRAA’s Air Transport Report 2020, which was published at the start of June, revealed a 63.7percent fall in total passenger numbers on the continent, from 95m in 2019 to 34.7m last year. The report points out that there is still a correlation between airport charges and passenger numbers, with some of the busiest airports, such as Johannesburg, Algiers, Cairo and Addis Ababa, offering some of the lowest charges. It argues that this “indicates that lowering the airport charges can have a positive effect on traffic”, although it is also possible that it is cheaper to handle passengers on a per capita basis when there is high turnover. Johannesburg and Cairo remained the busiest passenger airports, although Nairobi Jomo Kenyatta Airport handled the most freight over the year, at 330,000 tonnes. North Africa was the leading region, with 36.6percent of the total continental traffic.

NEED TO DEVELOP INTRA- AFRICAN NETWORKS

Just 13 African countries have direct flights to more than 20 other African states. Kenya and Ethiopia lead the way, with direct flights to more than 30 other African countries, although this is perhaps no surprise given that Ethiopian Airlines and Kenya Airways are among the three biggest operators in sub- Saharan Africa.

AFRAA argues that it is even more important for African airlines to develop their intra- African network because non- African airlines have limited their connections with the continent due to the pandemic. Some non- African airlines have invested heavily in their African operations in recent years, with Qatar Airways now flying to 26 destinations and Turkish Airlines betting heavily on Africa’s future. The latter now flies to 53 African destinations in comparison with just 41 in Asia. The choice of aircraft is often vital to an airline’s success. New aircrafts are more expensive but more reliable and cheaper to operate, while narrow- bodied – those with just a single aisle, such as the Airbus A320 and Boeing 737 – are becoming a more popular choice among the more commercially viable airlines operating in Africa. Such models are ideal for the medium- haul routes that dominate the African market, and are also big enough to serve the biggest airports, but not so large that they regularly suffer from a high proportion of unfilled seats. Triangular routes, where services connect three rather than two destinations, are also becoming increasingly popular.

MEDIUM- SIZED JET MARKET SHOWS PROMISE

The aviation manufacturing market should not entirely be viewed as a titanic struggle between Airbus and Boeing. Brazilian medium- sized aircraft specialist Embraer is particularly enthusiastic about Africa’s vast untapped air travel potential. While there are just 500 scheduled routes between African destinations, there are 800 between African airports and the rest of the world. The lack of services between even relatively populous African countries means travellers often take long, uncomfortable road journeys or fly via other continents just to get to a neighbouring African country. Embraer therefore hopes that its medium sized E170 and E190 aircraft with just 70- 120 seats can fill the gap by making it commercially viable to offer direct flights between African destinations. Its regional jets dominate similar markets elsewhere in the world and could help reduce the cost of medium- haul transport for both airlines and African passengers by increasing load factors – the proportion of seats sold on any flight. A Kenya Airways Embraer E190, with a configuration of 12 business class seats and 84 economy class seats. African load factors currently stand at about 70percent, in comparison with a global average of 82percent. Some airlines use wide- body aircraft on medium- haul routes because they want the flexibility of being able to use the same planes on longer routes or they hope to grow markets, but this can result in too many unsold seats. Moreover, demand for business jets in Africa is higher than before the pandemic, even in struggling Nigeria and South Africa, according to consultants WINGX Advance. Often regarded as the preserve of the super rich, business jets are being used in a variety of commercial environments.

Indeed, the Nigerian Civil Aviation Authority ( NCAA) has sanctioned some private jet operators for offering commercial operations without a license. While illegal, this black market does highlight the level of untapped demand for air travel in the continent’s most populous country.

MIXED FORTUNES IN KENYA AND ETHIOPIA

Of the big three carriers, Ethiopian Airlines expects to have generated a small profit in 2020, one of only three airlines anywhere in the world to do so. It operated many repatriation flights as people rushed to return home as lockdown restrictions kicked in, it converted passenger planes to freight carriers, and it has also helped to distribute vaccines and PPE equipment across the continent. The airline was experiencing strong growth before the pandemic – of the 25m annual seats added by Africa’s 10 biggest airlines between 2011 and 2019, Ethiopian was responsible for 15m. Ethiopian’s adaptability also extended to the opening of the final phase of its new Terminal 2 at Bole International

Airport in Addis Ababa in September. Socially distanced gate seating, self check- in kiosks, e- gates, thermal scanners and touch- free sanitisers were included in the $ 300m facility, which the airline describes as an 86,000 square metre bio ¬ safe terminal. Long- troubled Kenya Airways, one of Ethiopian’s regional competitors, has not fared so well. The airline secured moratoriums on debt capital repayments with its main creditors but these were not extended to interest repayments, leading to a fresh round of talks with lenders in an attempt to renegotiate the terms of its existing debts. Its revenue fell 59percent to KSh52.8bn ($ 494m) for the year to the end of December 2020, yet its costs declined by just 3.1percent. As a result, the Kenyan airline appointed the UK’s Steer Group in May to advise on its survival and recovery strategy. The Kenyan government will be watching the situation carefully as it agreed to reforms at the airline and other state- owned companies as part of a $ 2.3bn loan from the IMF in March. It has managed to cut some costs by bringing more servicing in- house but wider reforms will be needed to ensure a viable future.