African airlines to break even as many economies improve – Iata
AFRICAN airlines as a whole were expected to break even this year instead of the $100 million (R830.2m) loss previously forecast, according to the International Air Transport Association (Iata), which released its annual report on the financial outlook for the industry yesterday.
It said that African airlines had benefited from the strong growth of many economies on the continent, “boosted in some cases by investment and trade links with China and, for some, by strong oil revenues. However, within the region airline performance continues to be very mixed. On average load factors are the lowest in the world as many of the region’s carriers struggle to match capacity with demand.”
The forecast was released against a background of uncertainty over whether SAA would receive a multibillionrand guarantee from the government, its sole shareholder.
This would enable the airline to pay for new aircraft it has ordered to remain competitive, amid speculation that both SAA and its low-cost division, Mango, will report multimillion-rand losses for the year to last March at its delayed annual general meeting.
The entire airline industry has been hit by the soaring cost of aviation fuel and new taxes imposed by governments, combined with falling passenger demand, that have pushed some previously profitable airlines into bankruptcy protection and put some out of business.
South African domestic and regional airline Comair returned to profitability at the end of its financial year after reporting an interim loss – its first in more than 60 years of existence – while low-cost airline 1time is trading under the protection of business rescue.
Iata announced an upward revision to its forecast for the current year yesterday and now expected the industry as a whole to earn a total of $4.1 billion this year instead of the $3bn forecast in June.
Its report attributes this to better management by airlines rather than any improvement in the conditions they face. It believes global profits will rise modestly to $7.5bn next year although, the report says, “this is a net margin of just 1.1 percent”.
Pointing out that aviation supported about 57 million jobs and $2.2 trillion in economic activity, Tony Tyler, the chief executive and director-general of Iata, said yesterday that the industry had reshaped itself to deal with challenges by investing in new fuel-efficient fleets, adopting more efficient processes, carefully managing capacity and consolidating. “But despite these efforts the industry’s profitability still balances on a knife-edge.”
He stressed the importance of aviation in helping to improve the global economy.
“Growth is the only way forward and a healthy aviation industry can stimulate that – linking stagnant developed economies to robust emerging markets. Aviation connectivity spurs growth at both ends,” Tyler said.