African airlines lose Sh860bn as Covid-19 crisis takes its toll

Aeroplanes at the Jomo Kenyatta International Airport in Nairobi. FILE PHOTO | NMG

By FAUSTINE NGILA
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Summary

• The airlines have now lost a total of Sh860 billion as at May 2020, a new report reveals.
• There is currently a shortage of cargo capacity in Africa, with airlines currently surviving by ferrying medical equipment and essential goods to fight the virus.
• While the rate of infections in other continents is beginning to reduce, Africa is still grappling with increasing numbers.

African airlines continue to sink deeper into financial distress, owing to the economic hardships caused by the Coronavirus.

The airlines, which were already flying in turbulent skies even before the first case of Covid-19 was reported on the continent, have now lost a total of Sh860 billion as at May 2020, a new report reveals.

The Impact Assessment Analysis Report released recently by the African Airlines Association (AFRAA) further shows a 90.3 percent year on year passenger traffic reduction in May, with minimal recovery being expected in the next three months, starting with domestic operations, followed by regional and intercontinental flights.

There is currently a shortage of cargo capacity in Africa, with airlines currently surviving by ferrying medical equipment and essential goods to fight the virus.

"The rise in the number of Covid-19 cases indicates that the most impacted countries in Africa are South Africa, Egypt, Morocco, Algeria and Ghana, each with a total of more than 5,000 cases of infection," the report reveals.

While the rate of infections in other continents is beginning to reduce, Africa is still grappling with increasing numbers.

However, the recovery rate in Africa is higher, with an average death rate of 9 percent compared to the world’s 19 percent, which gives the air transport industry in the continent hope that business will resume in few months.

AFRAA Secretary General, Abdérahmane Berthé told Shipping and Logistics that low levels of liquidity is the main issue to be addressed for airlines to survive and restart their operations. Without funds, he noted African airlines will not survive the shockwaves of the pandemic long enough to restart their operations, and some may even collapse.

"AFRAA urges African governments to consider a bailout and stimulus package that compensates for the significant losses, reduces the burden of ongoing operating costs, and subsidises the industry's survival and recovery," he said.

He called on the international financial institutions and development partners to support airlines with facilities that can help ensure the availability of much-needed credit and liquidity.

"There is also the need to ensure passenger confidence to resume air travel. Communication with passengers on the health and safety measures in place is crucial to reassure them of a safe and sterile travel experience with appropriate measures in place," Mr Berthé said.

South African Airways, a state-owned carrier, has suffered one of Africa's heaviest financial setback after the government rejected request by a team restructuring the airline for an additional Sh53 billion to keep it in operation. That left the carrier, which has recorded a net loss of Sh170 billion since 2008, without the lifeline of government loan bailouts that have kept it flying through years of mounting debt and unprofitability.

Kenya Airways, on its part, has been the hardest hit airline in East Africa, recording a net loss of Sh12.9 billion for the financial year ended December 2019, despite its investment in new routes such as New York, Geneva and Rome. Uncertain of the global economic and geopolitical environment post Covid-19, the carrier estimates that it could take a whole year to recover, which clearly means a longer wait than expected to get back to profitable business.

The 'new normal' has crashed the ambitions of Morocco's Royal Air-Maroc, Air Namibia, Air Zimbabwe, Tanzania's Precision Air and EgyptAir to expand their revenue targets. Each of these airlines have been previously bailed out.

Tanzania, which has taken an unorthodox approach to the virus, opened its airspace to both scheduled and non-scheduled flights on May 19 while Morocco announced it would resume air transport business on June 11.

EgyptAir, which has faced painful moments in the recent past, has received a Sh200 billion bailout, with state treasury saying it will bear the loan's burden until the company achieves operating rates equivalent to 80 percent of the operating volumes in 2019.

International Air Transport Association (IATA) has renewed its call for government relief measures as the impacts of the Covid-19 crisis in North Africa deepens.

The Egyptian carrier, according to IATA, has had 499,000 jobs at risk since the outbreak of Covid-19, having recorded a loss of Sh170 billion in revenue while as many as 11 million passengers have been holed up in their houses.

Algeria recorded 5.8 million fewer passengers resulting in a Sh80 billion revenue loss and risking 169,800 jobs.

"Tunisia has had 4.3 million fewer passengers resulting in a Sh60 billion loss in revenue, with 92,700 jobs at risk," the latest IATA statement reads.

To save air travel, the international body has been advocating for direct financial support, loans, support for the corporate bond market and tax reliefs.