If African airlines are to survive the covid-19 pandemic onslaught, then the immediate injection of cash is needed to avoid insolvency or bankruptcy of the airlines.
Carriers on the continent are expected to lose US$ 8.1bn in revenues this year in the severe and an unprecedented event which is forcing players under the African Airlines Association (AFRAA) to seek more avenues for support to the industry.
The Afreximbank has however assured that there are existing opportunities for African airlines under the bank’s Pandemic Trade Impact Mitigation Facility (PATIMFA).
AFRAA’s Secretary-General, Abdérahmane Berthé notes that the impact of the pandemic is enormous and it could lead to insolvency or bankrupting African airlines in 2020.
The continental airlines’ body headquartered in Nairobi has proposed setting up an aviation sectorial covid-19 recovery fund for the support of the airline industry.
“We will continue to seek more avenues for support to the industry from development finance institutions, country development partners and international donors as we navigate through these tough times,” added Berthe.
On June 2, AFRAA released an analysis of the impact of the pandemic on the airline industry in Africa which reveals an estimated revenue loss of US$ 8.103 billion this year.
The analysis is the first in a series of studies that will be published by the Association examining the toll of the pandemic on Africa’s air transport sector.
The impact assessment analysis further shows a 90.3 per cent year on year passenger traffic reduction for the month of May with recovery expected to start from Q3 2020 with domestic operations, followed by regional and intercontinental flights.
“On cargo operations, there is currently a shortage of cargo capacity in Africa due to needs for the carriage of medical equipment and essential goods. In the wake of this lack of capacity and rising prices, AFRAA is assisting its members to adapt in a bid to keep supply chains operational,” notes the report.
From the analysis, the evolution of 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.
“While the rate of infections in other continents is beginning to ease off, in Africa the rate of infections is still on the rise. However, the recovery rate in Africa is higher, with an average death rate of 9 per cent compared to the global rate of 19 per cent.
Survival and recovery of Africa’s air transport
Berthé stated that the availability of liquidity is the main issue to be addressed for airlines to survive and restart their operations. Without it, airlines can simply not survive this pandemic long enough to restart their operations.
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 subsidizes the industry’s survival and recovery.”
“We also call upon international financial institutions and development partners to support Airlines with facilities that can help ensure the availability of much-needed credit and liquidity,” Berthe added.
Berthe encourages passenger confidence to resume air travel adding that 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.
To put the airline industry on the recovery path, AFRAA has a recovery plan defining a framework of various areas of intervention measures to be taken as part of urgent, immediate and consistent actions for the survival and rebound of the industry.
AFRAA is also working closely with leading aviation industry organizations under the framework of the High-Level Task Force that is undertaking various actions to ensure that the African civil aviation industry is well positioned on a strong trajectory for recovery during and post covid-19 pandemic.
Already, some airlines have started resuming operations though cautiously as the effects of the pandemic fight.
However, even with the resumption, most are struggling to stay afloat.
Troubled state-owned South African Airways (SAA) has spent almost 10 billion rand (US$540 million) since the airline entered a bankruptcy protection deal and administrators are proposing a structured wind-down of the business rather than liquidation.
The airline has not turned a profit since 2011 and it has been running on funds from the government which made bailouts remain solvent.
It entered business rescue in December in a last-ditch bid to save the company.
In East Africa, Kenya Airways has drawn a raft of requirements for travellers as the airline which has been in the red for years plans a return to the skies.
Travellers will be required to go through a rigorous process before being allowed on board with the airline serving local routes first before venturing into international routes.
Kenya is working on a legal framework to nationalise the airline where the government owns 48.9 per cent of the shares. The strategy is to buy out the remaining 51.1 per cent of the shares held by a group of local banks and the Royal Dutch Airlines.
In May, the country’s Treasury denied KQ a Sh7 billion emergency bailout since the government was keen on a long-term rescue plan.
In what will change the air travel dynamics in Africa, Qatar Airways purchased 49 per cent of RwandAir in what could be a win-win deal for both airlines. RwandAir which has not made profits since it began operations will ride on Qatar Airways’ muscle to weather the non-profitability while the Middle Eastern carrier will see reduced flight times to Central and West Africa among other benefits.
With this arrangement, Ethiopian Airlines which has made a mark on the continent will face stiff competition in its offerings to the continent.
And with its recent relaunch, Uganda national carrier Uganda Airlines faces an uphill task in the travel sector that has been worsened by the pandemic.
The covid-19 pandemic has worsened an already dire situation for the air travel sector where African airlines have been struggling to stay afloat.
With only three major intercontinental airlines where only one is profitable in Africa, the future looks bleak with last year’s predictions likely to be exceeded heading into the red zone.
For Tanzania, Air Tanzania may face an even harder time since the East African nation has not observed lockdown requirements which may lead to passengers avoiding using it for travel.
While airlines have started flying into Tanzania now, the country may experience a cold war of sorts as travellers keen on health safety could avoid using their services for fear of getting infected.
All in all, Africa’s airspace is headed into interesting times since the pandemic has changed air travel dynamics and which may birth new players while sinking those that have been in the game for a while.