Many of Africa’s airlines were in poor financial shape before the Covid-19 crisis, but the ensuing loss of revenue is driving most of them to the brink. Tom Collins reports from Nairobi
As the Covid-19 pandemic continues to decimate air passenger numbers, many African airlines risk bankruptcy as governments across the continent lack the financial resources needed to support their national carriers.
In April, Air Mauritius (AM) was the first African airline to enter voluntary administration as result of the crisis, while South African Airways (SAA) has been in a form of business protection since last December. British Airways’ South African franchisee Comair filed for business rescue in May.
“The reality is that airlines are under pressure and if nothing is done by early July many African airlines will go insolvent,” says Abderahmane Berthé, secretary general of the African Airlines Association (AFRAA), the continent’s industry body.
Most were in financial turmoil before Covid-19 and the loss of virtually all passenger traffic due to widespread lockdowns has exacerbated this trend. Traffic volumes reduced by 45% in March, 86.4% in April and 90.3% in May leading to a total estimated revenue loss of $8.1bn in 2020 – see infographic . If this continues, most airlines will need to source external funding or risk going bankrupt. Flights grounded
Though industry stakeholders are hopeful that modest traffic will resume in August, analysts believe the sector may take far longer to recover. AFRAA estimates that traffic volumes will not return to pre-Covid levels until 2022, predicting a 40% recovery in Q3 and 70% in Q4 of this year.
The lack of passenger revenues is bad news for airlines that must continue to pay fixed costs such as staff salaries, aircraft maintenance, aircraft leasing costs, aircraft orders and debt servicing.
In March, Kenya Airways (KQ) CEO Allan Kilavuka announced an 80% salary-cut and introduced unpaid leave for non-essential staff in a move to cut costs. Around half of Africa’s 6m aviation jobs are at risk of being lost should airlines fail to secure bailouts, the International Air Transport Association (IATA), the industry’s global body, says.
Elsewhere, aircraft orders have been delayed as airlines seek to conserve capital. “As a result of Covid-19, we expect to see a medium-term reduction in demand for new engines globally,” says Ryan Goodnight, vice president for customers in sub-Saharan Africa and Central Asia at Rolls-Royce. “Our main airframe customers Airbus and Boeing have cut production rates and […]
