The current situation in, and the short-term outlook for, the aviation industry in Africa is challenging, as it is elsewhere in the world. The International Air Transport Association (IATA), predicts that African airlines will lose $6 billion in revenue this year due to the Covid-19 pandemic, with passenger numbers more than halving. In the highly fragmented sector, operators are succumbing to the effects of travel restrictions and border closures: Air Mauritius recently filed for voluntary administration and South Africa’s stalwart of profitability, Comair, has placed itself in the country’s business rescue process. Others may follow suit in an effort to restructure their underlying businesses. In the short term, dealing with the immediate cash flow crisis has become the priority.
The ability of the aviation industry in most African nations to weather the viral storm and remain sustainable in the long term is hindered by existing structural factors. Local markets are highly regulated, often with protectionist policies limiting private or foreign ownership of operators and hindering competition. Most of Africa’s airlines are state-owned and it is often these state carriers that are the primary ground handler where they are located. These operators therefore have considerable sway when it comes to slot allocation and to policing the already high barriers to entry. These pre-existing barriers prevent an agile response to the rapidly evolving challenges of the pandemic.
What the African aviation sector will look like once lockdown measures are lifted is very much dependent on the form exit strategies take, how they are implemented and how economies are re-activated. Governments are unlikely to have the fiscal space to fund significant rescue packages for airlines when the deployment of fiscal policy should be concentrated on supporting health services. In the short-term however, African airlines will need government support to remain viable and to keep important trade routes open, as noted by the African Airlines Association. Some governments have already responded to financial assistance requests from their national carriers with Air Senegal and Rwandair reportedly benefiting from government stimulus packages aimed at the transportation sector.
Whilst the reliefs of rent deferrals and government support may ease immediate cash-flow issues, if the African aviation industry is to be sustainable in the long-term, creative and bespoke strategies need to be devised and implemented that cater to its unique challenges. Not being a homogenous entity, solutions and strategies may need to differ from country to country, and it will […]
