Why SAA and other African airlines are really vulnerable to the impact of the coronavirus

The coronavirus pandemic has brought the global aviation industry to its knees, and African carriers are particularly vulnerable as they seek assistance from governments already facing constrained finances.

Ethiopian Airlines Group, South African Airways and Kenya Airways are among national airlines staring at mounting losses and the destruction of growth plans put in place before the Covid-19 outbreak.

African carriers may lose $4 billion in 2020 revenue as demand for travel around the continent grinds to a halt, the International Air Transport Association said last week.

All three of Africa’s biggest carriers “will, in some shape or form, have to enter into conversations with their respective governments about bailouts,” Mike Mabasa, chairman of the Air Services Licensing Council in South Africa, said by phone.

While Ethiopian Chief Executive Officer Tewolde Gebremariam said Tuesday that his airline won’t be able to access state help, that may change if demand for travel doesn’t return quickly, Mabasa said.

Industry body IATA’s projected loss already looks optimistic after Ethiopian – the continent’s only profitable airline – said losses from January through April reached $550 million.

IATA’s estimate for the carrier was $300 million for the year as a whole. This could delay or kill a plan to start building a new $5 billion airport slated to have a bigger capacity than London Heathrow.

South African Airways was put into bankruptcy protection by the government even before the virus was detected in China late last year.

The national carrier only had enough cash to last until this month, based on the administrator’s most recent public comments , and its only ongoing passenger flights are chartered by governments such as Germany’s to bring home national citizens.

The Kenyan government, which owns just under 50% of Kenya Airways, has weighed a full nationalization of the carrier to boost its balance sheet and remains committed to that plan, Transport Secretary James Macharia said on Tuesday.

The airline has lost money since 2013 and asked the government for a cash bailout to get it through the next six months. “Cash Strapped” Yet none of the three governments are in an ideal position to bail out the carriers.South Africa’s economy is in recession and the National Treasury has long made clear that the country’s debt-laden state-owned power utility is a bigger priority. Ethiopia received $5 billion from the International Monetary Fund and World Bank last year to carry out a strict set of economic reforms as it tries to […]

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