Tag: International Air Transport Association

The International Air Transport Association (IATA) has identified high cost of aviation fuel, weak currencies, competition from foreign carriers and lack of connectivity as major obstacles to the growth of African airlines.

In its quarterly report on African airlines, IATA said the inability to resolve these obstacles took a toll on the operations of major African carriers during the past year.

Major African carriers include: South African Airways, Egypt Air, Kenyan Airways, Ethiopia Airlines, and Royal Air Maroc.

Revenues generated in weak home currencies, but with overheads paid in dollars or euro – coupled with fuel prices, IATA said, accounted for over 21 per cent higher costs for African carriers compared with the global average. Such arrangement, it added, puts African airlines often at a disadvantage with foreign competitors on intercontinental routes.

IATA said: ‘’Some of African aviation’s perennial problems – high fuel costs, weak currencies and competition from foreign carriers, affected the fortunes of the continent’s carriers during the past year.’’

It said revenues generated in weak home currencies, but with overheads paid in US dollars, or euro, coupled with fuel prices which are 21 per cent higher on the continent than the world average – means African airlines are often at a disadvantage to foreign competitors on intercontinental routes.”

In a related development, Secretary-General of the African Airlines Association (AFRAA)Elijah Chingosho, said at IATA meeting in Cape Town, South Africa, that for most airlines, the cost of fuel is about 35 per cent of operating costs. He, however, added that in Africa, it is 45-55 per cent because of charges.

He said: ”This is because governments levy very high taxes on fuel as well as the airlines themselves, leading to high operating costs.”

He said state-owned South African Airways was forced to borrow $159 million to cover its near-term operating costs. The loan, secured against 2012’s R5 billion government guarantee, is being used as working capital, while the flag carrier implements its latest turnaround plan – the ninth such strategy put before its shareholder.

In October, last year, the airline posted an operating loss of R1.3 billion for the 2011-2012 fiscal year.

Meanwhile, a former scribe of AFRAA, Nick Fadugba, urged African carriers to forge stronger partnership.

He said: ”SAA has become dependent on state aid due to its inability to sufficiently address challenges, including its high cost structure, unprofitable long-haul routes, inefficient aircraft fleet, overstaffing, management instability, and its lack of success in forging strong partnerships within Africa.”

Kenya Airways slipped to a net loss of KSh7.9 billion ($91 million) from last year to March, this year, as demand and yields were hit by geopolitical uncertainty, compounding high fuel prices and the slow European economy.

It attributed the loss, which compares with a profit of KSh1.6 billion of last year, to reduced passenger traffic.

In southern Africa, Air Namibia and Air Zimbabwe are relying on government bailouts to stay afloat, while South African low-cost and charter carrier, 1time, ceased operations in November, last year after posting a first-half loss of R35.4 million ($4.1 million), compared with a loss of R21.3 million during the same period last year.

Africa’s market characteristics have also proved problematic for low-cost start-up Fastjet, which has indefinitely postponed the launch of South African domestic services due to start this month.

While predictions of huge passenger growth in Africa have yet to come to fruition, there is still optimism that some of its airlines can realise that potential and benefit financially from it.