Loss making in COVID-19 -Why it costs African airlines $42 every time you fly

PUBLISHED: Mon, 06 Jul 2020 20:10:08 GMT

On the day Kenya Airways announced it was to shed staff, the skies darkened further with the findings of a gloomy International Air Transport Association report on the on the state of aviation in Africa.

The report laid bare the business case for running an airline in Africa painting it as a loss maker as COVID-19 has closed borders and discouraged travellers. There are quarantine restrictions in 36 countries across Africa and the Middle East. The numbers are depressing. The IATA report says  East Africa has lost 56% of its revenue and 53% of its passengers; West Africa 60% and 58%; North Africa 58% and 56% and Southern Africa 60% and 58%.

IATA says it is so bad that African airlines actually pay $42 to transport every passenger they carry in 2020. CNBC Africa asked the man behind the report how long can African airlines last in the face of these losses.

“Not long, not long. Our estimates have already shown that airlines have already burned through their cash reserves. We don’t expect any airlines in Africa to survive these kind of losses,” says   Muhammed Albakri, the regional vice-president for Africa and the Middle East for IATA, told CNBC Africa. 

“The impact of COVID-19 has been devastating all over the world but particularly for the African continent where the demand from passengers has fallen by 58% in 2020 compared to 2019. Airlines are supposed to post a loss of $2 billion that is because the decrease in the passenger numbers and $6 billion from passenger revenues that is something that has not been seen before.”

Albakri believes the only hope for survival for African airlines is for governments to give bail out packages and to open up borders to help kick start the travel industry.

Airlines should play a key role in the revival of African economies in the post-COVID-19 world by providing cheap and abundant air travel in aid of growth. Sadly, many of them are tottering amid falling revenue and grounded planes.

Kenya Airways is the next to take the pain. It has announced job losses will be made – even though the airline is not saying how many – will happened to keep the airline afloat. The airline has 4,000 workers and operates a fleet 36 planes flying to 54 global destinations.

Prior to the pandemic, the airline faced financial difficulties in its operations, owing to losses and debt.  In December 2019, the airline issued a profit warning, signalling that its losses widened to $129.7 million from $75.8 million in 2018.

Sign Up for Our Newsletter Daily Update
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.