11 December 2017

Africa: IATA Predicts U.S.$100 Million Loss for African Airlines in 2018

Lagos — The International Air Transport Association (IATA) has projected that global industry net profit would rise to $38.4 billion in 2018, an improvement from the $34.5 billion expected net profit in 2017 (revised from a $31.4 billion forecast in June).

However, African carriers are expected to continue to make small losses of $100 million in 2018 following "a collective net loss of $100 million in 2017".

The association which represents some 275 airlines in the world however said economic growth in Africa is expected to support demand growth of 8.0% in 2018, slightly outpacing the announced capacity expansion of 7.5%.

The wider economic situation is only improving slowly in Africa, which is hampering the financial performance of its airlines, IATA said.

According to IATA Economic Outlook report made available to our correspondent, "The key Nigerian economy is only just out of recession and growth in South Africa remains extremely weak".

The report added, "While traffic is growing, passenger load factors for African airlines are just over 70% which is over 10 percentage points lower than the industry average. With high fixed costs this low utilization makes it very difficult to make a profit. Stronger economic growth will help in 2018, but the continent's governments need a concerted effort to further liberalize to promote growth of intra-Africa connectivity".

Globally the 2018 outlook looks brighter, according to the forecast with the value of goods to be carried by airlines expected to exceed $6.2 trillion in 2018, representing 7.4% of world GDP.

The report added that direct employment by airlines will exceed 2.7 million worldwide in 2018.

On average across the world we forecast that in 2018 each airline employee will generate over $109,000 of gross value added (the firm-level equivalent to GDP), which is considerably higher than the economy-wide average.

IATA's Director General and CEO, Alexandre de Juniac commenting on the report said, "These are good times for the global air transport industry. Safety performance is solid. We have a clear strategy that is delivering results on environmental performance. More people than ever are traveling. The demand for air cargo is at its strongest level in over a decade. Employment is growing. More routes are being opened. Airlines are achieving sustainable levels of profitability. It's still, however, a tough business, and we are being challenged on the cost front by rising fuel, labor and infrastructure expenses".


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