Africa: Airlines to Register Net Loss of U.S.$300 Milion in 2019 - IATA

Cargo being loaded at Entebbe airport. in Ethiopian Airlines (file photo).
12 December 2018

African carriers are expected to report a net loss of $300 million in 2019, the International Air Transport Association (IATA) has said.

This is, however, lower than $400 million net loss registered in 2018.

The expected net loss per passenger is $3.51 making Africa the weakest region globally.

Globally, the aviation body has projected global airline industry to earn about $35.5 billion as net profit next year.

This is more than $32.3billion earned in 2018.

The growth is attributed to the reduction in oil prices and solid, albeit slower, economic growth of about 3.1 per cent.

According to IATA, it is expected that 2019 will be the tenth year of profit and the fifth consecutive year where airlines deliver a return on capital that exceeds the industry's cost of capital, creating value for its investors.

However, in a statement released in Geneva, yesterday, Alexander de Juniac, the IATA's Director General and CEO, said air transport in Africa will continue improving, "but only slowly".

Losses are expected to be cut in 2019 as fuel prices decrease. The region benefits from higher-than-average yields and lower operating costs in some categories.

Few airlines in the region are able to achieve adequate load factors to generate profits, he said, adding that the expected that rising other operational costs would weaken profitability in 2019.

"However, the sharp fall in oil prices and solid GDP growth projections have provided a buffer. So we are cautiously optimistic that the run of solid value creation for investors will continue for at least another year. But there are downside risks as the economic and political environments remain volatile," he added.

According to Brain Pearce, the IATA Chief Economist, there are significant downsiderisks to growth from trade wars and political uncertainties such as with BREXIT, but the consensus view is that these factors will not offset the positive impetus from expansionary fiscal policy and growing business investment in major economies.

Sustainability

Meanwhile, IATA has called on governments, especially in Africa, to embrace digital solutions to ensure sustainability profitability of the sector.

There is need to effectively manage climate change impact and focus on coordinated action based on global standards, Juniac said.

"For example, we have successfully asked governments through the International Civil Aviation Organisation (ICAO) to regulate us globally to manage our carbon footprint.The solution was the historic agreement on a Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) which will effectively cap net emissions from 2020. And by 2050 we will cut our net emissions to half 2005 levels."

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