The international air transport lobby IATA, is asking governments to extend emergency support to airlines as the losses attributable to disruptions caused by the COVID-19 crisis rapidly mount for African airlines.
Airlines in Africa had by March 11, chalked up a combined $4.4 billion in losses as a result of COVID-19 disruptions highlighting the risk of financial ruin for a region already reeling from high input costs for the industry.
IATA says what started as a health emergency has fast morphed into an economic crisis for many regions of the world. The airlines’ lobby argues that the crisis should be given equal attention to prevent a catastrophe.
“Stopping the spread of COVID-19 is the top priority of governments. But they must be aware that the public health emergency has now become a catastrophe for economies and for aviation,” says IATA’s Director General and chief executive Alexander de Juniac.
Presenting an analysis of possible loss trajectories for the region last week, Muhammad Al-Bakri, IATA’s Vice-President for the Middle East and Africa revealed that Kenya was likely to take the brunt of losses in Eastern Africa with financial analysis conducted on March 11, indicating that passenger volumes could dip by 622,000. Associated revenue losses could reach $125 million while 36,800 jobs would also be at risk. Any further escalation in the crisis could see passenger volumes fall by 1.6 million and $320 million in lost revenues.
“Extensive cost cutting measures are being implemented by the region’s carriers to mitigate the financial impact of COVID-19. However, due to flight bans as well as international and regional travel restrictions, airlines’ revenues are plummeting—outstripping the scope of even the most drastic cost containment measures, Al-Bakri said.
Al-Bakri also noted that with airlines cash reserves averaging just about two months in the region, carriers are staring at a liquidity and existential crisis. IATA estimates that the airline industry will need $200 billion in aid globally to preclude total collapse.
Kenya’s potential losses supersede Ethiopia’s which IATA has projected at 479,000 passengers and $79 million in revenues. Also, 98,400 jobs are at risk in Ethiopia. Passenger volumes could however sink by 1.2 million if the situation escalates and revenue losses to $202 million.
IATA, which did not provide any analysis for Tanzania and Uganda also sees passengers volumes falling by 79,000 for Rwanda and equivalent revenue loss of $20.4 million whike 3000 jobs would be at risk. But potential losses could expand to 201,000 passengers and $52 million in foregone revenues.
With a much bigger industry, South Africa will top losses on the continent with projections pointing to a 6 million contraction in passenger numbers and financials losses of $1.2 billion. The disruption has also put at risk 102,000 jobs in the country.
Nigeria would suffer the next big hit in Africa with an 853,000 drop in passenger numbers and $170 million in revenues. More than 22,200 jobs are also at risk in the country while any escalation would take losses to 2.2 million passengers and US$434 million in revenues.
While oil prices have dipped to their lowest levels since 2018, Al-Bakri pointed out that airlines would not benefit because they are not flying.
The losses from the disruptions far outstrip any potential savings on the oil bill he said.
International bookings in Africa are down roughly 20 percent in March and April while domestic bookings have fallen by about 15 percent in March and 25 percent in April, according to the latest analysis. African airlines had lost $4.4 billion in revenue by 11 March 2020 while ticket refunds have increased by 75 percent in 2020 compared over the comparable period for 2019.
IATA is asking governments to consider direct financial support to passenger and cargo airlines to make up for the shrink in revenues and liquidity attributable to travel restrictions associated to COVID-19. It is also recommending government support to the industry through loan guarantees and support for the corporate bond market by central bankers.
The lobby is also recommending tax relief through rebates on payroll taxes paid so far in 2020 or an extension of payment terms for the rest of the year along with a temporary waiver of ticket taxes and other Government-imposed levies.
“Several governments in Africa and the Middle East have already committed national aid for COVID-19 including Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Egypt, Nigeria and Mauritius. We ask that airlines, which are essential to all modern economies, are given urgent consideration. It will enable global supply chains to continue functioning and provide the connectivity that tourism and trade will depend on if they are to contribute to rapid post-pandemic economic growth,“ Al Bakri said.