African airlines estimate $3.5 billion loss for 2022, $800m in Q4, 2022

  • Despite low infection, vaccination rate in Africa stands at 24.6%

The African Airlines Association (AFRAA) has stated that the COVID-19 infection rate in Africa is low despite the low vaccination rate of a paltry 24.6 percent compared to the global average of 68.5%.

The continent’s airlines’ representative body disclosed that worldwide, the number of cases has reached 630 million and 12.6 million in Africa, stressing that the recovery rate is 99.98% worldwide compared to 98.01% in the region.

This is coming as the group estimate revenue loss for 2022 to be $3.5 billion, equivalent to 20% of 2019 full-year revenue. The projected revenue loss for the fourth quarter of 2022 is approximately $800 million.

AFRAA in its African airlines’ performance update for November 2022 made available to  Aviation Metric stated that November traffic and airlines capacity deployed reached 85.7% and 84.2% of the 2019 level respectively.

Some existing Nigerian airlines

Domestic market share according to the airlines’ body is now at 34.3% capacity and 34.3%% of passengers carried while intra-Africa passengers carried represented 30.9% and corresponding capacity at 24.8%.

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 Intercontinental traffic this month, it said is 34.2% and capacity 34.8%, with African airlines operations on international routes h exceeding the 2019 pre-Covid level by 2.28%.

Consequently, seven African airlines have exceeded the number of international routes they operated before Covid.

Of concern to AFRAA is the skyrocketing price of aviation fuel, otherwise known as jet fuel which continues the upward trend.

Year to date, the global average price per barrel is $141.5. The impact on global airlines’ fuel bills is estimated at $130.8 billion for the full year 2022.

Global airlines had in July this year announced an upgrade to its outlook for the airline industry’s 2022 financial performance, with the recent spike in aviation fuel headlining the major hurdle for recovery and profitability.

The airlines, under the aegis of the International Air Transport Association (IATA), said that the industry losses were expected to reduce to $9.7 billion, an improvement from the October 2021 forecast of $11.6 billion loss.

According to IATA, overall expenses were expected to rise to $796 billion. That is a 44 percent increase in 2021, which reflects both the costs of supporting larger operations and the cost of inflation in some key items like fuel which is the major headache for local airlines in Nigeria.

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IATA estimated that at $192 billion, fuel is the industry’s largest cost item in 2022 (24 percent of overall costs, up from 19 percent in 2021). This is based on an expected average price for Brent crude of $101.2/barrel and $125.5 for jet kerosene. Airlines are expected to consume 321 billion litres of fuel in 2022 compared with the 359 billion liters consumed in 2019.

Fuel prices have been rising steadily over the past few months, mainly due to the war in Ukraine, which has pushed up prices.

The situation has also led astronomically to the increase in airfares both on domestic and international routes.

Fuel is one of the first expenses in the organisation of a flight, after labour. Indeed, it represents up to 35% of the operating costs of airlines. Faced with this rise in prices, airlines are obliged to increase their fares on their flights.

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Meanwhile, AFRAA disclosed that a major highlight of the 2022 Yamoussoukro Decision Day (YD Day) celebrations held in Dakar, on November 14th, was the launch of the Single Africa Air Transport Market (SAATM)  Pilot Implementation Project (PIP), endorsed by 18 SAATM Member States, saying this was a commitment by the PIP member states to open up their markets unconditionally to each other.

 

Foreign airlines in flight

The Africa Union (AU), it would be recalled organised a continental capacity-building workshop on the regulatory instruments of the SAATM in Accra, Ghana from Nov 28th to December 2, 2022.

The workshop was used to sensitize States and RECs on the implementation of the SAATM regulatory instruments – operations, powers, and functions of the Executing Agency, consumer protection regulations, the competition regulations, the SAATM Dispute Settlement Mechanism, and the revised African Civil Aviation Policy (AFCAP).

Wole Shadare