Airlines Return To Profitability, Passenger Number To Peak By 2024

Airlines saw the most growth since January this year. The bullish outlook is informed by the easing of travel restrictions in key markets, writes WOLE SHADARE

 Return from the dead

African airlines seem to be returning to profitability. The last three years had been excruciating for airlines and the travel industry. It was a crisis that ‘crumbled’ literally the entire global travel industry. But since the relaxation of COVID-19 rules, airlines and the travel trade operators have dusted themselves up by posting fantastic financial results.

Although the carriers are not yet back to pre-COVID-19 state, they have shown remarkable signs to bounce back. Nigerian carriers are not doing too badly despite a very poor economy. With the high airfare introduced in the wake of the astronomical cost of Jet A1 and the harsh economic situation, they have been able to remain afloat, although they are not out of the woods yet.

 

IATA’s prediction

The International Air Transport Association (IATA) predicts a firm path to the resumption of global air travel, with passenger numbers expected to surpass the 2019 peak in 2024. The bullish outlook is informed by the easing of travel restrictions in key markets as COVID-19 vaccinations reach optimal levels and infection rates recede.

Across the globe, airlines posted a strong performance in January 2022, with Europe leading the pack and Africa also looking up. Improvements in the major North Atlantic and intra-European markets are the backbone of recovery. Asia-Pacific’s recovery is expected to continue to lag because China, the region’s largest market, continues to cling to restrictive border controls.

New markets

Airlines are either buying aircraft, hiring new personnel, or adjusting schedules to shift capacity to markets that are opening up faster and cutting back or putting on hold planned route launches to restricted destinations. For instance, this week, Ethiopian, Africa’s largest airline, placed an order for five brand-new Boeing 777-8 dedicated freighters, becoming the type’s launch customer on the continent. After several episodes of start and stop, Nigeria says it will finally relaunch its revamped flag carrier next year.

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According to the African Airlines Association (AFRAA), four airlines continued with their route development plans during 2021, while another 11 either reopened existing routes or launched new ones. At the end of January 2022, airlines in the region had reinstated 78.7 percent of their pre-COVID capacity.

Uganda launches new service

Uganda Airlines, which last year launched new services to Johannesburg and Dubai, is hiring staff for its London office ahead of a much-anticipated commencement of services to the UK. Kenya Airways, this week, announced a network review that will see its London service revert to daily, while Yaoundé will cease operating at the end of May. Airways is opening up new routes.

Further south, South African Airways returned to the market after coming out of restructuring. IATA sees passenger traffic bouncing past pre-pandemic levels, to reach four million travellers in 2024 – three percent higher than the last peak achieved in 2019. But it will not be until 2025 that African airlines hit a similar milestone.

Key drivers

Key drivers that would have supported Africa’s recovery are missing. Although 34 countries, which between them account for 80 percent of African traffic, have signed up to the Single African Air Transport Market (SAATM), the initiative has not gotten off the ground.

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Reduced infection rates

The optimism is shared by Airbus and Boeing, the world’s major commercial aircraft manufacturers, who are also sticking to their planned production rate increases.

According to them, intra-African demand remained weak at just 31.3 percent, while Intercontinental travel was struggling at 23.5 percent. Despite some easing, governments largely maintained coronavirus controls. For instance, while Uganda removed the requirement for its controversial test on arrival, travellers are required to present a negative COVID certificate taken 72 hours prior to departure on both the outbound and inbound legs.

While vaccinated passengers can travel to Mauritius without being subjected to a pre-departure test, they are required to take one on arrival and a second one on day five of their stay.

Subject to fewer restrictions, the domestic sector is expected to lead the recovery with regions that have a significant domestic sector benefitting more. In its January 2022 update, IATA says the pace of recovery slowed in both the domestic and international segments during January 2022 relative to December 2021 as governments tightened travel restrictions in response to the emergence of the Omicron variant last November.

Hard lessons

But IATA’s Director-General, Willie Walsh, says the government has picked lessons from this episode and is now more open to easing restrictions. “The recovery in air travel continued in January, despite hitting a speed bump called Omicron. Strengthened border controls did not stop the spread of the variant. But where population immunity was strong, the public health systems were not overwhelmed.

Many governments are now adjusting COVID- 19 policies to align with those for other endemic viruses. This includes lifting travel restrictions that have had such a devastating impact on lives, economies, and the freedom to travel,” Walsh says.

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Overall, demand for air travel was up 82.3 percent, compared to January 2021, although that number was 4.9 percent below December 2021 on a seasonally adjusted basis. On the opposite end, African airline traffic rose just 17.9 percent year-on-year during the reference period, which was lower than the 26.3 percent annual increase recorded in December 2021.

The region’s airlines boosted capacity by 6.3 percent over the period whiles the load factor improved by six percent, reaching 60.5 percent.

Cautious optimism

IATA cautions that while January 2022 saw strong growth in traffic compared to the preceding year, passenger demand was far below pre-COVID-19 levels.

Total RPKs in January were at 49.6 percent of January 2019 levels with international traffic down 62.4 percent and domestic traffic off the mark by 26.5 percent.

 

Some stranded passengers at Lagos airport

The Middle East, a key connector for Africa, saw demand rise 145. percent year-on-year in January, compared with January 2021, although that was still below 178.2 percent witnessed in December 2021, compared with the same period in 2020. January capacity rose 71.7 relative to the comparable period for 2021, with load factor inching up 17.5 percentage points to reach 58.6 percent.

Last line

Despite the global easing, African operators face mixed prospects, boxed in by low COVID- 19 vaccination rates and a smaller domestic market. That is likely to limit the number of people who can travel within the region and beyond.

Wole Shadare