Despite heavy funding, state owned carriers tumble

  • Why African airlines bleed-Olumide
  • Emirates first-ever loss, a one-off-Experts

 

 

The first ever loss recorded by one of the biggest airlines in the world-Emirates Airlines in 33 years signposts the devastating effects of COVID-19 pandemic to global aviation industry.

The impact is colossal even for state owned carriers that are heavily backed by their various governments as major carriers that have never reported losses were hit.

Airlines like Ethiopia Airlines, reputed to be the most profitable carrier in Africa by a distance, found itself in a precarious situation, no thanks to coronavirus that has seriously affected their bottom-line.

The Emirates loss did not come to many as a surprise as virtually all the carriers reported staggering losses. What made Emirates’ loss intriguing is the fact that the carrier is heavily backed by the United Arab Emirates (UAE);  a situation that led to one year spat over alleged Emirati government subsidies to its airlines and accusations of unfair competition in the U.S.

The COVID-19 pandemic has however caused the airline to first-ever loss amounting to $5.5 billion which experts described as one-off because of the enormous support it gets from the government.

 

Emirates aircraft in flight

The spat was resolved in 2018. Under the deal, Dubai-based Emirates and Abu Dhabi-based Etihad Airways agreed to voluntarily open up their accounting books by publishing annual financial statements “consistent with internationally recognized accounting standards.” The major U.S. carriers – Delta Air Lines, American Airlines and United Airlines – have long alleged those financials obscure billions in hidden subsidies by the Emirati government.

 It announced an AED 22.1 billion ($6 billion) Group loss for its financial year 2020-2021 on June 15. The airline branch contributed to this loss with AED 20.3 billion. Emirates is giving no guidance on its current financial year, but aims “to recover to our full capacity as quickly as possible.”

READ ALSO:  NAMA to accelerate AIS digitalisation

With its financial year running from March to March, Emirates suffered all the pain from the pandemic right from the start. On March 24, 2020, it grounded its entire fleet of 270 aircraft. It first resumed cargo-only services with its Boeing 777Fs and nineteen converted -300ERs before adding limited passenger services from June. Only a dozen of its 117 Airbus A380s were brought back into service, but to this day most double-deckers remain in storage at Dubai World Central and Dubai International Airport.

Meanwhile, Dubai has stepped in to rescue the carrier by injecting $1.1 billion in state support after a collapse in long-haul travel due to the coronavirus pandemic triggered the airline’s first annual loss in more than three decades.

While Emirates loss could be a one-off loss as a result of COVID-19 pandemic, experts told Aviation Metric that African airlines may not get the reprieve the UAE based carrier got from the government because the continent’s airlines had been making losses since they started operations.

Many prominent carriers like Kenya Airways have always recorded losses. Popular destinations to Asia, Europe, and North America have also been affected

In February, Air Namibia ceased operations and filed for bankruptcy. The airline had been in operation for more than 70 years

READ ALSO:  When Night Life Returns To Lagos Airport’s Second Runway

For a year now, South African Airways had grounded its fleet. It had been struggling even before the COVID-19 pandemic struck.

 

Some African airlines

Not a few believe that if COVID-19 could shake many state backed carriers to their foundation, they are of the opinion that flag carrier airlines do not stand the chance to survive where many of them are not entitled to subsidy from the government.

Former Chief Executive Officer of Virgin Nigeria and Chief Executive Officer of Ropeways, Capt. Dapo Olumide who spoke to our correspondent from Kumasi, Ghana said Emirates has lost money for the first time in their history because of extenuating circumstances.

His words, “First of all, they operate hub and spoke, they don’t do domestic flights. They do long haul flights and the smallest aircraft they have is B777 and the largest fleet they have is A380 and it has plus 400 seats.

“During COVID, there is no way you are going to fill those aircraft with the four engines with the cost of fuel. They were bound to lose money. No problem. It is a one-off and they will lose money again in 2021 and lose money in half of 2022 but they will recover”

 

 

Capt. Dapo Olumide, former CEO, Virgin Nigeria

For the African airlines, Olumide disclosed that their losses have something to do with COVID-19 pandemic but largely to do with the fact that they don’t domesticate maintenance of their aircraft, stressing that every airline in Africa is dollar-based because they have to maintain their aircraft outside their country and they will be losing money because they don’t have passengers.

READ ALSO:  Nigeria, a big market for us-RwandAir, plans not to exit country

“Remember you are selling your ticket in local currency whereas Emirates and co are selling tickets in dollars. They sell their tickets in local currency and that currency has to be converted into dollars. They are already losing money before they even start and of course they got leased aircraft and they still need the dollar to pay for the leased aircraft.

“Everything is stacked against African airlines and ofcourse in Nigeria, you now compound the problem by lowering our air fares. We like this price war in Nigeria but as in any war, there is always no winner in any war. You all lose. So, if you slash your fares and make it free like buy one ticket, get one free, you still lose money”.

A charter airline operator, Yemi Macgregor said African airlines were already loss making airlines even before COVID-19 pandemic, alleging that mismanagement is the bane of the continent’s major airlines.

Troubled South African Airways

He further stated that African carriers can survive like Emirates if they get the financial backing of their government, stating that Ethiopian Airlines despite COVID-19 is the pride of the continent.

He noted that what happened to Emirates and some other carriers was basically as a result of the pandemic coupled with restrictions that affected many airlines across the globe.

Wole Shadare