African Airlines to see the worst of the Coronavirus impact

Airlines on the continent are expected to see the worst impact from the Coronavirus-led travel disruptions in comparison to global carriers.

The impact is expected to leave the majority of carriers including the country’s flag bearer Kenya Airways (KQ) staring at potential dislocation as the region sits on the edge of the global aviation industry.

According to industry data, intercontinental flights are still the African airlines’ bread winner with a share of 51 per cent of the carriers business while Intra-African travel account for a mere 27.6 per cent of the market with the balance sitting within local travel to mirror the exposure of continental aviators to global volatilities.

In 2018, African carriers accounted for a mere 2.13 per cent of global revenue passenger kilometres (RPKs) while freight ton kilometres (FTKs) plunged to 3.4 percent from the slowdown in world trade.

Capacity measured in available seats per kilometre (ASK) meanwhile held up at a low 4.4 per cent with revenues made from freight sitting below the global average.

Earnings by local airlines further exacerbate the woes for African carriers with the majority already lying in a precarious financial position.

Continental carriers made an average loss of Ksh.158 ($1.54) per passenger in 2019 in spite of growing the total number of lifted passengers beyond the 91 million mark from 88.5 million passengers in 2017.

Combined, African airlines booked net losses rounding off to Ksh.10.3 billion ($100 million) in 2019 against higher earnings of Ksh.1.5 trillion ($14.5 billion) by peers in North America who earned an average Ksh.1516.88 ($14.77) off each passenger.

Further, African airlines further incurred operating expenses in excess of Ksh.2 trillion ($19.9 billion) with fuel costs, blocked funds in some African countries, Forex exchange fluctuations, higher taxes and charges.

Already, the International Air Transport Association (IATA) expects the aviation industry to witness its worst hit from the disruptions only seen most recently in the 2003 SARS outbreak.

According to an assessment by the global trade association of world’s airlines, countries with more than 100 cases of the Novel Coronavirus already represent 27 per cent of all global passenger revenues.

The recovery of airlines from the 2003 SARS epidemic stretched to seven months with the outbreak peaking in one to three months.

Presently, the extent of the Coronavirus outbreak remains unknown as infections hit 110 countries and territories with over 113,000 confirmed cases and more than 4,000 deaths.

African Airlines Association (AFRAA) Secretary General Abderahmane Berthe warns the impact of disruptions in aviation are usually profound going by accompanying narrow margins to the trade.

“The airline industry is very fragile as margins are very thin. As such, crises can have a very big impact on some airlines. It would however be difficult to assess the full impact at this time,” he said.

The Coronavirus has already claimed its first carrier victim in British Airline Flybe which went into administration at the start of the month with the outbreak having drowned the demand for air services.

While Berthe is hopeful for resilience among continental carriers, the AFRAA Secretary General expects African governments to step in with timely funding interventions.

“No airlines have collapsed from the Ebola or SARS crisis. Interventions are meanwhile dependent on the capacity of governments. We for instance saw States move to inject cash into airlines to aid recovery efforts in the post 9/11 fallout,” he added.

According to IATA, a limited spread scenario from the outbreak will lead to the loss of Ksh.6.5 trillion ($63 billion) in loss of passenger revenues while an extensive spread is likely to wipe out Ksh.11.6 trillion ($113 billion) or an equivalent 19 percent of global passenger revenues.