African airlines to lose $100m in 2016

African carriers are likely to lose $100 million in 2016, according to Chief Executive, Airlines Association of Southern Africa (AASA), Chris Zweigenthal.

He disclosed this at the three-day Air Finance for Africa summit in South Africa, last weekend.

This is, however, an improvement on the $300 million loss recorded by the continent’s carriers last year.

Zweigenthal equally lamented that out of 200 African airlines, only 34 are International Air Transport Association (IATA) members.

IATA membership confers on airlines the opportunity of helping to contain costs, improve cash flow and maximise efficiency.

Besides, IATA is the backbone of the global air transport industry, helping members achieve cost reductions related to air traffic control charges, fuel and taxation.

The AASA boss said that the region accounts for less than two per cent of global airline passenger traffic and about one per cent of global airlines’ cargo.

He stated that the challenges facing the African aviation industry range from strong state protectionism, lack of an enabling environment for new investors, high taxes and charges (above comparative world averages), a poor safety record due to ageing fleet and insufficient regulatory supervision.

He noted that likewise, a lot of air transport infrastructure across the continent is in need of upgrade.

Zweigenthal noted that the continent’s airlines are struggling with high taxes and charges, particularly levies on fuel.

“This has made it difficult for African carriers to charge cheaper fares. Instead, Gulf, European and Middle Eastern carriers have moved into the breach, taking the lion’s share of Africa’s air traffic business. Foreign carriers have subsidised fares, non-interest loans, grants and other major support.

“Any benefits Africa might hope to reap from the global fall in oil prices have been cancelled out by high taxes and charges as well as a strong US dollar.

“National carrier, Kenya Airways, is among the hardest hit African airlines, as 37 per cent of its fuel costs go to taxes and levies. Sky-high fuel taxes and other levies are going to ground Africa’s airlines sooner rather than later,” he added.

He urged African governments to move swiftly and forego the kind of revenue that stunts growth in certain key sectors such as aviation.

He stressed that it makes no sense to make African airlines contend with a competition that is so heavily subsidised and otherwise protected, adding that the very notion of competitiveness itself is at risk.

Zweigenthal also lamented that the cost of air travels in Africa is far more expensive than anywhere else in the world, saying the reason are not far-fetched.

He said: “We have very high operating costs from the airport ends.
We also have high taxes and charges that are imposed by the governments and other institutions on passengers and airlines. These are to raise revenue for other sectors other than the air transport development on the continent, he added.

“We have already started engaging with some of the African governments – where taxes and charges on air travel are much higher, and where fuel taxes are also very exorbitant – with the view to reviewing these downward.

We also have situations at some airports where passengers are levied taxes today for the construction of new airports, which will be used by passengers in the future”.