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It’s a free fall for African airlines as IATA paints a grim picture for the industry and warns of more losses for the fourth time in a row

Rwandair
  • Releasing the mid-year airline industry economic forecast during its 75th AGM in Seoul on June 2nd, IATA said 2019 is going to be yet another year of losses for African airlines — the fourth in a row.
  • IATA forecasts a worsening business environment, with rising fuel prices expected to drive a 7.4% rise in overall costs against a 6.5% rise in revenues.
  • Africa, the Middle East and Latin America, which continue to face significant downward pressures, are projected to stay in the red.

The International Air Transport Association (IATA) has warned that there is going to be no letup in losses and African airlines will continue to experience a free fall in profitability in 2019.

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Releasing the mid-year airline industry economic forecast during its 75th AGM in Seoul on June 2nd, IATA said 2019 is going to be yet another year of losses for African airlines — the fourth in a row — as the global airline industry braces for higher fuel prices and weaker global trade during 2019.

“This will be the 10th consecutive year in the black for the airline industry. But margins are being squeezed by rising costs across the board, including labour, fuel and infrastructure. The weakening of global trade is expected to continue as the US-China trade war intensifies,” Iata director general, Alexandre de Juniac, said.

IATA added that airlines were expected to make a net profit of $28 billion during the year, a 20 per cent lower than the $35.5 billion net profit that the association had forecast in its first outlook for 2019, last December.

The projections are a warning for East Africa’s struggling airlines and new ones that are setting up in the region.

IATA’s revelation will certainly dampen the spirits of Uganda Airlines which is set to make its maiden flight to Kenya’s capital soon after decades of inactivity in a move poised to challenge Kenya Airways dominance on the Nairobi-Entebbe route.

Air Tanzania is also gearing to take to the skies once again after it was revived last year following the purchase of new aircraft.

Keeping in mind that fuel accounts for on global average 25% of operating costs and Africa aviation fuel is over 30% more expensive than anywhere else in the world, Africa airlines are poised for challenging months ahead.

IATA forecasts a worsening business environment, with rising fuel prices expected to drive a 7.4% rise in overall costs against a 6.5% rise in revenues.

However, it is not all doom for the aviation industry and Mr de Juniac says despite the headwinds, the industry has turned a corner from the dark days of the 2000s.

Airlines have been in the black since 2010 but slowly the industry is turning around.

“The industry is still performing relatively well in 2019,” said Iata chief economist Brian Pearce at the AGM.

“We forecast net post-tax profits to fall to $28 billion this year, but that is still much better than before 2015.”

That prediction will translate into an average net margin of $6.12 per passenger departure, with North America leading the pack with $15 billion of the global cake and a net margin of 14.77 per passenger. Europe’s airlines are forecasted to rake in $8.1 billion, equivalent to $6.75 per passenger, and the Asia Pacific $6 billion or $3.51 per passenger.

Africa, the Middle East and Latin America, which continue to face significant downward pressures, are projected to stay in the red.

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