African airlines anticipate losses despite stronger growth forecasts

Alexandre de Juniac, Iata director general and CEO.

African carriers are expected to continue to make further losses in 2018 following a collective net loss of $100 million in 2017, according to the International Air Transport Association (Iata).

“Stronger forecast economic growth in the region is expected to support demand growth of 8.0% in 2018, slightly outpacing the announced capacity expansion of 7.5%,” said Alexandre de Juniac, Iata director general and CEO.

According to him, the wider economic situation is only improving slowly in Africa, which is hampering the financial performance of its airlines. “The key Nigerian economy is only just out of recession and growth in South Africa remains extremely weak. Stronger economic growth will help in 2018, but the continent’s governments need a concerted effort to further liberalise to promote growth of intra-Africa connectivity,” De Juniac said.

The net profit of the global aviation industry is expected to rise to $38.4 billion in 2018, an improvement from the $34.5 billion net profit expected in 2017. Strong demand, efficiency and reduced interest payments will help airlines improve net profitability in 2018 despite rising costs.

 "These are good times for the global air transport industry. The demand for air cargo is at its strongest level in over a decade. Employment is growing. More routes are being opened. Airlines are achieving sustainable levels of profitability. It’s still, however, a tough business, and we are being challenged on the cost front by rising fuel, labour and infrastructure expenses," said De Juniac.

He pointed out that the industry also faced longer-term challenges and that many of them were in the hands of governments. “Aviation is the business of freedom and a catalyst for growth and development. To continue to deliver to our full potential, governments need to raise their game - implementing global standards on security, finding a reasonable level of taxation, delivering smarter regulation and building the cost-efficient infrastructure to accommodate growing demand,” De Juniac highlighted.

He believes the cargo business will continue to benefit from a strong cyclical upturn in volumes, with some recovery in yields. Volumes are expected to grow by 4.5% in 2018 (down from the 9.3% growth of 2017) and cargo yields are expected to improve by 4% in 2018 (slower than the 5% in 2017).

De Juniac further pointed out that while restocking cycles were usually short-lived, the growth of e-commerce was expected to support continued momentum in the cargo business beyond the rate of expansion of world trade in 2018.

“Cargo revenues will continue to do well in 2018, reaching $59.2 billion (up 8.6% from 2017 revenues of $54.5 billion),” he projected.

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