Kenya's coronavirus-related aviation slump eclipses Ethiopia's

Wednesday March 25 2020

Kenya Airways planes are seen parked at the JKIA

Kenya Airways planes are seen parked at the Jomo Kenyatta International Airport near Nairobi, Kenya on March 6, 2019. PHOTO | THOMAS MUKOYA | REUTERS 

MICHAEL WAKABI
By MICHAEL WAKABI
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International air transport lobby, IATA, is asking governments to extend emergency support to airlines as the losses attributable to disruptions caused by the Covid-19 crisis mount for African carriers.

IATA says what started as a health emergency has morphed into an economic crisis across the world and that it should be given equal attention to prevent a catastrophe.

By March 11, airlines in Africa had chalked up a combined $4.4 billion in losses.

Kenya’s potential losses supersede Ethiopia’s which IATA has projected at 479,000 passengers and $79 million in revenues. Also, 98,400 jobs are at risk in Ethiopia.

Passenger volumes could however sink by 1.2 million if the situation escalates and revenue losses to $202 million.

IATA, which did not provide any analysis for Tanzania and Uganda, sees passengers volumes falling by 79,000 for Rwanda and equivalent revenue loss of $20.4 million while 3,000 jobs would be at risk. But potential losses could expand to 201,000 passengers and $52 million in foregone revenues.

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Catastrophic
With a much bigger industry, South Africa will top losses on the continent with projections pointing to a six million contraction in passenger numbers and financials losses of $1.2 billion. The disruption has also put at risk 102,000 jobs in the country.

Nigeria would suffer the next big hit in Africa with an 853,000 drop in passenger numbers and $170 million in revenues.

More than 22,200 jobs are also at risk in the country while any escalation would take losses to 2.2 million passengers and US$434 million in revenues.

In a webinar conference with journalists, Alexandre de Juniac, IATA’s director general and chief executive said; “Stopping the spread of Covid-19 is the top priority of governments. But they must be aware that the public health emergency has now become a catastrophe for economies and for aviation.”

Presenting an analysis of possible trajectories, Muhammad Al-Bakri, IATA’s vice-president for the Middle East and Africa said that Kenya was likely to harvest the brunt of losses in Eastern Africa with financial analysis conducted on March 11, indicating that passenger volumes could dip by 622,000.

Any further escalation of the crisis could see passenger volumes fall by 1.6 million and $320 million in lost revenues.

“Extensive cost-cutting measures are being implemented by the region’s carriers to mitigate the financial impact of Covid-19. However, due to flight bans as well as international and regional travel restrictions, airline revenues are plummeting—outstripping the scope of even the most drastic cost containment measures, Mr Al-Bakri said.

Government support

He added that with airline cash reserves averaging just about two months in the region, carriers face a liquidity and existential crisis. IATA estimates that the aviation industry will need $200 billion in aid globally to prevent total collapse.

While oil prices have dipped to their lowest levels since 2018, Mr Al-Bakri pointed out that airlines did not stand to benefit because they are grounded.

The losses from the disruptions far outstrip any potential savings on the oil bill, he said.

International bookings in Africa are down roughly 20 per cent in March and April while domestic bookings have fallen by about 15 per cent in March and 25 per cent in April.

African airlines had lost $4.4 billion in revenue by March 11, while ticket refunds increased by 75 per cent in 2020 compared with the same period for 2019.

IATA is asking governments to consider direct financial support to airlines to make up for the shrink in revenues and liquidity attributable to travel restrictions associated to Covid-19.

It is also recommending government support to the industry through loan guarantees and support for the corporate bond market by central bankers.

The lobby is also recommending tax relief through rebates on payroll taxes paid so far in 2020 or an extension of payment terms for the rest of the year.

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