Rosy outlook for airlines operating outside Africa

Tuesday December 18 2018

A RwandAir passenger plane takes to the skies.

A RwandAir passenger plane takes to the skies. IATA is projecting $35.5 billion for the industry in 2019 and a $32.3 billion net profit this year. FILE PHOTO | NMG 

By MICHAEL WAKABI
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African airlines are expected to narrow their losses to $300 million in 2019, down from the $400 million they expected to make this year, according to projections by the International Air Transport Association.

IATA chief executive Alexandre de Juniac said the gains will mainly come from a reduction in jet fuel prices.

While operators in the region enjoy above average yields and lower operating costs on some heads, few airlines are achieving adequate load factors to generate a profit. IATA is projecting a net loss of $3.51 per passenger in Africa.

Africa’s performance bucks the global trend, where IATA is projecting $35.5 billion for the industry in 2019 and a $32.3 billion net profit this year.

“Performance is improving but only slowly. All regions, except Africa, are expected to report profits in 2018 and 2019. Financial performance is expected to improve compared with 2018 in all regions except for Europe, where improvement has been delayed by fuel hedging,” Mr de Juniac said.

Return on investment in projected to stay flat at 8.6 per cent while the margin profit after tax will be 4 per cent of revenues of $885 billion, which is a 7.7 per cent increase over the $821 billion expected for 2018.

Passenger numbers will grow by 250 million to take the global total to 4.59 billion while cargo volumes will increase from 67.3 million tonnes to 65.9 million tonnes.

Economic growth, fuel prices and rising labour costs are among the key performance drivers for the industry in 2019.

The global economy is forecast to grow at 3.1 per cent, promising solid business barring risk from possible trade wars and Britain exiting the EU.

IATA’s forecast is based on the assumption that oil prices will fall back to $65 from the $73 average per barrel of Brent crude in 2018.

This will translate into a price of $81.3 per barrel of jet fuel compared with $87.6 for 2018.

Cargo will grow more sluggishly at 3.7 per cent to 65.9 million tonnes mainly as a result of a soft global trade environment and increasing protectionism.

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