African airlines caught in Ukraine turbulence
Monday August 01 2022
The war in Ukraine is eating into earnings by airlines that have had to endure rising costs of jet fuel.
And since Russia invaded Ukraine in February, cargo air freight and air tickets charges have increased to match the rise in jet fuel prices, engaging a reverse gear to an industry already struggling with post-Covid-19 recovery.
According to the African Airlines Association, airlines on the continent are likely to post losses of up to $4.1 billion this year on the back of expensive jet fuel. This is equivalent to 23.4 percent of 2019 revenues.
In a fight-back, the airlines have joined forces to negotiate better prices and a steady flow of jet fuel in a bid to help stave off a potential crisis caused by supply issues and soaring costs.
Also read: Hop-and-pick flights proposed as remedy for African ailing carriers
African Airlines Association Secretary-General Abderahmane Berthe’ said last week that a committee, which includes major carriers such as South African Airways and Kenya Airways, is set to secure deliveries for 12 months starting this month.
“The rising jet fuel has hiked air tickets and cargo freight rates thus impacting on the airlines cash-flows as the demand for flying has remained low as the industry still recovers from the effects of the global Covid-19 pandemic,” said Mr Berthe’.
International Air Transport Association (IATA) has warned that rising jet fuel prices were likely to cause airfares to increase this year, as airlines grapple with higher operating costs.
IATA director general Willie Walsh said as long as jet fuel costs continue to remain unstable and jump in price, so will airfares as they are passed along to consumers.
“Flying will be more expensive for consumers, without doubt,” said Walsh.
There has been a global rise in the cost of jet fuel since the beginning of this year as a result of a number of logistics challenges, among them Russia’s invasion of Ukraine.
According to S&P Global Platts, a market data and analysis firm that offers a full view of the energy markets, jet fuel price per barrel this week was retailing at $137.9 from about $99 in January this year.
Fuel costs account for between 10 percent and 12 percent of airline operating costs, and it will shift the operating calculations for any carrier, with Kenya Airways expected to be hardest hit as its fuel takes up an entire quarter of the airline's expenses.