Rampant inflation
SEP-Congo took over from Société de Manutention de Carburants Aviation (SMCA) – the company that supplies fuel to Blaise-Diagne International Airport in Senegal – after it had to deal with a paraffin shortage at the end of April. The company, which is responsible for oil logistics in DRC, sounded the alarm on 16 May, explaining that it had to impose a strict quota on its fuel supply because of the tension in stocks, thus leading to the cancellation of several flights at the Kinshasa airport.
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In Nigeria, although flight operations have been maintained, the concern is also growing. Given that a barrel of oil costs more than $110 (up nearly 73% over a year), the airline sector will have to perform a balancing act to cope with the consequences of the war in Ukraine. We interviewed Pascal de Izaguirre, CEO of Corsair, which currently operates five weekly flights to Abidjan and serves Mauritius alongside two other Indian Ocean destinations (Mayotte and Reunion).
Is the recovery in air traffic tangible?
Pascal de Izaguirre: For many weeks now, we have seen a strong improvement in traffic. I am not worried about demand – which is very much present after two years of frustration linked to the travel bans – but rather, as [is the case] for all companies, the economic aspect, due to the rise in fuel prices and the dollar against the euro.
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What are the concrete impacts?
In Corsair’s 2022 budget, which started on 1 October 2021, we assumed a metric tonne of paraffin [cost] $630; today it is double that. The whole sector has been considerably impacted. [Paraffin was trading at $1,157.1 per metric tonne as of 20 May 2022, according to data from the International Air Transport Association (IATA), which estimates the impact of higher fuel costs on airline budgets for all of 2022 at $121.1bn].
In addition to the price of fuel, there is also the rise in the dollar, because companies pay a large part of their expenses – paraffin, […] aircraft rental, maintenance, insurance, etc – in dollars. That’s a lot.
Have you had to increase your fares to cope with these extra costs?
We have increased our prices a little – all companies have or will have to, but this is only a partial solution. If we were to pass on all the increases in our production costs to our fares, this would push up ticket prices too much and [result in] a deflationary impact on demand, which would break the traffic recovery dynamic that we are seeing.
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