Private equity investor Mediterrania Capital Partners (MCP) is considering investments in supermarkets, health and education as the impact of COVID-19 whittles down the list of financially strong candidates, CEO Albert Alsina tells The Africa Report.
Coronavirus breaks Asian momentum of African airlines
Air traffic routes between Africa and Asia have been growing, but the Coronavirus is breaking the momentum.
Air traffic routes between Africa and Asia grew by five per cent in 2019 — more than the global average. Now, African carriers fear a shortfall of more than $400m (352,3m euro) due to the disruption of services to China alone, a direct result of the Coronavirus outbreak.
Raphaël Kuuchi, vice-president for Africa of the International Air Transport Association (IATA), said that “initial estimates indicate that $400m could be lost” by the continent’s airlines, based on data gathered “in the second week of February” and due solely to the cancellation of services to China.
The data were made public during the Aviation Africa Summit, held 4–5 March in Addis Ababa.
The Coronavirus epidemic has forced almost all African airlines — with the exception of Ethiopian Airlines — to stop flying to China.
Globally, IATA estimates a loss of turnover of up to $63bn (55.5bn euro), in the event of a pandemic limited mainly to Asia with a recovery for the summer season in other regions, to $113bn (99.5bn euro), for a scenario that spares no destination.
An Africa-Asia axis that was progressing, including in freight transport
For African airlines, the crisis comes at a time when the air interconnection of the African and Asian markets has been growing strongly.
According to a study by the association published at the end of February, “the Africa-Asia market experienced the strongest growth in 2019 (+5%), in a context of strong commercial relations between the two regions. However, the pace was much slower than in 2018 (9.4%).”
This increase in revenue passenger kilometres, the industry’s leading indicator, is higher than the global growth (+4.2%) recorded last year and that of routes between Europe and Africa, while traffic on Africa-Middle East routes is also in decline, with a 1.7%drop in 2019.
The IATA report notes that African companies had “the highest annual load factor in our time series (71.7%).” The good health of the Africa-Asia route in 2019 was also reflected in freight transport. “African airlines’ freight tonne-kilometres (FTK) grew strongly by 7.4% in 2019, compared to -0.3% in 2018.
This improvement is due to strong capacity growth and investment links with Asia. Indeed, Africa-Asia routes recorded double-digit FTK growth last year (12.4%),” IATA officials stated.
Margins in decline
It should be noted, however, that even before the impact of the Coronavirus, not all indicators were green in the African sky. Despite the increase in revenue passenger-kilometres last year, dollar revenues per passenger are declining on all the continent’s routes, as a result of increasing competition.
The biggest decline was on intra-African connections (-8.7 %). Europe-Africa is down 7%, the Middle East is down 5% and North America is down 3.1%. Unsurprisingly, this has affected operators’ margins, estimated to have fallen by 4% last year, compared with -3.4% in 2018.
The industry, however, is maintaining its appetite for new aircraft: with 40 deliveries in 2019, including 17 single-aisle aircraft.
By 2020, 28 such aircraft are expected to be delivered to African operators, compared with five wide-bodied aircraft.