African aviation is still in the red in 2022, says IATA

By Nelly Fualdes
Posted on Wednesday, 14 December 2022 09:21

A consignment of masks, testing kits and protective equipment is unloaded from a cargo plane operated by Ethiopian Airlines on 24 March 2020, in Nairobi. © TONY KARUMBA/AFP

According to the International Air Transport Association, African airlines are expected to divide their losses by three in 2023, to $213m. The $13bn lost in 2020 will be a distant memory.

North American airlines are already out of the red, and Europe and the Middle East are expected to follow in 2023. However, African airlines could still record more than $213m in losses next year, the International Air Transport Association (Iata) said in its World Air Transport Outlook report, which was released on 6

December.

The trade association estimates the cumulative losses of African airlines at $638m in 2022, out of a $7bn global total, due – in particular – to the sector’s collapse in China (the Asia-Pacific region will post $10bn in losses in 2022).

Headwinds

The report says the African continent “is particularly exposed to macroeconomic headwinds that have increased the vulnerability of several economies and made connectivity more complex”. For instance, it is the second continent most affected by inflation, after Europe. The economies of many countries are particularly vulnerable to the appreciation of the dollar, while the lack of local refineries makes fuel more expensive than elsewhere – not to mention the risk of shortages.

Despite these counter-currents, the African airline industry is not suffering the same kind of losses it experienced in 2020 ($13.5bn in passenger revenues, according to the International Civil Aviation Organisation). As such, it should still be able to cut its losses by three in 2023 in order to achieve a net margin of -1.7% in 2023, compared to -30% in 2020 and -5% in 2022.

Real transport costs are surprisingly continuing their downward trajectory, which is contributing to the recovery in traffic and connectivity.

For 2023, demand, which is expected to be 86.3% of its pre-crisis level, should increase by 27.4%. This growth is faster than the increase in capacity (+21.9% to reach 83.9% of the pre-2020 level), which will automatically increase the load factor, currently the lowest in the world at 61.2% (63.9% in 2023).

Focus on connectivity

Connectivity, i.e. the number of routes, “is being restored, but it will take more time to get back to pre-Covid-19 frequencies and capacities”, says Marie Owens Thomsen, Iata’s chief economist, in her global analysis. “Real transport costs are surprisingly continuing their downward trajectory, which is contributing to the recovery in traffic and connectivity.”

Freight – which represented a strategic retreat for the most flexible airlines (such as Ethiopian Airlines) at the height of the crisis – has seen demand and capacity gradually decline over the course of 2022. In October (latest figures available), African airlines carried 8.3% fewer tonne-kilometres than they had a year earlier.

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