African Airlines in Tight Financial Situation

AFRICAN airlines, including Air Namibia and South African Airways, are expected to remain in a tight financial position this year.

This is based on the International Air Transport Association’s (IATA) latest report on the state of the global airline industry, presented at its AGM and World Air Transport Summit in Miami this week.

The report revealed that net profit per passenger in Africa is almost one tenth of what it is in North America, half of what it is in Latin America, and nearly a quarter of what it is in Asia-Pacific.

African airlines are expected to post a collective profit of US$100 million for a net margin of 0,8% (US$1,59assenger), the thinnest of all regions.

Last year, traffic growth for African airlines was weak because of various problems that disrupted tourism, but market share also continues to be lost. Currencies have been weak, particularly for oil exporters, so the benefits of lower fuel prices will be limited in this region.

African airlines are also expected to see the slowest growth among developing markets with capacity and demand expansion of 3,3% and 3,2% respectively this year.

“The industry’s fortunes are far from uniform. Many airlines still face huge challenges,” said Tony Tyler, IATA’s director general and CEO.

Tyler said the recent decline in fuel prices is a welcome development. The 2015 industry outlook is based on an average Brent crude oil price of US$65 per barrel, which is 36% below the 2014 price of US$101,4. Jet fuel prices are expected to decline at a slower rate for a full year price of US$78 per barrel (33% below the US$116,6 level of 2014). Fuel still represents approximately 28% of the industry’s operating cost structure.

According to the 20152016 budget, over the past 15 years, government has spent more than N$4 billion to keep Air Namibia in business. The airline is set to receive a total of N$1,93 billion in public funds over the next three years.

Source : The Namibian