For more than a year now, African airlines have been enduring a tough operational environment, characterized by limited route scope and low air travel bookings. The situation may even get worse with airline industry experts predicting it will be a long half for the situation to normalize in terms of opening more or re-establishing routes abandoned as a result of COVID. To unpack the whole story, our journalist Martin Chemhere had an exclusive interview with Kamil Alawadhi, IATA Regional Vice President Africa & The Middle East:
Nomad Africa: Tell us how African airlines are coping with the low rate of passenger bookings?
Kamil Alawadhi: There are two very different realities in the African market at present. Demand for domestic air travel is recovering and many carriers are already operating around 70% of their pre-pandemic domestic schedules and capacity. However, due to broader economic constraints, the market has lost much of its elasticity. Carriers are setting fares at levels that are both affordable and stimulate demand, but the yields, or margins, on them remain slender.
Simultaneously, the international market for air travel to, from, and within Africa remains tepid and we do not expect full recovery to pre-pandemic levels before 2024.
Nomad Africa: How much revenue have they lost as a result of operating routes in this challenging time?
Kamil Alawadhi: The 69% slump in demand for passenger air travel to, from, and within Africa last year caused African airlines to lose close to $7.8 billion in revenue and incur $2 billion in combined net losses.
Strong demand for air cargo transport has been a bright spot. Volumes increased by 1% in 2020, translating into higher revenue cargo revenues. Africa is currently the best performing market worldwide for air cargo, with demand up by more than 20% so far this year, mostly driven by shipments between Asia and Africa. However, the rise in cargo demand is not compensating for the revenues lost by the sudden evaporation of passenger traffic. Cargo capacity is also constrained by a large proportion of the global long-haul fleet either mothballed or permanently retired. Before the pandemic, the vast majority of air cargo was carried in the freight holds of those wide-body jetliners.
Nomad Africa: What do you think the government interventions should be like as a way to prop up airlines that may struggle as a result?
Kamil Alawadhi: Worldwide, governments are increasingly appreciative of commercial air transport and the connectivity it provides, as they are crucial to any modern, sophisticated and aspirational society and economy. This is why we have seen governments, particularly in North America and Europe, providing financial relief and support to airlines, airports, and other components of the air transport industry, regardless of their ownership. In those regions, the relief has been mostly in the form of equity, but on a strictly temporary basis.
Pre-COVID-19, the sector contributed US$63 billion to Africa’s combined GDP and supported about 7.7 million jobs, of which about 500 000 were aviation industry employees. The pandemic and accompanying economic crisis has jeopardized 4.5 million of those jobs and wiped out about US$37 billion in GDP contribution.
However, in Africa, where there are many more competing demands on government spending, it is not always possible for governments to take equity positions in cash-strapped airlines – either state- or privately-owned. In 2020, IATA helped to secure US$30 billion worth of pledges from the AU and various international financial institutions to be used as relief for African airlines and the tourism business. Unfortunately, very little of this has reached the intended beneficiaries, despite our repeated calls for governments to remove red tape and other barriers that are preventing those benefactors from releasing the funds.
Strong demand for air cargo transport has been a bright spot. Volumes increased by 1% in 2020, translating into higher revenue cargo revenues. Africa is currently the best performing market worldwide for air cargo, with demand up by more than 20% so far this year, mostly driven by shipments between Asia and Africa.
At the same time, most African governments have other financial relief instruments and levers at their disposal. These include the ability to scrap, reduce or defer statutory charges, levies, and taxes on air transport, all of which would reduce pressure on airlines and enable them to launch and expand their services, which in turn sustains jobs and livelihoods.
Nomad Africa: There is talk of a third wave and new variants hitting Africa, what is IATA doing and how prepared is it for this?
Kamil Alawadhi: We know a lot more now about the transmission of COVID-19 and over the past several months we have demonstrated how effective measures prevent it from being spread through air travel. IATA continues to impress upon governments and health authorities the need to adopt the health and biosecurity measures for air transport that were developed by the UN’s International Civil Aviation Organisation and World Health Organisations together with IATA and other industry role-players.
Similarly, we are calling on governments to do away with quarantines and replace them with affordable testing, tracking, and tracing.
Nomad Africa: The low rate of air travellers means that in the event of travel restrictions being eased, airlines won’t be able to prepare as much as they could have done outside the pandemic, tell us more about this?
Kamil Alawadhi: Airlines have not been idle during the crisis. They have been developing and refining plans for their restart. Governments need to develop the benchmarks and plans that will result in a safe, orderly, and timely restart. That means working with governments in at least two areas:
– establishing operational restart plans, including aircraft maintenance and readiness as well as refresher training for pilots, cabin crew, and technical support personnel,
– adopting tools to manage new COVID-19 testing and vaccine requirements such as the IATA Travel Pass app. In Africa, the IATA Travel Pass Advisory Group includes Ethiopian Airlines and RwandAir, which are currently testing the app.
Nomad Africa: Do you think the imminent travel pass could solve the issue of the low rate of travel in Africa?
Kamil Alawadhi: The low rate of travel in Africa is a result of these main factors:
– Hassle factors such as the continued requirements for quarantines and the high cost of COVID-19 tests
– The slow and uneven roll-out of COVID-19 vaccination programmes across the Continent. This is impeding the lifting of international travel restrictions and delaying the recovery of Africa’s economies.
Most businesses are still cash-strapped and continue to curtail corporate travel in favour of virtual online video conferences and meetings.
The IATA Travel Pass is intended to provide a standardized, intuitive and secure solution that will enable travellers to retrieve and store their COVID-19 test and vaccination status certificates and share them with immigration and health authorities. For it to boost confidence in travel, governments around the world have to recognize and adopt the technical standards embodied in the Travel Pass and avoid introducing any unnecessary inconsistencies or create confusion for travellers.
Source: Nomad Africa Magazine