South African Airlines planes take off at O.R Tambo International Airport in Johannesburg, South Africa on Friday, January 24 2019. Pic: Waldo Swiegers / Bloomberg
Despite the huge funding of national airlines by African governments, it is distressing that African airlines deliver perpetual losses. While it can be understood why Emirates Airlines made its first loss in 33 years, it is difficult to understand the perennial losses posted by major African airlines.
While Emirates loss could be a one-off as a result of the COVID-19 pandemic, experts told AirInsight that African airlines may not get the reprieve the UAE-based carrier got from its government because the continent’s airlines had been making losses since they started operations.
The impact is colossal for state-owned carriers like Ethiopian Airlines, South African Airways, Kenya Airways, Air Maroc, Rwandair, and Egypt Air. Prominent carriers, like Kenya Airways, have always recorded losses. In February, Air Namibia ceased operations and filed for bankruptcy. The airline had been in operation for more than 70 years. For a year now, South African Airways was grounded. It had been struggling even before the COVID-19 pandemic struck.
Many observers believe that COVID-19 will shake state-backed carriers to their foundation. They are of the opinion that flag carriers do not stand a chance to survive. Former Chief Executive Officer of Virgin Nigeria and Chief Executive Officer of Ropeways, Capt. Dapo Olumide who spoke to your correspondent from Kumasi, Ghana. He said Emirates has lost money for the first time in its history because of extenuating circumstances. “First of all, they operate hub and spoke, they don’t do domestic flights. They do long-haul flights and the smallest aircraft they have is B777 and the largest fleet they have is A380 and it has plus 400 seats. During COVID, there is no way you are going to fill those aircraft with (passengers) and then they have four engines with the cost of fuel. They were bound to lose money. No problem. It is a one-off and they will lose money again in 2021 and lose money in half of 2022 but they will recover.”
For African airlines, Olumide disclosed that their losses are impacted by the COVID-19 pandemic, but largely to do with the fact that they don’t domestically maintain their aircraft. He stressed that almost every airline in Africa has dollar-based MRO costs because they have to maintain their aircraft outside their home country and they will be losing money because they don’t have enough dollar-paying passengers.
“Remember you are selling your ticket in local currency whereas Emirates are selling tickets in dollars. Whereas African airlines sell tickets in local currency, then that currency has to be converted into dollars. They are already losing money before they even start and, of course, they have leased aircraft and they still need the dollar to pay for the leased aircraft. Everything is stacked against African airlines and, of course in Nigeria, you now compound the problem by lowering airfares. We like this price war in Nigeria but as in any war, there is no winner in any war. You all lose. So, if you slash your fares and offer a buy one ticket, get one free, you still lose money”.
A charter airline operator, Yemi Macgregor said African airlines were already loss-making even before the COVID-19 pandemic, alleging that mismanagement is the bane of the continent’s major airlines. He further stated that African carriers can survive like Emirates if they get the financial backing of their government. For example, Ethiopian Airlines, despite COVID-19, is the pride of the continent. He noted that what happened to Emirates and some other carriers was basically a result of the pandemic coupled with restrictions that affected many airlines across the globe.
