African airlines boom to last

Two new expert reports see bright future for African aviation

SPECIAL REPORT | BIRD AGENCY | In a month of good news, two new expert reports are painting a bright present and future for African airlines.

The first, a report by the International Air Transport Association predicts that African airlines will post a collective profit for the second consecutive year in a striking turnaround for one of the sectors worst hit by COVID disruption. It says African airlines are expected to achieve a net post-tax profit of US$100 million, a significant improvement from the previous year.

The other, a study by European aircraft manufacturer Airbus highlights how Africa’s untapped aviation routes are capable of fueling major growth in both intercontinental and intra-continental flights. West African routes lead, with experts advocating for their exploration alongside visa-free travel to revolutionise air travel across the continent.

The Airbus study says West Africa holds the potential for an aviation revolution that leverages its booming population, diverse economies, and strategic geographical position to open up new routes.

Booming demand

The International Air Transport Association story meanwhile says African airlines have returned to profit on booming demand which will further shore up their earnings in 2024.

“The demand to travel is there,” said Kamil Alawadhi, IATA’s Regional Vice President for Africa and the Middle East.

Pent-up demand for travel is expected to fuel the full recovery of Africa’s aviation and tourism sectors with both inbound and outbound travel showing impressive performance, according to recent air travel research.

Tourists, long confined by the constraints of the pandemic and with vacation savings, will make up the bulk of visitors to the continent.

This surge in demand is expected to not only resuscitate the aviation sector but also propel the tourism industry to new heights. Egypt, Kenya and South Africa are expected to witness the biggest rebound.

International Air Transport Association (IATA) figures show that in 2023, the global international traffic including in Africa climbed 41.6% versus 2022 and reached 88.6% of 2019 levels.

“December 2023 international traffic climbed 24.2% over December 2022, reaching 94.7% of the level in December 2019,” it said on Friday (February 2), ” teeing up airlines for a return to normal growth patterns in 2024.”

“The restoration of connectivity is powering the global economy as people travel to do business, further their educations, take hard-earned vacations and much more,” it said.

Some 4.7 billion people are expected to travel in 2024, a historic high that exceeds the pre-pandemic level of 4.5 billion recorded in 2019, according to Iata.

German research platform Statista estimates show that revenue in the Travel and Tourism market in Africa will reach US$24.42 billion this year.

Challenges remain

But IATA’s Kamil Alawadhi emphasised the dual nature of this positive financial outlook.

“Africa’s airlines are making a collective profit. That is good news,” he said, noting however that this profit margin is “razor-thin and well below the global benchmark,” with many airlines across Africa continuing to struggle with significant losses. Key issues such as high operational costs and heavy taxation have posed significant obstacles.

Profit per passenger is expected to be nearly double the 2023 figure. However, the projected US$100 million profit, equating to 90 cents per passenger, is in stark contrast to the global average of US$6.14, underscoring the tenuous nature of this rebound, according to the trade association of the world’s airlines.

Additionally, the lack of a continent-wide multilateral traffic rights regime has limited the sector’s ability to fully capitalise on the rising travel demand.

“The demand to travel is there. To meet it, the African airline sector needs to overcome many challenges,” Alawadhi said.

Profit margins are anticipated to be 0.6% of revenue, up from 0.4% in 2023, yet still considerably lower than the global net profit margin of 3.1%.

Revenue passenger kilometres (RPK) growth is expected to be 8.5%, indicating robust passenger demand, although slightly trailing the projected capacity growth of 9.1%.

The load factor is projected to reach 61.9%, slightly above the 59.8% break-even load factor for African airlines.

These figures reflect a sector regaining its footing, albeit slowly and unevenly across the continent.

To address these challenges, IATA’s Focus Africa initiative offers a strategic framework designed to strengthen the aviation sector.

The initiative outlines steps to create a more resilient and efficient industry, which can drive economic growth and social development.

“The prize for working together across the continent for safe, efficient, and sustainable air connectivity is well worth focused policy efforts,” Alawadhi stresses.

New routes needed

The Airbus study entitled ‘Exploring the horizons: A study of unserved air routes to, from and within Africa’ says experts are advocating exploration of new routes alongside visa-free travel to revolutionise air travel across the continent.

The study reveals that West Africa holds the potential for an aviation revolution leveraging its booming population, diverse economies, and strategic geographical position to open up new routes. It highlights that nine out of the top fifteen unserved routes start or end in West Africa.

These routes, including Lagos-New York, Abuja-Nairobi, and Dakar-Libreville, represent significant opportunities for airlines in the region.

“It is surprising to observe that throughout the entirety of the year 2023 and up to the conclusion of the IATA-summer in 2024, merely two routes connected Nigeria with North America and that both routes were operated by non-Nigerian operators: Lagos-Atlanta, operated by Delta Air Lines and Lagos-Washington, operated by United Airlines,” the Airbus study explains.

“What is particularly remarkable is that during the same period, the whole region of West Africa only had three entry-points in North America: Atlanta, New York and Washington,” the authors further highlight.

Beyond West Africa, other cities across the continent considered “most appealing unserved routes” link cities such as Cape Town, Nairobi, Dakar and Douala.

At the top of the list of unserved routes in Africa are long-haul intercontinental flights connecting the continent to North America, Europe, and the Indian subcontinent.

These routes highlight crucial gaps in air travel, driven by high demand for direct flights from major African cities to global hubs. Currently, passengers endure time-consuming connecting flights, adding unnecessary inconvenience to their journeys.

This is even as projections by the African Airlines Association show African airlines are likely to cross the 100 million passengers mark for the first time in 2025, a sign of the growing traffic volumes in the country’s aviation sector.

According to AFRAA, passenger numbers will hit 98 million by the close of year, 2024, which is a 15% increase from 2023 before hitting beyond the 100 million mark by 2025.

Airbus projects a 4.1% annual growth in air traffic over the next 20 years, leading to a demand for 1,180 new aircraft in Africa by 2043.

Despite challenges, the study highlights the potential for greater air travel efficiency through improved connectivity and optimized flight paths, promising reduced travel times and costs.

Notable progress is already underway, with several airlines expanding to cover new routes within Africa and beyond. Ethiopian Airlines is leading the charge, aiming for a 30% growth in passenger numbers by mid-2024.

More foreign airlines are also increasingly expanding into new African routes. For instance, AirAsia, a leading Asian carrier, has announced a direct route to Kuala Lumpur, Malaysia, starting in November 2024.

This new intercontinental route eliminates the need for long layovers, offering travellers an effortless journey between East Africa and Asia.

The ongoing expansions are yielding results, with IATA projecting Africa’s airlines to earn a collective net profit in 2024 for the second consecutive year, showcasing the sector’s impressive post-pandemic resilience.

The Airbus report suggests creating direct long-haul routes between several other key destinations. These include routes from Harare to London, Johannesburg to Mumbai, Entebbe to London, Cape Town to Brussels, Durban to London, and Nairobi to Washington.

The report also proposes flights from Lagos to multiple North American cities, such as Manchester, New York, Toronto, and Houston.

While the authors acknowledge that unserved city pairs within the continent rank relatively lower in terms of economic feasibility due to lower traffic numbers, there are promising prospects such as between the Cape Town-Lagos route.

“Given the pivotal roles played by both Lagos (Nigeria) and Cape Town (South Africa) within their respective countries and across the African continent, the establishment of a non-stop service between these cities emerges as a sensible case,” the authors explain.

“Despite the significance of both cities, there is currently no non-stop flight between them. Historical schedule data indicate that such a service has never existed. Moreover, there is no direct air service connecting Cape Town with the entire subregion of West Africa.”

Other high-potential intra-continental routes that the report identifies include Dakar-Libreville, Abidjan-Douala, Abuja-Nairobi, and Dakar-Douala.

However, according to experts efforts to ensure visa-free travel for Africans will create a real impact in easing travel, especially at the regional level.

According to Alan Hirsch, a research fellow at the New South Institute and emeritus professor at the Nelson Mandela School of Public Governance at the University of Cape Town, by the end of 2022, only 27% of African routes allowed visa-free travel for Africans.

“Regularising freer movement of people across African borders is one of the continent’s great developmental challenges. It is one of the flagship projects of the African Union’s Agenda 2063,” Hirsch explained.

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SOURCE: Bonface Orucho, bird story agency