Africa’s airlines to incur $100 million loss in 2018, says IATA

Africa’s airlines are expected to continue making a combined loss of $100 million in 2018, the same as 2017, in spite of an anticipated eight per cent growth in demand and capacity expansion of 7.5 per cent.

This is according to the International Air Transport Association’s (IATA’s) 2018 global airline industry forecast, which was presented by IATA’s Director-General, and CEO, Alexandre de Juniac, in Geneva, Switzerland on 5 December.

The forecast says the slow pace of wider economic improvement in Africa is hampering the financial performance of the continent’s airlines. Nigeria is only just out of recession and growth in South Africa remains extremely weak. As a result, although traffic is growing, the passenger load factors (i.e. the measure of utilised capacity) are just over 70 per cent. This is more than 10% lower than the global industry average.

The combination of low utilisation and high fixed costs make, it difficult for airlines to make a profit, IATA says. Stronger economic growth will help in 2018, but Africa’s governments need to make concerted effort to free up intra-African access to their markets as the increased connectivity will stimulate wider economic growth.

The combination of low utilisation and high fixed costs make it difficult for airlines to make a profit, IATA says. Stronger economic growth will help in 2018, but Africa’s governments need to make a concerted effort to free up intra-African access to their markets as the increased connectivity will stimulate wider economic growth.

Globally, IATA expects global industry net profit to rise to $38.4 billion in 2018, an improvement from the $34.5 billion expected net profit in 2017 (revised from a $31.4 billion forecast in June).

2018 is expected to be the fourth consecutive year of sustainable global airline profits with a return on invested capital (9.4 per cent) exceeding the industry’s average cost of capital (7.4 per cent).