Roundup: African airlines struggle amid strong USD, economic hardships

0 Comment(s)Print E-mail Xinhua, November 18, 2017
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KAMPALA, Nov. 17 (Xinhua) -- Although passenger numbers are expected to slightly increase for African airlines in 2017, the carriers are likely to remain under pressure from a strong U.S. dollar, the International Air Transport Association (IATA) has said.

According to IATA, the airlines are expected to make a combined loss of about 100 million dollars in 2017, making Africa the only region that is currently not profitable for airlines.

The aviation association pinned the loss on economic hardships the region has been facing for the last two years, partly due to the gain in strength of the dollar.

"The entire global economy has not been good for about two years, due to the strength of the U.S. dollar, and Africa like the rest of the world, has felt the impact. The drop in global GDP therefore comes with a drop in aviation traffic, and because aviation is not very developed in Africa, airlines have been operating at loses," Raphael Kuuchi, the IATA Africa vice president told Xinhua in a recent interview.

IATA is a global association of airlines based in Montreal, Canada, that represents more than 270 members, and is responsible for setting aviation standards.

Kuuchi said African airlines made a 9.6-dollar loss on every passenger carried in 2016, with a high expectation that the loss will climb to 10 dollars in 2017.

He said American airlines on the other hand made 22 dollar profit on each passenger carried in 2016, although the margin is expected to drop to 19 dollars in 2017.

According to IATA statistics, global airlines collected 186 dollars in revenue per passenger, and spent 178 dollars on costs, leaving a margin of 7.54 dollars per passenger in 2016.

Kuuchi said 60 percent of the profits made were collected by American airlines, followed by Asia Pacific and Europe, while the rest struggled to make ends meet.

He said in order to change the narrative, African governments must focus on liberalizing the region's airspace, so as to increase both intra region and outside air travel.

He said the region must also improve in visa openness to attract more tourists, who contribute significantly to aviation traffic.

"The East African Community has done it fairly well, and now it is credited for having the highest openness to visa index compared to other areas of the world. This is what the entire continent needs," he said.

According to the World Bank, the continent's real annual GDP growth over the last 16 years has averaged 5.4 percent, with the last five years registering a slowdown to 3.3 percent a year.

However, the bank indicates that by 2022, Africa's real GDP growth is forecast to grow at 5.6 percent, which according to Kuuchi, is a big opportunity for the continent's aviation.

"Over the next 20 years, growth in the aviation industry will be driven by the east and southern parts of the hemisphere, and Africa is expected to contribute significantly to this growth, due to its anticipated impressive economic recovery," he said.

IATA statistics indicate that over the next 20 years, aviation traffic in Africa is expected to grow at 5.7 percent a year, and contribute in excess of 6.8 million jobs and 72.5 billion dollars in GDP.

According to IATA, the region will also have added 274 million passengers to its current 136 million by 2036, bringing hope to profitability of the industry in Africa.

David Kakuba, Managing Director Civil Aviation Authority, Uganda's state owned air transport regulator, said the country is positioning itself to handle the expected increase in passenger traffic by expanding the Entebbe International Airport and upgrading several regional airdromes to airport status.

He said Uganda's aviation traffic is expected to grow from the current 1.3 million passengers a year to 5.5 million in the next five years, prompted by the commercial production of oil in the country and a rise in tourism numbers.

Aggrey Bagiire, Uganda's minister of state for works and transport, said the airlines industry last year directly and indirectly contributed to employing 6.8 million people in Africa, and generated 72.5 billion dollars in GDP contribution to African economies.

Experts say air transport is an important enabler of economic activity and a driver of competitiveness by connecting businesses and markets, facilitating trade, encouraging FDI and enabling tourism. Enditem

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