IATA: African Airlines Have Turned the Corner, Now Profitable

Chinedu Eze

The International Air Transport Association (IATA) has confirmed that African airlines have turned the corner to become profitable after many of them recorded losses over the years.

Recently, the global body announced that Africa’s airlines are expected to earn a collective net profit in 2024 for the second year in a row, which it described as a welcome and hard-won result reflecting the sector’s resilience in its post-COVID-19 recovery.

IATA disclosed that the expected $100 million profit, however, translates into just 90 cents per passenger – well below the global average of $6.14.

The association, therefore, called on Africa’s governments to take advantage of a strengthening aviation sector to maximize its benefits for economic and social development across the African Continent.

According to IATA’s Regional Vice President for Africa and the Middle East, Kamil Alawadhi, “Africa’s airlines are making a collective profit. That is good news. But it is razor-thin and well below the global benchmark. And there are wide variations across the continent where many individual airlines still struggle with losses.

“The demand to travel is there. To meet it, the African airline sector needs to overcome many challenges, not least of which are infrastructure deficiencies, high costs, onerous taxation, and the failure to broadly implement a continent-wide multilateral traffic rights regime”

“The challenges facing African aviation are significant, but they are not insurmountable. IATA’s Focus Africa initiative is by no means a panacea, but it does lay out a framework to build a stronger aviation sector that will provide even better support to 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 across the continent.”

Financial outlook in 2024 indicates African airlines are projected to achieve a net post-tax profit of $100 million, the second year of profits following the COVID crisis and profit per passenger is expected to reach USD 0.9, nearly doubling the 2023 figure of $0.5, reflecting improved operational efficiency and increased demand, but well behind the global average of $6.14.

The region’s profit margins are anticipated to be 0.6% of revenue, up from 0.4% in 2023. This remains significantly lower than the global net profit margin of 3.1% and revenue passenger kilometers (RPK) growth is forecasted at 8.5%, indicating continued strong passenger demand across the region.

This does, however, lag behind the expected growth in capacity of 9.1%.

IATA said the region’s load factor is expected to reach 61.9%, slightly ahead of the 59.8% breakeven load factor for African Airlines.

According to IATA, Focus Africa aims to address key challenges and opportunities within the continent’s aviation sector.

“The initiative emphasizes six priority areas: Safety, Infrastructure, Connectivity, Finance and Distribution, Sustainability, and Future Skills,” IATA said.

On safety, the global association said Africa had no jet hull losses in 2023, for the second year in a row. Moreover, the continent recorded no fatalities in commercial aviation accidents in 2023, as presented within the IATA Annual Safety Report; so, the all-accident rate for Africa was 6.38 per million sectors which is an improvement on the five-year average of 7.11.

Further according to the global platform, “IATA Operational Safety audit (IOSA) registered carriers continue to outperform non-IOSA registered carriers both on the continent and globally. There are currently 31 operators in Africa on the IOSA registry.

“The priority for Africa continues to be the implementation of safety-critical ICAO Standards and Recommended Practices (SARPS) for safety. Under the Focus Africa initiative IATA introduced the Collaborative Aviation Safety Improvement Program (CASIP) to help deliver this.

“The Global Aviation Safety Plan (GASP) and the AFI (Africa and Indian) Regional Aviation Safety Plan are targeting SARPS implementation at 75% for Africa. Currently, only 12 out of Africa’s 54 states meet this standard.”

On connectivity, IATA said the Single African Air Transport Market (SAATM) seeks to liberalize civil aviation across the continent by removing restrictions on traffic rights for African airlines.

According to IATA, SAATM provides Africa with a ready-made mechanism to drive economic growth, but few governments have taken the steps needed for its implementation.

It further stated: “Moreover, an IATA analysis of 607 bilateral air service agreements (BASA’s) in Africa revealed limitations on the development of intra-Africa connectivity because the implementation of over half of these agreements was being compromised. 

“Non-compliance by African governments with BASA is a major obstacle to achieving seamless regional connectivity and growth in the African aviation sector. To develop economy-boosting intra-Africa connectivity Africa’s governments must back SAATM with actions. This is another key element Focus Africa is addressing.”

On blocked funds, the Association said the development of connectivity in Africa also requires certainty that markets will abide by global standards with respect to the repatriation of funds from sales activities, remarking that airlines still struggle with the inability to repatriate blocked funds efficiently and in line with international agreements and treaty obligations in several African markets.

The amount of blocked funds in African countries in June 2024 stood at $880 million, just over 52% of the $1.68 billion in blocked funds globally. This is an improvement following Nigeria clearing 98% of the total funds blocked ($831 million).

Noted Al Awadhi: “The potential for aviation in Africa is huge. It has 17% of the world’s population yet only contributes about 2% of total global travel.

 “While there are hurdles to overcome, through collaborative initiatives like Focus Africa with our partners including AFCAC (Africa Civil Aviation Commission), AFRAA (African Airlines Association) and AASA (Airlines Association of South Africa) we are addressing critical challenges hindering the advancement of aviation across Africa.

“Our goal is a safer, more efficient, and better-connected continent, driven by a diverse, skilled workforce to unleash aviation’s potential and unlock the economic and social opportunities.”