IATA Projects African Carriers Will Post Net loss of $800M in 2017

African carriers are expected to deliver the weakest financial performance with a net loss of $800 million in 2017 driven by regional conflict and the impact of low commodity prices according to The International Air Transport Association (IATA).

In a statement, IATA says the loss will amount to average loss of $9.97 for every passenger flown.

“Capacity in 2017 is expected to grow by 4.7 percent, ahead of 4.5 percent demand growth. “

However, IATA says ‘2016 will be a record year for industry profitability’ owing to: Slower global GDP growth: 2.2%, which was below mid-year expectations of 2.3% growth and Non-fuel unit costs increased by 2.0% in 2016.

This year, IATA projected that combined, the African airlines will make loss of $500 million (Sh50.8 billion.

Globally, it projects to make a net profit in 2017 of $29.8 billion.

Much will be generated from North American carriers, European carriers, Asia-Pacific carriers, Middle Eastern carriers and Latin American carriers.

“Airlines continue to deliver strong results. This year we expect a record net profit of $35.6 billion.  Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning $29.8 billion. That’s a very soft landing and safely in profitable territory. These three years are the best performance in the industry’s history—irrespective of the many uncertainties we face. Indeed, risks are abundant— political, economic and security among them. And controlling costs is still a constant battle in our hyper-competitive industry,” said Alexandre de Juniac, IATA’s Director General and CEO..

“We need to put this into perspective. Record profits for airlines means earning more than our cost of capital. For most other businesses that would be considered a normal level of return to investors. But three years of sustainable profits is a first for the airline industry. And after many years of hard work in restructuring and re-engineering the business the industry is also more resilient. We should also recognize that profits are not evenly spread with the strongest performance concentrated in North America,” said de Juniac.

IATA projects higher oil prices will have the biggest impact on the outlook for 2017.

“Governments, however, do not make aviation’s work easy. The global tax bill has ballooned to $123 billion. Over 60% of countries put visa barriers in the way of travel. And the total number of ticket taxes exceeds 230. Billions of dollars are wasted in direct costs and lost productivity as a result of inefficient infrastructure. These are only some of the hurdles which confront airlines. Our aim is to work in partnership to help governments better understand and fully maximize the social and economic benefits of efficient global air links,” said de Juniac.

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Airlines from Africa could increase their annual earnings by about 24 per cent if the proposed common passport for all citizens within African Union is introduced. According to a recent study by Sabre Corporation, a US-based technology service provider to global travellers, airlines operating within African destinations will see their annual earnings per passenger rise by 24 per cent to $1,508 (Sh153,442). Currently, earnings per individual traveller in Africa averages $1,149 (Sh116,913).

As per AU’s agenda 2063, the common passport is expected to be operational  in 2018.