South African commercial aviation activity picks up in second quarter


Activity in the South African commercial aviation industry recovered in the second quarter of this year, recording a nearly ten per cent improvement over the first quarter, according to the Commercial Aviation Association of Southern Africa (CAASA).

The organisation’s CAASA Aviation Activity Index (CAAI) has been tracking activity in the commercial aviation sector since the first quarter of 2014. On Friday it said the current index level of 146.2 represents a 46% increase from the base period in 2014, and a record increase in the trend (four-quarter average) of 9% from the first quarter of 2019.

“This strong second-quarter showing is to be welcomed because the health of the commercial aviation sector correlates directly to the health of the overall economy. However, the overall trend shows that the industry has not recovered from the downturn experienced at the beginning of 2017. To continue growing, we need to put the right conditions in place to promote sustained growth in the commercial aviation industry,” said Leon Dillman, CEO of CAASA. “These would include lower interest rates and greater policy certainty.”

Research by the International Air Transport Association (IATA) shows that the air transport sector supports over 470 000 jobs in South Africa and accounts for 3.2% of national gross domestic product ($9.4 billion).

Dr Roelof Botha, who researches the Index for CAASA, said that because of the sector’s inherent volatility, the Index makes use of a four-quarter moving average to track trends over the longer term. “Aircraft are expensive, so the import and export of a small number of units can affect the Index quite dramatically in a given quarter. The four-quarter moving average shows us that the industry still has a long way to go to match its previous highpoint in the second quarter of 2016.”

Dr Botha says that the activity in the second quarter was driven by the performance of four key indicators. The export of aircraft grew by 115.8% and of parts by 7.1%, while the imports of non-powered aircraft increased by 83%. Air-traffic movements (ATMs) at non-ACSA airports grew by 17.6%.

Dillman believes that it is important to keep an eye on the trend relating to the import and export of aircraft. “There are many factors to take into account. For example, we are particularly good at refurbishing aircraft and selling them on, but obviously for this commercial activity to be sustainable, we need a steady supply of aircraft to be imported.

“Rand volatility will play a role here as companies attempt to get the best possible arbitrage, so companies might be taking advantage of rand weakness to sell and are waiting to buy planes when the rand recovers,” he said. “But we also need to be on the lookout for signs that South Africa’s population of working commercial aircraft is reducing because that would signal long-term economic decline. It’s too early to call yet.”

CAASA said it is heartening that air traffic movements (ATMs) at the five largest non-ACSA (Airports Company of South Africa) airports grew strongly during the second quarter. These airports handle primarily commercial and recreational activities, and thus increased air traffic movements indicate increased economic activity.
Another important trend is the decline in movements at five of the nine ACSA airports. This is directly linked to the decline in inbound tourism following from the imposition of stricter visa regulations during the tenure of the previous Minister of Home Affairs, Malusi Gigaba, said Dillman.

“The uptick in ATMs at OR Tambo during this quarter bucks this trend, and we must hope that it’s an indication that the tide is turning as the tourism market comes to terms with the new visa regulations,” he noted. “The figures for the third quarter will give us a good indication whether this is a trend, as we hope it is.

“One thing is clear: the health of commercial aviation is a valuable, but often overlooked indicator of the health of the overall economy,” Dillman said.