Southern African airlines are battling slackening demand and the evaporation of already slender profit margins in a reflection of lacklustre economic growth across the region, warns the Airlines Association of Southern Africa (AASA).
This slackening demand is threatening airlines’ ability to create and support jobs and stimulate economic growth, AASA said. The industry body represents 20 airlines across the Southern Africa Development Community (SADC) and Indian Ocean region.
“Our industry – specifically in our region – is staring down the barrel of a gun. While airlines in the rest of the world are seeing rebounding growth and healthier 4 percent average profit margins, most African airlines have been unable to follow suit and remain stuck in an on average 0.8 percent ($1.59 per passenger) profit margin band with IATA forecasting a combined return of around $100 million across the continent again this year. When one considers the size of the potential market, it is clear that this performance is hardly the basis for a sustainable industry,” said AASA CEO, Chris Zweigenthal addressing the association’s annual general assembly taking place at Fancourt, George, today.
“What is missing is an alignment of governments’ policies and strategies to let airlines safely, efficiently and affordably carry more people and goods on more routes linking more towns and cities, more frequently, across the continent. This is how we can stimulate economic growth and with it create the jobs and prosperity that are craved in the region,” Zweigenthal added.
The past 12 months have seen the industry overcome the devastating social and economic impact of the West African Ebola outbreak. At the same time, oil and aviation fuel prices have plummeted, except in some African oil-producing countries. In theory, for airlines that honed the art of lean and efficient operations over the previous decade, 2015 should be a bumper year.
“But it’s not going according to plan. Economic uncertainty characterised by labour disputes, electricity shortages, weakened currencies in some markets, a rampant US dollar in others, such as Zimbabwe, and more recently, the downturn in China’s fortunes have pushed those of the airlines and of the region back over the horizon,” Zweigenthal added.
Africa’s transport and aviation ministers recently gathered in Pretoria where they acknowledged their governments’ recognition of air transport’s strategic role as an enabler of trade, business, tourism, economic growth and a driver for creating desperately needed jobs. They also reaffirmed their governments’ commitments to opening up their markets to other African carriers so that the entire region could reap these socio-economic rewards, AASA said.
“All this is well and good,” Zweigenthal stated, but noted that there is little political will to actually opening up markets and connectivity. “Instead, we continue to see obstacles to growth strewn across the runways. Government departments do not set out to sabotage airlines or their economies, but a siloed approach to policy making leads to unintended harmful consequences even if policies and implementation strategies are conceived with the very best intentions. South Africa’s new visa and immigration regulations are a prime example,” he explained.
AASA called on governments, regulatory authorities, airlines, airports and service providers to form much closer engagements.