The International Air Transport Association, IATA, has predicted that African carriers collectively are likely to make small losses of about $100 million in 2018.
A statement issued by Alexandre de Juniac, IATA’s Director-General on Tuesday in Geneva, a copy of which was made available to the News Agency of Nigeria in Abuja, said the forecast followed a collective net loss of $100 million by the airlines in 2017.
Mr. Juniac said a stronger forecast economic growth in the region was expected to support demand growth of eight per cent in 2018, slightly outpacing the announced capacity expansion of 7.5 per cent.
He said that the wider economic situation was only improving slowly in Africa, which hampered the financial performance of its airlines.
According to the forecast, the key Nigerian economy is only just out of recession and growth in South Africa remains extremely weak.
“While traffic is growing, passengers load factors for African airlines are just over 70 per cent which is over 10 percentage points lower than the industry average.
“With high fixed costs, this low utilisation makes it very difficult to make profit.
“Stronger economic growth will help in 2018, but the continent’s governments need a concerted effort to further liberalise to promote growth of intra-Africa connectivity,’’ he said.
Mr. Juniac said that strong demand, efficiency and reduced interest payments would help airlines improve net profitability in 2018 in spite rising costs.
According to him, 2018 is expected to be the fourth consecutive year of sustainable profits with a return on invested capital exceeding the industry’s average cost of capital.
According to him, these are good times for the global air transport industry as safety performance is solid.
“We have a clear strategy that is delivering results on environmental performance while more people than ever are traveling with strongest level in demand for air cargo in over a decade.
“Employment is growing, more routes are being opened and airlines are achieving sustainable levels of profitability.
“It is still, however, a tough business, and we are being challenged on the cost front by rising fuel, labour and infrastructure expenses,’’ he said.
The IATA boss said the industry also faced longer-term challenges, many of which were in the hands of governments.
He described aviation as the business of freedom and a catalyst for growth and development, urging governments to implement global standards on security.
Mr. Juniac also urged governments to find a reasonable level of taxation, deliver smarter regulation and build the cost-efficient infrastructure to accommodate growing demand.
According to him, the benefits of aviation are compelling with 2.7 million direct jobs and critical support for 3.5 per cent of global economic activities.
“The industry is ready to partner with governments to reinforce the foundations for global connectivity that are vital to modern life,’’ he said.
IATA has also predicted global industry net profit to rise to $38.4 billion in 2018, an improvement from the $34.5 billion expected net profit in 2017.
Highlights of expected 2018 performance according to the association include; a slight decline in the operating margin to 8.1 per cent down from 8.3 per cent in 2017.
“There is also an expected improvement in net margin to 4.7 per cent up from 4.6 per cent in 2017 and a rise in overall revenues to 824 billion dollars.
“A rise in passenger numbers to 4.3 billion, six per cent on the 4.1 billion passengers in 2017 and a rise in cargo carried to 62.5 million tonnes from 59.9 million tonnes in 2017.
“Slower growth for both passenger and cargo demand is expected, while average net profit per departing passenger of 8.90 up from 8.45 dollars in 2017 is also expected.’’