​Airlines eye $18bn profits in 2014,but African carriers to make only $100m as high taxes, fuel costs and insecurity clobbers them

In rush to cut fuel costs Mozambique, Rwanda, Kenya and Ethiopia airlines scramble to buy new planes.

Airlines are expected to earn a net profit of $18 billion worldwide in 2014, but the share of Africa’s carriers is projected to be only $100m, according to data from the International Air Transport Association (IATA) availed at its just-ended 70th Annual General Meeting in Doha, Qatar.

IATA’s director general Tony Tyler said, “In Africa taxation is a major problem with fuel being 21% more than other parts of the world because of taxes”. In addition to the fuel costs driven by high taxes, IATA also says security is another factor affecting the health of Africa’s aviation sector.

Africa only holds about three per cent of passenger traffic and about two per cent of cargo in the global air transport equation. 

“The share of [the global] market African airlines have is diminishing. African airlines are mainly small, weak and under capitalised with poor management,” said African Aviation Services Limited chief executive Nick Fadugba.

Speaking in an interview on the sidelines of the AGM, Fadugba said 25 years ago there were close to 50 African carriers that were members of IATA; that number has now dwindled to about 20.

Investments in fuel-efficient aircrafts are among the reasons for a 1.7% improvement in fuel efficiency the industry has seen lately. LAM Mozambique, Air Rwanda, Kenya Airways and Ethiopian Airways have all embarked on aircraft modernisation, acquiring newer models including the fuel efficient Boeing 787 Dreamliner. 

Fuel headache
Fuel remains a major headache for the aviation industry, representing almost 30 per cent of total operating costs. The total fuel bill this year is expected to reach $212 billion, with the average price of 2014 standing at $123.3 per barrel.

IATA will hold two aviation days in Africa, Johannesburg and Algiers, in the second half of the year. The forums will bring together governments and industry to promote the message that aviation should not be the easy target to raise money from with new tax laws. 

African aviation industry leaders must be praying for a major break from these meetings, because they are stuck with meagre fortunes at a time when globally the business is rebounding. The net profit of $18 billion expected for 2014, is a 69.8% increase compared to $10.6 billion in 2013.

Partly as a result of poor economic performance, safety too is a major concern over Africa’s aviation sector. “Safety [in Africa] is our major priority, it is below other regions. We are working with smaller airlines to reach the global norm,” said Mr Tyler. 

IATA is already working with 16 airlines in the region to help them get IATA Operational Safety Audit  (IOSA) as part of helping all African airlines meet the Abuja Declaration deadline of 2015. The declaration was by African governments, under the African Union, in 2012 to make it mandatory for all carriers in the region to be IOSA certified. 

‘Global mind set’
Airlines on the IOSA registry are performing almost seven times better than non-IOSA operators in Africa, according to IATA.

Mr Tyler called on the global industry to have a “global mind set” as it entered its second century. 

“The key to unlocking aviation’s future potential is a global mind set. We are the industry that connects people and business to make global possible. Securing our future potential with a global mind set begins with our immediate challenges to be profitable, safe and secure business, provide efficient customer-focused services and be sustainable in all that we do,” he said. 

The industry’s financial performance doe not match the value it delivers, he said. 

Air transport supports 6.9 million jobs, including employees in airports, airlines, air traffic management and aerospace, according to recent statistics from Air Transport Action Group (ATAG), which represents the global industry. 

Aircraft tracking
The mysterious disappearance of the Malaysian Airlines flight early March 2014 dominated several of the conversations at the meeting. 

IATA has put in place the Aircraft Tracking Task Force (ATTF), which is expected to deliver draft options for enhancing global aircraft tracking to the International Civil Aviation Organization (ICAO) in September.

“Aviation stakeholder are united in their despite to ensure that we never face another situation where an aircraft simply disappears,” said Kevin Hiatt, IATA Senior Vice President, Safety and Flight Operation. 

“While States work through ICAO to develop and implement performance based global standards, the industry is committed to moving forward with recommendations that airlines can implement now.” 

•The author writes on aviation and tourism affairs. Twitter: @pwangui


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