With more cases of COVID-19 reported in African nations by the day, the aviation industry is beginning to respond. Ethiopian has stopped flying to 30 countries just this week, and other airlines are taking steps to cut routes and services too. With a lack of coordinated response from governments in terms of financial support, does coronavirus spell disaster for African airlines, or could there be a hidden opportunity to reinvent the market for the better?
Yesterday, I had the pleasure of participating in the AviaDev Africa webinar, which examined African airlines’ response to the global pandemic. Moderated by CEO and Founder of AviaDev Jon Howell, discussions were held with a variety of airline executives and industry experts. You can watch the webinar yourself in the video below:
Within the discussions, it was interesting to hear that, among all the plight, some airlines see an opportunity for a proper reset of aviation in Africa. There was a strong sense of hope among the participants that the industry could come out of the current situation even stronger than before.
African aviation’s response to COVID-19
While there has been a response to the pandemic across Africa, the depth of this has been mixed. Nations such as Rwanda, Nigeria, Mauritius and South Africa are implementing support measures for airlines, including payment holidays, and Ghana has relaxed some restrictions relating to consumer protection laws.
However, this is not enough to save the majority of Africa’s airlines. The sharing of the burden from revenue losses is still waiting for decisive action from governments. Without definitive fiscal support, make no mistake, airlines will fail.
Airline executives present at the webinar were keen to highlight the issue of regional connectivity, and for governments to support airlines who deserve to be bailed out. Sean Mendis, COO of Africa World Airlines, called for assistance at an industry level, not just further subsidization of inefficient state-owned carriers at the expense of up and coming airlines.
He was supported by Nowel Ngala, Commercial Director of ASKY Airlines, who said,
“Let there be a serious and in-depth analysis of all airlines, both state-owned and private, based on their 2019 performance. Let this inform the assistance type and level of support given.”
Two months’ liquidity, or more like two weeks
IATA recently showed that African airlines, on average, had enough liquidity in capital to survive for two months without revenue. However, special envoy on Aero Political Affairs for IATA, Raphael Kuuchi, noted that even this is an unrealistic assessment. He said that, with the winter being a slow period for airlines anyway, many will already have run out of cash. He said,
“If they don’t get the support they need now, by the end of COVID, there won’t be any airlines left to support economic recovery. Even if there were, recovery will be much slower.”
His sentiments were echoed by the CEO of LAM Mozambique, Joao Po Jorge, who noted that with January and February traditionally the lowest months for airline revenue, most were surviving on more like two weeks’ worth of spare cash, nothing more.
Aviation in Africa is assessed by IATA to provide 2.6% of GDP to the continent. It supports an estimated 6.2 million jobs, and will be vital to the region’s economic recovery in a post-COVID world.
The opportunity shrouded in crisis
Bearing in mind the other economic impacts of the COVID-19 outbreak, many African airlines may struggle to secure the support they need to continue flying in the post-pandemic world. Joao Po Jorge believes that the airlines that do survive will need to operate at 200% in order to fill in the gaps left by those who don’t make it to the other side.
This situation would present something of an opportunity for African aviation to reinvent itself to some degree. With fewer carriers, there would be less impetus to compete, no room for overcapacity and more flexibility to collaborate for the good of the future market.
Sean Mendis believes that the post-COVID world will give Africa’s airlines a chance to open up partnerships even more, calling the crisis a “proper reset” for Africa. Airlines still operating will be able to ask themselves whether they need to compete on routes, or if they can feed into local airlines’ hubs and leave the onward journey to them.
The biggest opportunity for airlines in Africa has to be getting the Single African Air Transport Market (SAATM) pushed through finally. Removing this barrier would enable all African airlines to compete on a more level playing field, and would allow smaller carriers to establish those connections that will really stimulate the economic recovery of Africa as a whole.
With COVID-19 instigating a ‘stress-test’ of all airline business models, there is a real opportunity for Africa to reset its aviation marketplace and to make it fit for the future. Whether we’ll see the collaboration and decisive action required to make this a reality remains to be seen.
What do you think about the impact of coronavirus on African aviation? An economic disaster or a valuable opportunity? Let us know in the comments.