Transformation in the African aviation industry is non-negotiable

The aviation industry remains critical to Africa’s (EZA) (AFK) continual development. It supports approximately 6.8 million jobs on the continent and contributes about $72 billion towards Africa’s aggregate GDP. Moreover, Africa’s population growth is driving increased demand for air transport, according to Chris Zweigenthal, CEO of the Airline Association of Southern Africa (AASA). Miguel Santos, Boeing sub-Saharan Africa MD, Africa expects the demand for air transport to, from and within Africa to double over the next 20 years, requiring over 1,220 new aircraft in the combined African fleet to satisfy industry growth and meet market demand. Hence, the transformation underway in the African aviation industry is non-negotiable, he said.

Nearly 100 million airline passengers take to the skies every year in Africa, with this number expected to double within the next 20 years. Currently, the eight largest airlines on the continent account for over 40% of total passenger traffic.

Africa’s largest airlines

Below is a list of the largest airlines in Africa, by passenger traffic, as per latest available data (from annual reports). If Africa’s aviation industry does a turnaround, these would be the first to benefit.

For 2017, the global airline industry (JETS) (IYT) (XTN) is expected to post a net profit of $31 billion, according to the International Air Transport Association’s (IATA) forecast. However, airlines throughout the African continent often struggle to find a sustainable and profitable model given challenges faced by the aviation sector in the region. For example, member airlines of the Airline Association of Southern Africa (AASA) are expected to report losses, yet again, this year to the tune of $350 million.

However, new airlines are taking a fresh look at the market, and attempting to create business models which better adapt to the nuances of the African aviation market. One such company is FastJet Plc (FJET.L). First launched in 2011 to service domestic routes in Tanzania, the airline has expanded to five other countries over the past two years in a bid to create a pan-African low-cost airline. It’s most recent expansion was on 3 November when it launched operations in Mozambique with scheduled services from Maputo to Nampula, Beira and Tete.
Other airlines employing a low-cost model in hopes of making air travel more accessible within the continent include Kulula, flyafrica, Mango, JamboJet, Fly540, Skywise, Dana Air, and FlySafair.

Current headwinds to the African aviation industry

Challenges that the association is looking into and that are currently serving as headwinds to the aviation industry in Africa include:

  1. African governments’ failure to reform market access
  2. Lack of connectivity and open skies agreements on the continent
  3. Lack of effective coordination between governments, educators, and the industry
  4. High US dollar-driven operating costs
  5. The exodus of skilled aviation professionals from Africa
  6. Failure to meet employee transformation targets by fixing basic and tertiary education
  7. State-owned airlines operating below capacity
Related Article  Russian ETFs Are Underwater, But These 7 Stocks Have Mitigated Their Fall Into Negative Territory
- Advertisement -