African airlines building back capacity, but profit remains elusive for the region
Air travel in Africa continues to build rapidly towards pre-pandemic volumes. However, while the continent is one of the industry leaders in bringing back passenger traffic, the economic performance of airlines in the region remains concerning.
African airlines have suffered more than USD3.5 billion in collective net losses in the past three years, and losses are projected to continue in 2023.
- Air travel in Africa has rebounded to 94.8% of pre-pandemic levels, with domestic, intra-Africa, and intercontinental travel contributing to the recovery.
- Scheduled seat capacity in Africa has surpassed pre-pandemic levels, reaching around 4.5 million seats per week in early April 2023.
- Filed forward schedules indicate that regional capacity will continue to grow, with projections of around 5 million seats per week by June 2023.
- International travel within and to/from Africa has performed better than average compared to other regions since late 2020.
- Despite the recovery in passenger traffic, African airlines have collectively suffered over USD3.5 billion in net losses in the past three years, with projected losses to continue in 2023.
- The economic performance of airlines in Africa is hindered by factors such as limited liberalization of the intra-African market, infrastructure shortcomings, lack of harmonized aviation standards, protectionism, and high taxes and tariffs on air transport.
Summary
- African Airlines Association (AFRAA) reports that traffic handled by airlines in Africa for Mar-2023 reached 94.8% - or pre-pandemic (Mar-2019) levels.
- African air traffic was split between domestic markets (37%), intra-Africa travel (31%), and intercontinental travel (32%) in Mar-2023.
- Scheduled seat capacity in Africa now above pre-pandemic levels, reaching around 4.5 million seats per week in early Apr-2023.
- Filed forward schedules indicate that regional capacity will continue to grow compared to pre-pandemic volumes.
- Air transport is of vital importance for travel within the region, but connectivity remains weak.
Airline passengers back at 95% of pre-pandemic levels
The African Airlines Association (AFRAA) reported that traffic handled by airlines in Africa for Mar-2023 reached 94.8% - or pre-pandemic (Mar-2019) levels.
Traffic was split between domestic markets (37%), intra-Africa travel (31%), and intercontinental travel (32%).
AFRAA estimates that African airlines will handle approximately 85 million passengers in 2023 - this is about 11% down from the 95.6 million passengers that airlines handled in 2019.
It is also only about 9% growth on the estimated 78 million passengers that African airlines handled in 2022.
African airlines: passenger traffic, 2008-2023 (f)
Scheduled seat capacity in Africa has now firmly progressed above pre-pandemic levels, reaching around 4.5 million seats per week in early Apr-2023.
African region: scheduled airline seat capacity (weekly), 2019-2023
During Mar-2023 international seats on offer were 4.6% above Mar-2019.
Two of Africa's largest international markets showed significant growth. International seats to/from Egypt were more than 200,000 per week better in Mar-2023 than in Mar-2029, and international capacity to/from Ethiopia was up nearly 20% during the month.
Domestic capacity was a little better than 1% above pre-pandemic levels.
Domestic capacity is being held back by a lack of aircraft deliveries and some sluggishness in several major markets.
Of note is South Africa, where capacity is still down by more than 100,000 seats per week. Four airlines - South African Express, Comair (along with its Kulula.com unit) and Mango - have halted operations in the market since the onset of the COVID-19 pandemic.
Top 10 African country markets by weekly seats (Mar-2023)
Filed forward schedules indicate that regional capacity will continue to grow compared to pre-pandemic volumes, reaching around 5 million seats per week during Jun-2023.
Forward schedules for May-2023 are as much as 10% above pre-pandemic levels, although seats flown are likely to be somewhat lower than projections.
Airline schedules are typically subject to downward revisions, and capacity is cut into by circumstances and inevitable operational issues.
International capacity now leading the recovery
The international market has performed particularly strongly for African airlines since late 2022.
When travel is compared to other regions, international travel within and to/from Africa has performed persistently better than average since around late 2020.
Africa and global seat capacity recovery vs 2019
Given the long travel distances and limited ground transport infrastructure on the continent, air transport is of vital importance for travel within the region.
As of Mar-2023, eight of Africa's largest hubs - Johannesburg, Nairobi, Addis Ababa, Lusaka, Cairo, Casablanca, Abidjan and Lomé - were matching or bettering pre-pandemic levels on intra-Africa travel.
At least seven African airlines are currently operating larger international networks than they were before the onset of the COVID-19 pandemic.
Intercontinental arrivals have also been healthy, supported by demand for VFR (visiting friends and relatives) from parts of Europe, North America and the Middle East.
Tourism into North and East African states recovered strongly, with many airlines in these subregions benefiting from liberal air services arrangements with countries outside Africa.
However, intercontinental arrivals in states in Southern and Central Africa have been weaker.
Part of this has been due to the slow return of Asian traffic, particularly from China, as well as lingering concerns about COVID-19 and macroeconomic factors.
Regional airlines struggling for profits in constrained market
Despite outperforming most of the rest of the world in terms of passenger traffic, the economic performance of airlines in the region is still lacking.
African airlines have long been loss-making, largely thanks to a lack of liberalization of the intra-African market, along with infrastructure shortfalls, a lack of harmonised aviation standards, protectionism, and a heavy-handed approach to taxes and tariffs on air transport.
IATA estimates that African airlines collectively suffered a net loss of USD1.8 billion in the first year of the COVID pandemic. This eased to USD1.1 billion in losses in 2021 and then down to an estimated USD638 million 2022.
IATA estimates of African airlines' collective net profit
The airline industry association's Dec-2022 forecast projects that although regions like North America, the Middle East and Europe are likely to be profitable on a collective basis in 2023, losses in Africa will continue.
IATA expects that airlines in Africa will suffer a collective net loss of USD213 million over the year, taking post-COVID-19 losses to approximately 3.75 billion.
The revenue outlook for regional airlines also continues to brighten.
AFRAA estimates that revenues for regional airlines during 1Q2023 were down by USD300 million vs 2Q2019. This is more than USD1 billion better than the shortfall reported in 1Q2022.
The forecast for 2Q2023 is that the gap will narrow again as traffic continues to build, to a shortfall of approximately USD200 million.
African airlines: COVID-19 period revenue loss estimate
Full recovery to pre-pandemic levels for passenger traffic is now expected to occur in 2024, but economic performance in the region will continue to suffer as long as Africa's internal market remains constrained.
Even before the pandemic airlines in the region struggled to make a profit, thanks to structural impediments.
COVID-19 has not made these better, although African states are starting to come around to the benefits of air services liberalisation and improving flows of passengers and cargo.
Air transport has an important role to play in the wider recovery of African economies in the post-COVID-19 period.
However, the continent's fractured skies will remain a brake on recovery and a challenge to industry growth.