IATA calls on states, financiers to rescue Africa’s airlines

The global aviation trade association has renewed its call for government to aid the industry, which is on the verge of collapse as the impact of the Covid-19 crisis deepens.

The International Air Transport Association (IATA) has said African countries, including Kenya, Ethiopia, South Africa, Nigeria and Tanzania, will be hit hardest due to severe travel restrictions that have lasted three months, costing the airlines revenues running into billions of shillings.

The association is calling for the rescue of the airlines through a mix of direct financial support, loans, loan guarantees, support for the corporate bond market and tax relief.

Kenya is expected to lose Sh168 billion in contribution to the economy and 3.5 million passengers, representing a 50 per cent reduction in passenger demand. This is expected to result in a Sh76.65 billion revenue loss while risking 193,300 jobs at the national carrier Kenya Airways (KQ)  and Jomo Kenyatta International Airport (JKIA).

Ethiopia, on the other hand, is expected to lose 2.5 million passengers, resulting in a Sh45.15 billion revenue loss and risking 500,000 jobs.

Kenya had already lost Sh56.7 billion and had about 137,965 jobs affected as of April 2, the association said.

“To minimise the impact on jobs and the broader African economy it is vital that governments step up their efforts to aid the industry,” IATA said.

The new alert comes after KQ announced it will seek a government bailout after grounding its aircraft due to the ban on international flights, signalling a cut in revenue. KQ chief executive officer Allan Kilavuka said the airline is still waiting for government action.

“We are still talking with the government. In terms of time frame, it’s the Ministry of Transport and National Treasury to decide,” he said in a phone interview.

IATA is also appealing to development banks and other sources of finance to support Africa’s air transport sectors.

“Airlines in Africa are struggling for survival. Air Mauritius has entered voluntary administration, South African Airways and SA Express are in business rescue, other distressed carriers have placed staff on unpaid leave or signalled their intention to cut jobs,” it said. “More airlines will follow if urgent financial relief is not provided.”

KQ has announced that top executives and employees will take a pay cut of up to 75 per cent of their gross salaries as part of mitigation measures to save the firm. The airline is also facing increased competition from Ethiopian Airlines in the cargo business, the only revenue driver for now.

This is after the government exempted exports of flowers, fresh fruits, vegetables and medical supplies from the flight ban.

The government signed a deal allowing Ethiopian Airlines to use passenger planes for shipment of cargo from JKIA.

The economic damage of a crippled aviation industry, IATA said, extends far beyond the sector itself.

“Aviation in Africa supports 6.2 million jobs and $56 billion (Sh5.88 trillion) in GDP. Sector failure is not an option, more governments need to step up,” said Muhammad Al Bakri, IATA’s regional vice-president for Africa and the Middle East.

Source: Business Daily