Weak growth for African airlines
Africa’s air carriers in general are suffering from weak economies and stiff competition on international markets, the International Air Transport Association (IATA), has said in its outlook.
IATA said growth is also weak, with a 0.4% capacity expansion expected for 2015 increasing to 1.6% in 2016.
“Airlines in Africa are expected to be in the red in both 2015 and 2016 with losses of $300 million and $100 million, respectively.
“The region’s losses per passenger make its performance in 2015 worse than Latin America’s. Political instability is impacting important tourism markets in North Africa,” the report said. Performances in the Industry will vary from region to region, according to the outlook as shown below:
North America: North American carriers are leading the industry’s performance and are expected to generate considerably more than half the industry’s total profits in both 2015 ($19.4 billion) and 2016 ($19.2 billion). On a per passenger basis, profits of $21.44 in 2016 also places their performance at the top of the industry. This is as a result of a strong US economy, the appreciating US dollar, lower oil prices and a restructured industry. Capacity growth by North American airlines is expected to accelerate from 3.7% in 2015 to 4.8% in 2016 on the strength of the US economy.
Asia-Pacific: Profits for the Asia-Pacific region are expected to grow from $5.8 billion in 2015 to $6.6 billion in 2016. Overall profits per passenger for 2016 are forecast at $5.13, well behind both the US and Europe. Although the Chinese economy has slowed, air travel remains strong. The region’s carriers will benefit more fully from the impact of lower fuel prices in 2016 as hedges unwind. The region is, however, in the front line for the impact of continued weakness in cargo revenues. Passenger capacity growth is expected to accelerate from 6.0% in 2015 to 8.4% in 2016 as new aircraft are delivered largely to accommodate growth in the major emerging markets of India, Indonesia and China.
Middle East: Middle East carriers are expected to see collective profits of $1.4 billion in 2015 which is lower than the previously forecast $1.8 billion. The region is expected to recover most of the lost ground with a $1.7 billion net profit in 2016. The Middle East is, however, split between strong Gulf airlines, with successful long-haul super-connector operations, and regionally-focused airlines which are suffering from the impact of lower oil revenues and political conflict.
Profit per passenger of $7.97 forecast for 2016 is slightly less than that expected for European airlines and almost a third of what North American airlines are achieving. Overall the region is still generating double-digit growth. Capacity is expected to expand by 12.1% and 12.2%, respectively, in 2015 and 2016 largely as a result of growth in traffic over the region’s modern hubs.
Latin America: The performance of carriers in Latin America is weak on the back of the deepening economic crisis in Brazil, weak commodity prices and adverse currency fluctuations. The region is expected to finish 2015 with a $300 million loss, recovering to a $400 million profit in 2016. Recent elections in Venezuela and Argentina are expected to result in a more business-friendly environment for airlines. These are both key markets where government controls have blocked the repatriation of airline profits (some $3.78 billion in Venezuela). The region is still expected to see a robust capacity growth of 5.6% in 2015 accelerating to 7.5% in 2016 on the strength of demand on links with North America.
Africa: Airlines in Africa are expected to be in the red in both 2015 and 2016 with losses of $300 million and $100 million, respectively. The region’s losses per passenger make its performance in 2015 worse than Latin America’s. Political instability is impacting important tourism markets in North Africa. The continent’s carriers in general suffer from weak economies and stiff competition on international markets. Growth is also weak, with a 0.4% capacity expansion expected for 2015 increasing to 1.6% in 2016.