Kenya Airways projected to suffer biggest COVID-19 losses in East Africa

March 23, 2020 in Business, Companies, Trade & Industry, Travel & Tourism by Editor

Kenya Airways has the biggest exposure to losses associated with disruptions to travel occasioned by COVID-19, the international air transport lobby IATA, has said as it asked governments to extend emergency support to airlines.

IATA says Airlines in Africa had chalked up a combined $4.4 billion in losses by March 11, as a result of COVID-19 disruptions. The lobby is now telling governments to consider the economic impacts of COVID-19 with the same sense of urgency they are applying to the health dimension.

“Stopping the spread of COVID-19 is the top priority of governments. But they must be aware that the public health emergency has now become a catastrophe for economies and for aviation,” says IATA’s Director General and chief executive Alexandre de Juniac.

De Juniac’s warning rhymed with an analysis of possible loss trajectories for the African air transport industry that were last week shared by Muhammad Al-Bakri, IATA’s Vice-President for the Middle East and Africa which indicated that passenger volumes in Kenya would fall by 622,000 passengers and $125 million lost and 36,800 jobs would be at risk, if the crisis did not expand beyond its current scale. Further escalation would sink volumes by 1.6 million passengers and send financial losses to $320 million, IATA said.

Al-Bakri said while Africa’s airlines had implemented extensive cost cutting measures to mitigate the financial impact of COVID-19, flight bans as well as international and regional travel restrictions, airlines’ revenues were falling faster than the yield from even the most drastic cost containment measures. 

Airlines cash reserves were averaging just about two months in the region and carriers face a liquidity and existential crisis.  

IATA estimates that the airlines will need in the region of $200 billion in aid globally to survive the crisis.

Despite having a smaller fleet Kenya will lose more money than Ethiopia. IATA has projected a decline of 479,000 passengers and $79 million in revenues for Ethiopia.  Related job losses are projected at 98,400 jobs. Unabated, passenger volumes could fall further by 1.2 million while $202 million in revenues would be lost.

Under the current scenario, Rwanda’s passenger volumes will suffer a dip of 79,000 and $20.4 million in revenues while 3000 jobs would be at risk. But potential losses could expand to 201,000 passengers and $52 million in foregone revenues.

Because of its relative size, South Africa will top African losses. South African is seen suffering a 6 million reduction in passenger numbers and $1.2 billion in financial losses while 102,000 could be sucked out of the industry.

Nigeria will also suffer a big hit to passengers and revenues an 853,000 drop in passenger numbers and $170 million in revenues projected. Some 22,200 jobs are exposed. Losses could climb to 2.2 million passengers and US$434 million in revenues if the situation escalates.

Airlines will not benefit from the current dip in oil prices because they are not flying, Al-Bakri said.

“The losses from the disruptions far outstrip any potential savings on the oil bill. International bookings in Africa are down roughly 20percent in March and April while domestic bookings have fallen by about 15percent in March and 25percent in April,” he revealed.

Losses by African airlines had reached $4.4 billion in revenue by 11 March 2020 while ticket refunds have increased by 75percent in 2020 compared over the comparable period for 2019.

IATA is asking governments to consider direct financial support to passenger and cargo airlines or to help airlines through loan guarantees and support for the corporate bond market by central bankers.

IATA is also recommending tax relief through rebates on payroll taxes paid so far in 2020 or an extension of payment terms for the rest of the year along with a temporary waiver of ticket taxes and other Government-imposed levies.

“Several governments in Africa and the Middle East have already committed national aid for COVID-19. We ask that airlines, which are essential to all modern economies, are given urgent consideration. It will enable global supply chains to continue functioning and provide the connectivity that tourism and trade will depend on if they are to contribute to rapid post-pandemic economic growth,” Al Bakri said.

@Kenya_airways.com@ugandainvestIATAUganda