Demand Takes off despite the Downturn: Emerging from a Period That Has Seen a Volatile Fuel Price Coupled with a Global Economic Downturn, the Prospects for Africa's Aviation Industry Might Be Viewed, at Best, as Difficult. Yet the Picture Is Not Entirely Gloomy, Reports Stephen Williams
Williams, Stephen, New African
Not only is next year's FIFA World Cup hosted by South Africa forecast to increase airline passenger demand from across Africa and further a field, bur one investment bank's research into the aviation sector suggests that, even with the financial slowdown, the outlook is quite positive. On the back of Africa's continuing growth in per capita income as well as rapid urbanisation, the research asserts, some African countries will see annual air travel growth rates of more than 9% over the next decade.
In the first eight months of the 2008-09 financial year, Ethiopian Airlines' revenues rose by an astonishing 45%, despite the global economic crisis. In local currency terms, the airline earned Br8.37bn ($745m) over eight months, with gross revenue of Br6.12bn ($545m) on ticket sales for nearly two million passengers.
The airline's operational capacity has been increased with the acquisition of three additional aircraft. "The airline has bought a cargo plane for $60m and leased two Boeing 757s and a Boeing 737-800," Girma Wake, its chief executive reported in June.
But Kenya Airways is not that lucky. It suffered a Sh5.6bn ($76m) loss for the year ending March 2009, compared to Sh6.5bn ($88m) pre-tax profit recorded during the same period last year. It is the airline's first loss in the 13 years since it was privatised. Some comfort was, however, taken in Nairobi with the fact that the company's revenues were up by 19% from Sh60.4bn ($822m) in 2008 to Sh71.8bn ($977m) this year. Although Kenya Airways' earnings from passenger traffic, cargo and handling services rose by over 10%, the airline had clearly misjudged the oil market and was continuing to pay a high price for its fuel because of its hedging strategy.
A similar misfortune seems to have befallen South African Airways (SAA); it could be facing another financial crisis this year if penalties are exacted over a contested order for 15 new planes. …