African Airlines are expected to remain in red in both 2023 and 2024, even as carriers from other regions of the world such as North America, Europe, and Middle East are expected to deliver a strong financial performance in the same period.
- •According to the International Air Transport Association (IATA), African carriers are expected to generate losses in both 2023 and 2024.
- •The continent remains a difficult market in which to operate an airline, with economic, infrastructure, and connectivity challenges impacting the industry performance.
“Despite these challenges, there is robust demand for air travel. Underpinned by this demand, the industry continues to reduce losses,” noted IATA.
IATA noted that the regions across the globe have recovered from the pandemic at different speeds. North America, Europe and the Middle East are expected to post net profits in 2023. Asia Pacific will join the group in 2024, but IATA still expect Latin America and Africa to be in the red in 2024.
North America remains the standout region in terms of financial performance. It was the first market to return to profitability in 2022 and built on this performance in 2023 by delivering efficiencies, particularly in high passenger load factors.
- •Consumer spending has remained solid, despite cost-of-living pressures, and the demand for air travel remains robust and is expected to outpace growth in capacity into 2024.
- •The Middle East is expected to deliver a strong financial performance in both 2023 and 2024.
- •IATA say the region’s carriers have been swift to rebuild their international networks and restore their super-connector hubs.
“To that end, capacity is expected to grow faster than demand in 2024; however, with more efficient fleets, net profit margin has a potential to slightly increase.”
IATA expects the overall industry expenses to grow to $914 billion in 2024, with airlines estimated to consume 99 billion gallons of fuel next year.
Fuel price is expected to average $113.8/barrel (jet) in 2024 translating into total fuel bill of $281 billion, accounting for 31% of all operating costs.
- •High crude oil prices are expected to continue to be further exaggerated for airlines as the crack spread (premium paid to refine crude oil into jet fuel) is expected to average 30% in 2024.
- •In the 2023 Half Year results, Kenya Airways reported a loss before tax of Kshs 22 billion linked to the impact on foreign exchange losses on monetary items, loans and leases.
- •According to KQ Chief Executive Officer Allan Kilavuka, the legacy debt and the devaluation of the Kenya shillings against major currencies are two concerns that continue to hold back the airline.
“We are working to resolve the issue of the legacy debt in collaboration with our stakeholders and the Kenyan government. The debt is worsened by the devaluation of the Kenyan shilling against the dollar since January, which we have had to book as foreign exchange losses. The devaluation of the Kenya shilling has a significant negative impact on our financials as a majority of our transactions are carried out in the major foreign currencies,” he said.
Kenya Airways Half-Year Loss Before Tax Hits Sh 22 Billion – Kenyan Wallstreet