African airline profitability ‘not impossible’

African carriers are expected to record a net loss of about $800m in 2017, delivering the weakest financial performance of any region. According to the International Air Transport Association (Iata) this performance will largely resemble that of 2016. Africa has a history of both national and private airlines operating at massive losses or going bankrupt. However, running a profitable airline in Africa is not impossible, says aviation industry expert and managing director of Plane Talking, Linden Birns. “Several airlines on the continent are proving that profitability is possible, no matter how difficult and challenging the environment,” he told FTW. Ethiopian Airlines in particular stands out as an example of what can be achieved in the aviation industry. “It is one of the airlines that has been incredibly successful and has been profitable for at least the past decade. They are seeing about 12% on average return on investment every year,” he said. “It is also seeing growth of around 14% a year – and to top it all it is a stateowned airline. It explodes the myth that airlines in Africa struggle to be profitable or that you have to be privately owned to have any chance of achieving profitability.” According to Birns, Airlink is another example of a successful, profitable African airline, while Rwandan airline, RwandAir, was showing real potential. “This airline is definitely one to watch. It is still early days, but the management is investing wisely. What is encouraging is that they have started in a measured way, purchasing the appropriate equipment at the right time and growing the route network slowly but wisely. They are taking their lead from Ethiopian Airlines,” said Birns. “What is just as encouraging is how they are leveraging their position geographically as a potential hub. It is a very interesting development.” He says what profitable airlines have in common is a sound business strategy that not only allows for consistency and continuity but also ensures flexibility, which allows the airline to adapt to market conditions. “However, African airlines do face some very real obstacles and challenges that other players in the world don’t. Not only that, but often these are also beyond their control,” said Birns. This includes the scale of the economy and the strength of the currencies they operate in. “Many of them operate in small economies with weak currencies but, without the airline, the economy would shrink even more and so all efforts are made to keep national airlines going as it gives some form of autonomy to the country. Without a national carrier, country hands over control of it is air exports and tourism sector to third parties.” According to Birns, while there are some airlines running at major losses, many airlines on the continent are simply being impacted by the economic conditions and the strong dollar.

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Ethiopian Airlines in particular stands out as an example of what can be achieved in the aviation industry. – Linden Birns