Africa could rise stronger from the Covid crisis

Africa was late to start feeling the effects of the Covid 19 virus – but a number of its most populated nations were hit with a vengeance. As the continent reels from the pandemic, Alan Peaford argues that emerging from the lockdowns and crisis could offer a new start for Africa’s aerospace and defence industries.

African airlines have never been in a strong position as far as global aviation goes.

As the coronavirus pandemic entered the continent, the industry in Asia, Europe and the Americas was licking its wounds and trying to work out how it could recover.

The International Air Transport Association (IATA) chief economist, Brian Pearce, who along with the organisation’s CEO, Alexandre de Juniac, had been monitoring the global scene and appealing to governments to recognise the unique value to the world economy from aviation and to help keep the industry alive, estimated that 2020 – the worst year ever in aviation history – would see African airlines make a combined loss of more than two billion dollars.

“Border closures have all but stopped flights and international donors will be needed to supplement the limited means for the region’s governments to provide relief packages,” he said.

Countries like France, Germany, the US and Singapore were reporting huge cash bailouts to prop up airlines and the broader supply chain. Cash is king in the aviation industry and, as the pandemic hit and aircraft were grounded, it has all been about cash reserves.

Very few African airlines have reserves of anything more than a few weeks.

The secretary general of AFRAA – the industry body for the African airlines – Abderahmane Berthé recognised the crisis immediately and developed a recovery plan involving airlines, airports and governments. “The availability of liquidity is the main issue to be addressed for airlines to survive and restart their operations. Without it, they can simply not survive this pandemic long enough,” Berthé said. He joined IATA in calling for African governments to consider a bailout and stimulus package that compensates for the significant losses, reduces the burden of ongoing operating costs, and subsidizes the industry’s survival and recovery.”

AFRAA’s impact assessment analysis showed a 90.3% year-on-year passenger traffic reduction for the month of May and a likely revenue loss of $8.103 billion for the year.

However, as AFRAA called on international institutions to support the industry, some big players were already talking up the opportunity for African airlines.

The ‘open skies’ single African air transport market (SAATM) agreement is seen as excellent timing for stimulating regional traffic and, without the burden of legacy aircraft and old technologies, the new African carriers could grasp the opportunity.

Embraer, with 54 operators in 27 countries in Africa, – the second largest original equipment manufacturer (OEM) on the continent after Boeing – believes that the number of airlines will drop. “Those that don’t have support from government, or that didn’t have a strong balance sheet, will not prevail,” said Raul Villeron regional vice president for Middle East and Africa. “They will really go down or bust. And then the other airlines that remain in the market will have less competition and will probably be in a very good position. Keep in mind that oil prices are lower. Ownership costs will be lower, so it’s a perfect environment in which to operate. The question mark is demand. And if you have the right capacity for the right demand, you will be making a lot of money.”

Collins Aerospace – now part of the third largest OEM in the world – has identified the potential for Africa. “The visa-free travel and the bilateral agreements between the African countries will lead automatically to increased air travel, and support national economic developments, and this will lead to accelerating the commercial aviation sector,” said Jens Ziesel, sales director for Africa. “We see the big benefit of skipping certain areas or investments, which are not necessary anymore,” he added. “That is the lessons learned from what the airlines have done in Europe or around the globe. They don’t have to do that now. African aviation will save money and not have to invest in things that are not up to date anymore,” he said.