Aviation: Impact of coronavirus pandemic on African travel and tourism industry

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As coronavirus cases continue to rise in parts of Africa, countries in Asia and Europe are giving holiday-makers the green light to start travelling to overseas destinations. In Nigeria, domestic flights resumed yesterday, 8 July, so we decided to look at the trends and effects travel restrictions have had on the continent since the start of the pandemic.

Naturally, volume is down
A look at the monthly flights tracked by the OpenSky Network shows flight volumes are down 46% year-on-year (roughly 1.2 million flights less than last year). While this isn’t surprising given international flights have only begun to ramp up, travellers and airlines have felt the effects. As governments worldwide ease lockdown restrictions and lift bans on international travel, some questions remain around flight schedules with frequent cancellations as airlines struggle to fill seats.

In some cases, borders have only opened to travellers from select countries where there is a low or declining number of new COVID-19 cases. Last week, the UK agreed to travel corridors with 59 countries allowing passengers entering England without requiring quarantine from 10 July. However, travellers from Canada, USA and most of Central or South America will not enjoy this luxury. Similarly, countries in Africa, the Middle East and most of Asia are also excluded.

If that didn’t seem like enough hurdles, many airlines and countries could now require passengers to undergo COVID-19 testing either prior to a flight or on arriving at their destination. Hong Kong has already introduced mandatory testing even for asymptomatic travellers and airlines are offering tests to passengers ahead of boarding. Kenyans, in some cases, are required to provide proof they tested negative for the virus before they fly.

The impact on the travel and tourism industry
According to the African Union (AU) commissioner for infrastructure and energy, African countries have lost almost $55 billion in travel and tourism revenues over the three months due to the coronavirus pandemic. An industry the AU says represented almost 10% of the gross domestic product of Africa. This concern is echoed in the report released by the International Air Transport Association (IATA), who urged governments in Africa to implement alternatives to quarantine on arrival to restart their economies while reducing the risk of imported COVID-19 cases.

IATA projects that the outlook at the national level has worsened for major aviation markets in Africa since April with large declines in every key metric, i.e. passenger demand (demand), airline revenue (revenue) and jobs at risk (jobs).

Disruptions in passenger demand and revenue have hit the bottom line of airlines hard. Many US airlines and other recognisable airlines in the African markets such as Lufthansa and Air France have sought governments bailouts to weather the effects of the pandemic. In total, IATA expects airline losses to exceed $84 billion this year.

In a rare instance of a flag carrier potentially going under, the state-owned South African Airways (SAA) is currently set for bankruptcy but is currently in discussions with the South African government to receive a $1.2 billion bailout. SAA has had other struggles prior to this year but pandemic pushed it over the edge.

What is clear is the impact of the pandemic on the aviation industry is felt all across the world and Africa has not been immune. By sheer monetary value, South Africa, Nigeria and Kenya seem to be the hardest hit based on data from IATA. Given their economic size in the continent, this doesn’t come as a surprise. However, another interesting trend is those suffering the largest impact on employment: Ethiopia, Tanzania, Ghana and Angola – countries that have large tourism hubs which have effectively been brought to a standstill.

The situation at home
Reading this, you might wonder what the effects on Nigeria could look like. Well, the data is scarce.

Recently, the Minister of Aviation confirmed that domestic flights would resume on 8 July at the Nnamdi Azikiwe International Airport, Abuja and Murtala Muhammed Airport, Lagos. The Kano, Port Harcourt, Owerri and Maiduguri airports would reopen on 11 July, while other airports across the country plan to reopen on 15 July. There have been no clear indications when international flights might restart, but local airlines are expected to hit passengers with significant price hikes. Not the best way to encourage an already hesitant traveller in these times but it may be a signal of what’s to come for Nigerian airlines as they struggle to ramp up air travel again.

For an industry that’s had relatively stagnant pricing for more than a year, travellers are unlikely to react pleasantly to a significant price hike. Online searches for flight tickets show some carriers charging up to double the expected ticket price.

This could be in an attempt to make up the loss from following recommended social distancing rules which mean fewer seats can be filled in a flight – or it could just be the effect of lower demand. Whatever it is, lower passenger volumes could essentially force airlines to charge higher prices to make the trip worth it.

The chart above shows that Nigeria saw steady growth in passenger volumes before the pandemic hit. Flight volumes though (chart below), had stayed relatively stagnant between 2018 and 2019. This means that the growth we have seen in Nigeria’s aviation sector has come from an increase in the aircraft capacity utilisation rate (otherwise known as percentage load factor).

This is the percentage of seats on a plane occupied by passengers, which also determines whether flights break-even for an airline and thus worth operating. In 2019, IATA cited an average global load factor of 84%, with Africa averaging in at 71% but earlier in April the revised data published noted a global load factor of 76% with Africa’s load factor at 67%.

Unfortunately for airlines, the road to the load factors seen in 2019 is a long one and the price sensitivity of the average traveller in Nigeria may seriously dampen their recovery plans. Load factors are set to take a hit as governments have placed social distance policies which include leaving middle seats empty. Travel experts had predicted that load factors would start around 30%; however, the four flights that operated yesterday (the first day of resumption) had an average load factor of 70%. This will be welcomed news for the airlines because if flights don’t hit the capacity needed to break-even, no one is taking off.

By Abdul Abdulrahim
Source: stearsng.com

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