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IATA forecast $300m loss for African carriers in 2019

IATA forecast $300m loss for African carriers in 2019

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The International Air Transport Association (IATA) has forecast bleak outing  for Nigeria and African airlines in 2019  affirming that the  continent’s carriers are expected to report a $300 million net loss .

The projected loss is a slight improvement of $400 million net loss recorded in 2018.

Director-General of IATA, Alexandre de Juniac made the disclosure at the global IATA Media Day at the agency’s headquarters in Geneva in a paper titled, “Cautious optimism extends into 2019 airlines heading for a decade in the black”.

He said the precarious situation makes Africa the weakest region as it has been over the past four years, stressing that performance is improving but only slowly.

His words, “Losses are expected to be cut in 2019 as fuel prices decreases. The region benefits from higher-than-average yields and lower operating costs in some categories. However, few airlines in the region are able to achieve adequate load factors to generate profits.”

This is coming as the clearing house for global airlines has criticized the stoppage of airport projects under construction, describing it as an ‘extreme case’.

He listed Lagos, London, Addis Ababa, Sao Paulo, New York, Frankfurt, Bangkok and Sydney as some of the aerodromes in the world with huge bottlenecks in terms of capacity leading to slow passenger facilitation.

Ironically, while African airlines are expected to lose $300 million in 2019, other region’ carriers’ in North America, Europe, Asia-Pacific, Middle East and Latin America are to post $16.6billion; $7.4billion; $10.4 billion; $800 million and $700 million net profits respectively in 2019.

He urged governments in these countries to help decongest airports adding that it is a shame to waste the investment already made, citing the example of Mexico City where the new Mexican government is backtracking on constructing a critically needed hub airport.

Speaking on planned airport privatization in Nigeria and other countries, de Juniac lamented that airlines have many bitter disappointments with airport privatization/concession.

He recalled that IATA Annual General Meeting (AGM) in June held in Sydney unanimously passed a resolution urging governments to be cautious, stressing that there is lack of transparency in the transaction process and influence from unsolicited proposals, interested private parties or financiers.

It would be recalled that Nigeria is at the verge of concessioning many of the airports across the country starting with those in Lagos, Abuja, Kano and Port-Harcourt, with claim by government that it had scarce resources to run the facilities.

Meanwhile, the government had slowed down on the exercise with many wondering how it intends to drive it and ensure good regulatory framework for the exercise so that it would be a win-win gain for airlines, consumers and other airport users.

He said : ” There are already many airport concessions across the world but they frequently suffer from a wide range of issues across the concession life cycle.

“Experience has shown that while these contracts are negotiated between the government and the concessionaire, there is a risk that the interests of these contracting parties can take precedence over those of other stakeholders including airline customers of the airport, the passengers which use the airport and rely on quality services at fair prices, as well as the wider community and the economic benefits the airports supports.

“We expect there to be many more concession contracts coming as new airport infrastructure is built to support traffic growth needs in various regions especially the Far East so it is very important the improvements are made to the concession setting process”, he added.

Historically airport concessions he said have suffered from unduly long and arbitrary concession lengths, adding that it can be for the benefit of the government with higher concession fees and longer term returns for the concessionaire.

He cited example of Charles de Gaulle Airport, Paris where they are seeing a concession length of 70 years being proposed. Sydney Airport he noted was privatized in 2002 with a long-term lease of 50 years plus a 49 year option for extension.

Speaking in the same vein, Director, Government and Infrastructure, Delloitte, Dorian Reece in her presentation, “Airport Privation: Focus on concession”, said, “We have seen many examples of very high concession fees; where a large proportion of the gross revenue of the airport is diverted to the government and not necessarily reinvested back into aviation”.

“This of course puts substantial pressure on charges increases and/or resistance invest in needed infrastructure. The bad practices cannot continue for the overall interest of aviation. A balanced concession is a new approach that defines new ways of developing and delivering an airport concession based on a wider stakeholder perspective than typically used’, he stated.

 

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