IATA: Airlines to soar with $25.7bn net profit in 2024 despite challenges.

The International Air Transport Association (IATA) has revealed a positive outlook for the airline industry, projecting improved profitability in 2023 and stabilisation in 2024. However, concerns arise as global net profitability is expected to fall significantly below the cost of capital in both years, revealing substantial regional variations in financial performance.

2024 outlook highlights

In 2024, net profits for the aviation industry are forecasted to reach $25.7 billion, a marginal improvement from the projected $23.3 billion in 2023, resulting in net profit margins of 2.7% and 2.6%, respectively.

Return on invested capital is expected to lag behind the cost of capital by 4 percentage points in both 2023 and 2024, primarily due to a global increase in interest rates driven by heightened inflationary pressures.

Operating profits for the airline industry are on an upward trajectory, projected to rise from $40.7 billion in 2023 to $49.3 billion in 2024. Total revenues are anticipated to experience robust year-over-year growth of 7.6%, reaching a historic high of $964 billion. On the expense side, projected growth is slightly lower at 6.9%, resulting in a total expenditure of $914 billion in 2024.

Exceptionally, 4.7 billion individuals are expected to engage in travel in 2024, surpassing the pre-pandemic level recorded in 2019. Cargo volumes are predicted to increase, reaching 58 million tonnes in 2023 and rising to 61 million tonnes in 2024.

Willie Walsh, Iata’s director general, acknowledges the industry’s resilience, stating, “Considering the major losses of recent years, the $25.7bn net profit expected in 2024 is a tribute to aviation’s resilience.” He underscores that the recovery has come at the cost of about four years of growth.

Revenue and passenger trends

Industry revenues are expected to reach $964bn in 2024, with an inventory of 40.1 million flights, exceeding the 2019 level of 38.9 million. Passenger revenues are set to reach $717bn in 2024, reflecting a 12% increase from $642bn in 2023. Passenger yields are expected to improve by 1.8% compared to 2023, driven by high demand and limited capacity due to persistent supply chain issues.

Efficiency levels remain high, with the load factor expected to be 82.6% in 2024, slightly better than 2023 (82%) and consistent with 2019.

Cargo and expenses

Cargo revenues are projected to fall to $111bn in 2024, impacted by the growth of belly capacity and international trade stagnation. Yields are expected to decline by -20.9% in 2024.

Expenses are anticipated to grow to $914bn in 2024, with fuel prices averaging $113.8/barrel (jet). Airlines are expected to consume 99 billion gallons of fuel in 2024. The aviation industry is increasingly focusing on Sustainable Aviation Fuels (SAF) and carbon credits to reduce its carbon footprint.

Industry CO2 emissions in 2024 are expected to be 939 million tonnes from the consumption of 99 billion gallons of fuel. SAF production is estimated to rise to 0.53% of airlines’ total fuel consumption in 2024, adding $2.4bn to next year’s fuel bill. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is estimated to incur costs of $1 billion in 2024.

Regional roundup

At the regional level, North America, Europe, and the Middle East are expected to post net profits in 2023, with Asia Pacific joining the group in 2024.

However, Latin America and Africa are expected to face challenges, remaining in the red in 2024.

Global economic factors and risks

Global economic developments, wars, supply chain issues, and regulatory risks pose potential risks to industry profitability.

The aviation industry’s recovery is commendable, says Walsh, yet challenges persist, and profitability remains below average. Addressing regulatory burdens, infrastructure costs, and supply chain challenges will be critical for sustained resilience in this vital global industry.

Source:Bizcommunity.

Ethiopian Airlines -Ethiopian Aviation University.

Ethiopian Aviation Academy (EAA) is the largest and most modern aviation academy in Africa recognized as ICAO Regional Training Center of Excellence. To train aviation professionals from classrooms to full flight simulator training, EAA offers leading industry standard training for pilots, aircraft technicians, cabin attendants and ground services staff both for initial and recurrent students. The Leadership & Career Development Center is also training thousands in Management and Leadership Skills.

Our cabin crew training simulates real-time scenarios with training aircraft designed for emergency drills and service trainings. Our pilot training school uses light aircraft for its basic training with dedicated simulators. Full flight simulators of all fleets Ethiopian operates are available for flight training. Virtual Maintenance Trainers (VMTs) and various workshops feature our aircraft maintenance training. Beyond these, our academy develops standard training packages including e-learning and virtual classroom trainings. Trainee services include a trainee’s cafeteria, dormitories, an administration complex and a plush new auditorium. The academy plans to take in 4,000 students a year in its training programs.

In line with the rapid growth of Ethiopian Airlines Group, Ethiopian Aviation Academy has been upgraded to Ethiopian Aviation University, which will enable it to provide a broader range of educational programs and increase the level of expertise in the Aviation Industry. The University has been accredited by the Ethiopian Higher Education Relevance and Quality Agency (HERQA), to offer undergraduate and graduate degree programs in various aviation and hospitality fields. 

Ethiopian Aviation University has been accredited by Ethiopian Higher Education Relevance and Quality Agency to offer undergraduate and graduate degree programs in various aviation and hospitality fields.

Currently, the University offers various aviation courses such as BSc in Aeronautical Engineering, Aviation Maintenance Engineering, Aviation Management & Operations, BA in Tourism & Hospitality Management, MSc in Data Science, MBA in Aviation Management. The University also offers Diploma and Certificate Programs in Aircraft Maintenance Technician, Pilot Training, Cabin Crew and Commercial Training, Leadership & Career Development, Catering Training in addition to ICAO and Online Courses.  Ethiopian also owns training facilities in other regional cities of the country including in Hawassa, Dire-Dawa, Bahir-Dar and Mekelle.

Here is a video from Ethiopian Aviation Academy: https://we.tl/t-6ixUCPdIHJ

Source: https://corporate.ethiopianairlines.com/eaa

UNWTO and AFCAC collaborate on air connectivity in Africa.

Towards improving connectivity and advancing seamless travel in Africa, the United Nations World Tourism Organization (UNWTO) has strengthened its partnership with the African Civil Aviation Commission (AFCAC).

The new Memorandum of Understanding signed between UNWTO and AFCAC reflects the importance of boosting cooperation between tourism and aviation to create jobs and drive inclusive growth in Africa.

This agreement is based around shared initiatives, including the promotion of sustainable tourism and the implementation of the Single African Air Transport Market (SAATM).

UNWTO has actively participated in AFCAC’s recent events, particularly the SAATM Pilot Implementation Project aiming to accelerate Africa’s interconnectivity by 2025.

Acknowledging the significance of travel facilitation, UNWTO has also commended countries, including Benin, The Gambia, Kenya, Rwanda, and Seychelles, for offering free visas to African tourists, aligning with the shared vision of increased connectivity.

Source: Guardian

Navigating the Skies: The Reality of Carbon Offsets in Air Travel

In the wake of global efforts to combat climate change, the aviation industry has faced increasing scrutiny for its environmental impact. Responsible for nearly 3% of global carbon dioxide emissions, airlines are under pressure to adopt sustainable practices. One prominent approach has been the introduction of carbon offset programs, allowing passengers to pay extra to mitigate the environmental impact of their flights. However, the question remains: Does buying carbon offsets genuinely contribute to a greener planet?

Understanding Carbon Offsets

Carbon offsets operate on the principle of mitigating climate damage caused by carbon emissions. Passengers, concerned about their flights’ carbon footprint, can opt to purchase carbon credits. Each credit represents the reduction of one tonne of carbon dioxide emissions, typically generated from verified environmental projects. When these credits are used to compensate for emissions, they are retired, becoming carbon offsets.

The Role of Airlines

Over 50 airlines, including major carriers such as Singapore Airlines, Cathay Pacific, Qatar Airways, Lufthansa, and All Nippon Airways, offer passengers the option to buy carbon offsets. Despite this widespread availability, the voluntary nature of these programs results in a notably low uptake rate. According to Air Transport Action Group Executive Director Haldane Dodd, the participation rate is typically “very low,” with fewer than 5% of passengers choosing to offset their emissions through airlines.

Challenges in Uptake

Experts point to various reasons behind the low adoption of carbon offset schemes. The voluntary nature of these programs means passengers perceive them as an additional cost, potentially impacting travel budgets. With rising airfares and growing concerns about inflation, consumers are becoming increasingly cost-conscious. Although the pandemic has heightened awareness of green consumption, the financial considerations often outweigh the desire to offset carbon emissions.

Singapore Airlines’ Approach

Singapore Airlines, for instance, offers passengers the ability to calculate their carbon emissions and pay for offsets. Funds from these offset fees contribute to initiatives such as rainforest preservation in Indonesia, solar energy projects in India, and the distribution of clean-burning cooking stoves in rural Nepal.

While the intention behind carbon offset programs is noble, the current reality indicates a significant gap between intention and action. Addressing the low uptake of these initiatives requires a comprehensive understanding of consumer behavior, cost considerations, and effective communication about the tangible impact of offset contributions. As the aviation industry continues to grapple with its environmental responsibilities, finding ways to bridge this gap will be crucial in fostering a truly sustainable future for air travel.

Source: Airspace-Africa.

Free Routing Airspace in Africa inches closer to reality

Free Routing Airspace in Africa inches closer to reality with trial flights kicking off on November 2 2023.

Cooperation, collaboration, and commitment of stakeholders, including CANSO, AFRAA, IATA, ICAO, and Air Navigation Service Providers (ANSPs), made free routing flights a reality for the first time.

In the Free Routing Airspace (FRA) Trial kick-off workshop, participants coordinated with all relevant operational services and secured approvals for the two trial flights. Shortening the flight time, flights ET935 and KQ 508 operated safely outside the existing routes directly from Addis Ababa to Abidjan and Nairobi to Accra, respectively.

Implementing the Free Routing Airspace will annually bring significant cost savings to the participating airlines and will support a sustainable future for the African Industry. Cumulating over a year, the shortened flight time on one of these one-way flights avoids burning 292 metric tonnes of fuel, prevents the emission of 340 metric tonnes of CO2, and reduces the operator’s fuel bill by an estimated USD310,000. Assuming similar savings on the return leg, extending free routing flights to 20 daily flights, the operators’ CO2 footprint will be reduced by 5 million metric tonnes, and the airlines will cut more than USD 1.2 million from their fuel bill.

The project kick-off workshop was graciously sponsored by AFREXIMBANK. Various ANSPs provided navigation services to the historic flights, including: Ethiopia CAA, Kenya CAA, CAA Uganda, RVA (DRC), ASECNA, NAMA (Nigeria), and Ghana CAA.  The FRA project is one of the five LAB Projects of the African Aviation Industry Group African Aviation Sustainability Laboratory to revamp Air Transport in Africa that was held from 27 June to 1 July 2022 at AFRAA Headquarters in Nairobi, Kenya.  

The next trials in the first quarter will contribute to making the FRA a reality in 2024.

Source: Timesaerospace

AFRAA’s Secretary General, Discusses African Aviation Recovery, Blocked Funds, and Priorities for Transformation

One of the most significant revelations from the interview is the remarkable recovery of the African aviation industry. Berthe notes that the industry has been on an upward trajectory since late 2022. By September, African aviation had not only recovered but exceeded pre-COVID-19 traffic levels, providing a beacon of hope for the sector. He predicts that early next year, the industry will surpass pre-pandemic levels, showcasing its resilience and vitality.

While the level of connectivity on the continent remains very low, Berthe envisions a dynamic future, stating, “The traffic is expected to double by 2040.” AFRAA represents 50 member airlines on the continent, that accounts for over 85% of the total international traffic carried by African carriers.

Challenges Persist: Unblocking Funds Critical for Sustainable Recovery

Despite the positive trends in traffic recovery, Berthe underscores the substantial challenges faced by African airlines, with a particular focus on blocked funds. These blocked funds represent payments owed to African airlines by foreign governments. The amount of blocked funds in different African states continues to grow, impeding airlines’ liquidity and operational capabilities.

Berthe details AFRAA’s proactive approach in addressing this issue through advocacy initiatives and seeking solutions to unblock these funds. He also highlights the vital role of governments and central banks in prioritizing the aviation sector to ensure the efficient flow of funds and avoid detrimental consequences for the airlines.

AFRAA’s Strategic Priorities: Sustainability, Safety, and Connectivity

The interview delves into AFRAA’s current strategic priorities, encompassing sustainability, safety, and connectivity:

1. Sustainability: Berthe emphasizes the multidimensional nature of sustainability, encompassing environmental, economic, and social sustainability. AFRAA’s sustainability roadmap, developed during the Transport Sustainability Laboratory in Nairobi, serves as a guiding framework to ensure the long-term viability of African airlines.

2. Safety: Maintaining the highest safety standards remains a top priority for AFRAA. The launch of the first Safety and Operations Summit, hosted by Ethiopian Airlines, is scheduled for May next year. Ensuring safety remains paramount as African air transport continues to expand.

3. Connectivity: While recovery is in progress, Berthe highlights the need to improve connectivity within Africa. AFRAA’s projects aim to enhance connectivity and expand flight routes on the continent, with a particular focus on promoting interline and codeshare agreements among member airlines.

The AFRAA SG emphasizes that collaboration is the linchpin of progress in the African aviation industry. Collaboration is required between African airlines, regulators, and other sectors such as tourism and trade to drive transformation. He stresses that while expanding route networks is crucial, signing agreements that enhance connectivity is equally vital. Collaboration remains the key to unlocking the industry’s full potential and ensuring its long-term success.

Source: Airspace Africa.

New JKIA Terminal Construction To Start In January

The government plans to modernize and expand Jomo Kenyatta International Airport (JKIA) as it seeks to make it competitive regionally.

Caleb Kositany, Chairman of the Kenya Airport Authority (KAA), said that the new facility will reduce congestion at Kenya’s main port of entry and exit.

Kositany said that the facility will reinforce JKIA’s status as Africa’s premier hub and gateway into East and Central Africa.

The KAA Chair spoke on Sunday when he presided over Togolese passenger airline Asky Airlines inaugural flight from Lome-Nairobi as the company expanded its presence in East Africa.

The airline will be flying four times a week between the two nations.

Its expansion to Kenya now provides travelers with connecting flights to Abidjan, Abuja, Accra, Bamako, Bangui, Bissau, and Beirut.

Others are Brazzaville, Conakry, Cotonou, Dakar, Douala, Freetown, Kinshasa, Lagos, Libreville, Monrovia, N’Djamena, Niamey, Ouagadougou, Pointe Noire, & Yaounde.

JKIA, which was constructed in 1978, is Kenya’s crucial airport and is home to Kenya Airways and Jambojet, among other airlines.

It handles over 5 million passengers annually. Initially, it was meant to accommodate 2 million travelers per year.

Source: Capital Business

Nigeria returns $29mn in trapped funds – IATA

Nigeria appears to have returned USD29.2 million in foreign airlines’ blocked funds in the past four months, according to the latest statistics released by the International Air Transport Association (IATA).

In a statement on September 19, the association said Nigeria presently accounts for USD783 million of blocked airline funds, while in another statement in June, it said Nigeria was withholding USD812.2 million in April 2023.

On inquiry, an IATA spokesperson confirmed that the reduction in trapped funds was “due to many factors, including a weak intervention from the [Nigerian] government”. “Government intervention was not deep enough to significantly reverse the trend as the figures have started going up again. We forecast higher figures in September due to the accumulation of new sales, lack of liquidity on the Investors’ & Exporters’ FX Window and the inability of the Central Bank of Nigeria (CBN) to settle legacy matured FX (foreign exchange) bids.”

The latest IATA statistics were released during a meeting between Nigeria’s new Minister of Aviation and Aerospace Development, Festus Keyamo, and IATA’s Regional Vice-President for Africa and the Middle East, Kamil Al Awadhi, in Abuja last week.

Al Awadhi called on the new Nigerian government for closer consultation with the aviation industry to develop short- and long-term solutions for foreign exchange access for domestic and foreign carriers.

IATA Director General Willie Walsh has warned that airlines cannot continue to provide services in markets where they cannot repatriate their revenues. A case in point has been Emirates (EK, Dubai International), which suspended services to Nigeria after the route became financially unviable, with the CBN holding on to the carrier’s ticket sales. It has demanded the repatriation of at least 80% of its remaining frozen funds and a guaranteed mechanism to prevent future remittance delays.

Emirates first suspended flights to Nigeria on September 1 after demanding the payout of USD85 million of its revenue. It reinstated them 10 days later after the CBN released USD265 million to international airlines. By November 2022, the carrier suspended flights again, citing unsuccessful negotiations with the Nigerian authorities.

Relations between the nations have thawed following the appointment of the new Nigerian president, Bola Ahmed Tinubu, earlier this year. Following a meeting on September 11 between Tinubu and Emirati President Mohamed bin Zayed Al Nahyan, the Nigerians announced an agreement was reached that would see Emirates and Etihad Airways resume flights and immediately lifting a UAE visa ban on Nigerians. However, no official statement was issued by the UAE. An unidentified Emirati official told CNN there was no change in the travel ban. Nigeria then indicated the CBN would announce a roadmap in the next two weeks to address the refunds and that modalities were being discussed with the UAE government.

Source: ch-aviation.

Navigating the Skies: Decoding East Africa’s Air Travel Metrics

East Africa, a region known for its breathtaking landscapes, vibrant cultures, and economic potential, has been steadily fostering regional integration through the East African Community (EAC). Beyond its picturesque beauty and cultural diversity, East Africa is also a hub of aviation activity.  The analysis company Aerotrail provides Airspace Africa with the comprehensive analysis of airline connectivity within the EAC member countries, shedding light on the key insights that shape this dynamic industry.

EAC Air Travel Insights

One of the hallmarks of the EAC is the ease of travel for its citizens within the region. By simply presenting a valid national passport, individuals can explore neighboring EAC countries hassle-free. This privilege is further enhanced by the introduction of the East African Passport, a travel document designed to streamline border crossings for East Africans. Notably, this passport is exclusively designated for travel within the confines of the EAC region.

In most instances, travelers within the EAC enjoy the luxury of visa waivers, facilitating smooth journeys across borders. The exception to this rule is travel to or from the Democratic Republic of Congo (DRC), where a visa remains a requirement. However, it’s crucial to emphasize the importance of carrying a passport when traversing borders within the EAC.

Additionally, Kenya, Uganda, and Rwanda have taken a significant stride by recognizing their respective citizens’ national identification cards as valid travel documents. This recognition is rooted in a binding East African Agreement among these three nations and has yielded considerable implications for air travel within this specific bloc of countries.

Key Airports

To comprehend the intricate web of airline connectivity within the EAC, it’s vital to recognize the role of key airports. These airports serve as the linchpins of regional air travel, connecting EAC member states with each other and the wider world.

1. Burundi: Bujumbura International Airport
2. Democratic Republic of the Congo: N’djili International Airport
3. Kenya: Jomo Kenyatta International Airport
4. Rwanda: Kigali International Airport
5. South Sudan: Juba International Airport
6. Tanzania: Julius Nyerere International Airport
7. Uganda: Entebbe International Airport

Overall Air Connectivity

Kenya’s Jomo Kenyatta International Airport and Uganda’s Entebbe International Airport hold a special distinction in the EAC’s air travel landscape. These airports are the exclusive gateways that facilitate scheduled airline connections to the main airports of all other EAC member nations. When it comes to regional networks, Entebbe Airport takes the lead with connections to approximately fifteen regional destinations. Following closely are Jomo Kenyatta International Airport and Kigali International Airport, both offering scheduled connections to ten regional destinations each.

Longest Airline Routes

In the world of aviation, distance is often a defining factor. Among the longest routes within the EAC network, the Nairobi–New York route stands out, spanning an impressive 11,832 kilometers. This route is serviced daily by Kenya Airways, utilizing Boeing 787-8 Dreamliner aircraft. Following closely in terms of distance are routes like Nairobi-Changsha, Dar-es-Salaam–Guangzhou, Nairobi-Guangzhou, and Dar-es-Salaam-Amsterdam.

Domestic air travel is the backbone of regional connectivity, and the EAC boasts its share of extensive domestic routes. Notably, the Democratic Republic of the Congo (DRC) offers the most extensive domestic routes compared to other EAC countries. Routes like Kinshasa-Goma, Kinshasa-Lubumbashi, Kinshasa-Kisangani, and Kinshasa-Kindu are lifelines connecting communities across vast distances. Additionally, the route connecting Dar-es-Salaam to Kigoma stands out as the longest domestic route within the EAC, spanning a distance of 1,085 kilometers.

Passenger Seats and Airlines

The heart of the aviation industry lies in the seats that carry passengers from one destination to another. In the EAC, several airlines play pivotal roles in connecting people, cultures, and economies. Kenya Airways leads the pack with a substantial 122,906 weekly seats, followed by Ethiopian Airlines with 46,221 seats and RwandAir with 36,626 seats. Notably, the Kenyan low-cost carrier, Jambojet, commands a significant position with 28,860 weekly seats.

Available Seat Kilometers (ASK) is a key metric that reflects an airline’s capacity. In this regard, Amsterdam takes the commanding position with an impressive tally of approximately 132 million ASK, closely trailed by Dubai, Paris, Istanbul, and London. Within the EAC region, Kenya Airways firmly establishes itself as the dominant carrier, boasting a remarkable total of about 300 million ASK.

Ticket pricing in the airline industry is a complex interplay of factors, including route distance, demand, aircraft type, and more. Interestingly, longer airline routes within the EAC tend to be more cost-effective per kilometer traveled, particularly for intercontinental routes. The principle of economies of scale comes into play, where larger aircraft, equipped with more seats, can distribute operational costs across a broader passenger base, resulting in reduced ticket prices per kilometer.

Source: Aerospace Africa

African airlines prepare for traffic surge

Over the next two decades, Africa’s jet fleet is projected to more than double to 1,550 aircraft, when Africa’s population is forecast to hit 2.17 billion.

In so doing, it will surpass the fleets of America, India and China combined, according to data from the International Air Transport Association (IATA).

The growth will come on the back of significant growth in airline passenger numbers.

IATA shows major airline markets in Africa had already outperformed their 2019 levels in terms of origin-destination (O-D) air passenger traffic by Q2 of 2023, thanks largely to domestic market recovery and outperformance.

Nigeria recorded the highest growth in passenger numbers, adding 52 per cent more compared to the pre-pandemic levels.

Egypt, Ethiopia and Morocco came in second, third and fourth place, with 33 per cent, 31 per cent and 13 per cent growth respectively.

While Algeria and Tunisia also recorded growth, they experienced lower performances at 3 per cent and 5 per cent more traffic compared to 2019 figures.

The only exception was South Africa, which recorded 3 per cent fewer passenger numbers (below its pre-pandemic levels), attributed to economic challenges in the country.

Some 44 per cent growth between 2022 and 2023 has also helped a recovery in international traffic to and from Africa, now just 11.8 per cent off pre-pandemic levels, with a full recovery expected by year-end.

Data from IATA projects the number of commercial aircraft deliveries is approaching 30 in 2023. This is a far lower than the 50 deliveries in 2019- its peak year – but off the lows of around 20 deliveries over the last two years.

“African airlines are increasing their number of new aircraft units, which might be a sign of an anticipated full recovery by the end of this year” said IATA in its quarterly Air Transport Chartbook.

Three African carriers have either announced delivery or have plans for long-term expansion also covering 2023.

Ethiopian Airlines is looking to increase its fleet size from 140 aircraft to 271 by 2032, with a mix of narrow-body and wide-body planes. It has its eyes firmly fixed on Boeing’s bigger aircraft.

RwandAir expanded its fleet in March with its third long-haul aircraft from Airbus, while South African Airways said in May it had received the green light from the government to expand its fleet by six.

Carriers said all these projected new fleets will allow them to expand their seating capacities for regional and domestic routes and increase flights to Europe, the Middle East and Africa.

Over the last two months, African airlines have been recording steady growth in capacity – which rose by 27.4 per cent in July- making Africa the only region to experience capacity growth outrun traffic demand, according to IATA.

According to Boeing’s Commercial Market Outlook 2023, Africa’s air traffic growth is forecast to rise some 7.4 per cent, which is above the global average of 6.1 per cent.

Domestic passenger traffic is seen as quadrupling in 20 years on rapid population growth and urbanisation within the continent.

Source:   The-star.