SA airlines set to lose R55 billion in revenue, over 250 000 jobs on the line

Revenues generated by airlines in the South African market will fall by about R55 billion ($3 billion) in 2020 – 56{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} below 2019 levels, according to the latest estimates by global airline body the International Air Transport Association.

It is estimated that the fall in revenue puts 252 100 South African jobs at risk, as well as about R93 billion of the country’s gross domestic product (GDP) – the part generated by aviation directly plus air transport-dependent tourism.

The average aid in Africa is around 1{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} ($0.8 billion) of the 2019 revenues of airlines on the continent compared to about 25{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} of their 2019 revenues received in aid by North American airlines, 15{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} received by European airlines and 10{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} of revenues received by airlines in the Asia-Pacific region.

“Aviation is vital for connecting markets and moving people and goods between them. It is not an indulgence of the rich, but an enabler of economic wealth for everyone. Without a viable air transport sector, recovery will be drawn out and painful,” Muhammad Albakri, IATA’s regional vice president for Africa and the Middle East, said in a statement on Wednesday.

During a briefing last week he said both state-owned and private domestic airlines in South Africa were in urgent need of help.

Government relief

IATA, the Airlines Association of Southern Africa (AASA) and the Board of Airline Representatives of South Africa (BARSA) called on the South African government to provide specific financial relief to the aviation sector to address the severe impact of the Covid-19 crisis on the industry due to flight bans and border closures. The organisations have sent out a call for urgent aid to the aviation industry before.

It suggests that relief could include direct financial support to passenger and cargo carriers; financial relief on airport and air traffic control charges and taxes; and reductions, waivers and deferrals of statutory taxes and user-fees imposed on flights and passenger tickets.

Airports Company SA (ACSA), which manages and operates nine airports in SA, recently told Parliament that it will need about R10 billion in government guarantees over the next five years in order to obtain bank loans to continue operating.

President Cyril Ramaphosa announced on Sunday night that domestic air travel may be phased in during lockdown Level 3, starting with business travel only. The dates for such a start must still be announced and airlines have responded with cautious optimism about the news.

“South African authorities have provided support for air transport by temporarily suspending airport slot use rules and extending the validity of personnel licenses and certifications, which have been welcomed by the air transport industry,” said Albakri.

“However, urgent financial support from the government is needed now to keep the sector alive and ensure that its air transport system emerges fit and capable of fulfilling a crucial role as a primary economic enabler and job creator.”
According to Chris Zweigenthal, CEO of AASA, the concessions and support requested from government becomes even more critical at the time of re-starting aviation where there will be pressure on depleted cash reserves to fund operations.

“It is essential that urgent action is taken now to support airlines and the industry as a whole in these difficult times. We all need to work together to minimise the impact by creating a platform for recovery from the unprecedented damage being inflicted on international air carriers including South African Airlines,” said Zuks Ramasia, CEO of BARSA and former acting CEO of SAA.

Treasury and the Department of Public Enterprises are set to brief Parliament on SAA and SA Express on Wednesday evening. These state-owned airlines are already in business rescue and provisional liquidation respectively.

Contradicting messages from SAA’s corporate division and its business rescue practitioners make it unclear at this point whether the state-owned flag carrier will be able to resume operations in June, while the provisional liquidator of SA Express has indicated that it is unlikely that the regional airline will restart operations.

Low-cost airline Mango, a subsidiary of SAA, is keen to resume flights and private airlines Flysafair and Airlink as well as JSE-listed Comair – which operates and British Airways under a license agreement – are also eager to restart, but await further details from government as well as market assessments to establish whether it would make commercial sense to do so.

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