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Opinion


STRONG GROWTH AHEAD FOR AFRICA’S AVIATION SECTOR

By Team IBAJune 3, 20243 Mins Read
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IBA, an aviation market intelligence and advisory company, predicts that
post-pandemic passenger growth will continue in the African aviation market, and
forecasts that the industry’s compound annual growth rate of RPK in the region
will be at 4.7% from this year until the end of the decade.

Airlines have been increasing capacity to Africa, with an average 8.4% increase
from Q2 2023 to Q2 2024. In particular, there has been a marked 38% increase in
seat capacity from the Asia Pacific region, and a dramatic 105% rise in seat
capacity from Latin America. Traffic is forecast to grow at 8% this year, with
domestic, international and intercontinental markets all growing.



Ethiopian Airlines remains the region’s largest operator, with 12,790 million
ASKs in Q2 2024 – an increase of 8% year on year. Some smaller carriers have
grown their capacity more steeply in this timeframe including TAAG (81%), Air
Cairo (30%), Kenya Airways (21%), and Egyptair (14%).

These insights were shared by IBA at the recent African Aviation Summit: Air
Finance Africa Conference (21 to 23 May) in Johannesburg, South Africa. The
conference largely shared a positive outlook for the African aviation market,
with an appreciation of the future challenges. IBA’s head of consulting, Dan
Taylor, delivered an update and forecast on trends, aircraft supply, and airline
profitability in the African aviation market, based on data from the IBA Insight
platform.

Airlines based across Africa have placed orders, with Ethiopian Airlines leading
the charge, with 90 aircraft on order. The rising costs of jet fuel and the
price of emissions offsetting have been important factors in order decisions.

The aircraft orderbook held by African carriers is mixed across aircraft types,
with notable highlights being the Boeing 737 family (57 aircraft), the Airbus
A350 family (35), the Boeing 777 family (30) and the Boeing 787 family (26).

However, IBA believes that the African aviation market will remain undersupplied
with aircraft for the next two years as airlines are impacted by long order
backlogs, slow production capacity and, in particular, the reduction in Boeing
737 MAX production.

Despite the higher costs for aircraft, profitability has risen to a certain
degree, enabling airlines in Africa to lower their net debt like most airlines
across the world. However, IBA’s intelligence shows that Africa is the only
region in the world where it estimates that the average net profit margin for
the full 2023 financial year for airlines across the continent will remain
negative, at -3%. Profitability is unlikely in the near future as the market is
highly fragmented with challenges around traffic rights and agreements,
infrastructure, and access to capital.

IBA forecasts that African airline revenues will return to 2019 levels in 2024,
but when expressed collectively, that losses will continue to occur until 2025.

Insights from IBA Airlines’ risk analysis shows that some airlines in Africa
remain at more risk compared to other global regions, with its figures for
Africa being 53% for 2024, compared to a more favourable global average of 72%.

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