The future of aviation in Africa after Coronavirus was the subject of a webinar by Invest Africa held this week with aviation experts. It came on the day that Air Mauritius entered into voluntary receivership, and this was said to be the first of many that will follow.
The call, which was said to be one of the most popular by Invest Africa, featured Rodger Foster (CEO at Airline SA), James Hogan, (former CEO at Etihad), Nick van de Meer (COO at Vista Global), Tony Payne, Yvonne Makolo (CEO at RwandAir) and Allan Kilavuka (MD at Kenya Airways).
- The whole industry in lockdown and we have never seen global aviation stop, just cargo and emergencies. Airlines, can’t use 9/11 and SARS as an indication, but 9/11 resulted in 40% of business loss which took almost 5 years to recover from.
- 40% of the global commercial aircraft grounded may not fly ever again. When SAA resumes after Coronavirus, it may only operate at 3% of its previous capacity flying 5 routes with 3 planes, down from 3,000 flights and 55 routes.
- Rethink business models: Rethink networks, rationalize flees, and operate small capacity aircraft. When travel resumes it’s unlikely that will require large aircraft. There may be just 3-4 business class passengers on some routes and while people may increase travel over 12-24 months, the global shutdown has made them realize that virtual meetings work, and there is less need to travel.
- There’s too much capacity and, with 200 airlines, too many players in Africa aviation. It will be survival of the fittest.
- Airlines usually have 2 months of cash on hand, but with no planes in the sky, they are engaging in cash conservation in the short-run and finding alternative fundraising to be sustainable in the long run.
- While airlines are in discussions with their governments, countries have other many priorities now, like health and hospitals, and there will be no more free money from governments for airlines.
- Instead, airlines need to work with each other – airlines, airport, MRO, manufacturers etc. Airlines don’t have the balance sheets that airports do and consolidation will be essential because of reduced demand across the board and excess capacity.
- What makes a bankable airline for investors? Airlines all have the same overheads – and it is not necessary every airline to duplicate these. A 5-star hotel operates 5 restaurants using one kitchen. African airlines should restructure and have one centre of excellence for MRO (maintenance, repair, and operations), pilot training, finances, back-office structures.
- The productivity of staff and assets need to improve significantly – use fewer resources to do more work – but airlines have to balance that with an even smaller and health-conscious travelling public (crew and passengers) and extra costs of cleaning aircraft that are unbearable. Alongside that, skills are abundant as Covid has placed pilots and engineers on furlough and retrenchment.
- But the challenge with cooperation and consolidation are different laws, regulation, politics, and bilateral agreements in every country.
Listen to the aviation webinar here.