“We will approach the year with caution, hoping for the best, but preparing for the worst,” says Aaron Munetsi, CEO of the Airlines Association of Southern Africa (Aasa).
Aasa represents most of the airlines based in the Southern African Development Community (SADC) region, and addresses issues affecting their ability to do business. It acts on behalf of members with regard to engagements with airport and air navigation service operators, meteorological services and their respective tariff regulators.
They also liaise with airworthiness authorities, transport policymakers, legislators and departmental officials.
In an interview with Business Report on 2022 and the outlook for 2023, Munetsi said that as South Africa was so brutally reminded with Covid-19 and then Russia’s invasion of Ukraine, “we’re not always good at accurately reading the tea-leaves”.
Going into the new year, he said Aasa would like to see the recovery of air traffic to pre-pandemic levels and a return to profitability.
South Africa’s economic fortunes remain unclear and depended heavily on both global geopolitics as well as local political certainty, and economic and fiscal policy continuity.
“A stronger rand would help airlines close the gap that has opened up between their cost base, which is heavily dollar-denominated as the standard currency of aviation, and revenues, which are generated in rand and other relatively softer currencies,” he said.
Aasa described 2022 as “definitely a year of highs and lows as on one hand they had welcomed the relaxation and withdrawal of Covid-19 travel restrictions and the re-opening of all of the SADC markets for air travel, which spurred demand for air travel.
“However, geopolitical challenges in Europe dampened the situation sending shock waves, which continue to reverberate through our industry globally, and here in Southern Africa. As a result we saw fuel prices more than double and although the price of crude oil has softened to below $80 (R1 381) a barrel, the price of jet fuel remains stubbornly above $138 a barrel with the crack spread between the two items more than doubling from the traditional $20 a barrel split.
“Compounding this were the critical fuel supply shortages in April at OR Tambo International Airport as a result of the Durban floods and in September/October at Cape Town International Airport. The upshot was two-fold: higher fuel transportation, logistics and storage costs and flights having to tanker fuel to avoid refuelling at affected airports or being diverted to refuel elsewhere,” Munetsi said.
He said another low-tide moment was the collapse or winding down of some domestic airlines that were still to finalise their affairs. The exit from the market of these airlines resulted in the loss of hundreds of skilled jobs, and a significant portion of capacity evaporated from the domestic and Southern African regional market.
Comair, which operated the British Airways franchisee and low-cost carrier kulula.com brand, earlier this year went belly up.
In response, the country’s mostly privately owned airlines had rallied to address the capacity crunch by expanding their fleets, upping their aircraft utilisation and right-sizing their workforce which put the sector within 80% of its 2019 capacity.
There were still some imbalances, as an example on weekdays there was a surplus of seats due to lower demand, but in most instances from Fridays to Sundays and over long-weekends and holidays, flights were heavily booked with many selling out, he said.
Faced with higher operating costs and other inflationary factors, including higher interest rates on the loans that some of the airlines took out to stay afloat during the pandemic, airlines had no wiggle room to add capacity, except in markets that could support the additional capacity at economically viable fares.
With regard to the festive season, Aasa said they had just seen the launch of a 17-nation pilot implementation project as a precursor to the Single Africa Air Transport Market (Saatm).
The organisation said it was intended to demonstrate how freer market access among the participating countries could enhance air connectivity, stimulate economic activity and create much-needed jobs.
Munetsi said that South Africa, which is one of the continent’s leading markets, was among the participants.
“The country’s airlines are waiting expectantly for the Department of Transport for information on how best they can take part. Our hope is this will inspire the other African Union member states to follow suit and fully implement the Saatm.
“It is an African Union 2063 flagship project intended to underpin the Africa Continental Free Trade Area by removing barriers to intra-Africa markets for the continent’s airlines. However, while market access is a crucial element, it requires the development of harmonised and fair charges, taxes and regulations which will be applied reciprocally. We do not want to see a situation where countries abuse other instruments at their disposal as crude protectionist weapons, as this would run counter to the spirit and intentions of Saatm,” he said.
With the increased volumes and return of air traffic post-Covid, Aasa said it was keeping a close watch on local airports after seeing the chaos in airports in the UK, Europe and North America during their peak summer holidays in order not to repeat their mistakes.
These countries had a lack of equipment as well as trained, skilled and security-vetted airport workers, which caused chaotic bottlenecks, flight delays and tens of thousands of cancelled or disrupted journeys.
Overall, Munetsi said, the airline industry was renowned for its resilience.
“We’ve come through many crises and faced many challenges. The current ones may be unique, but they will not be our last. In many ways, it is a lot like playing batsman in cricket. We step out onto the field and play to defend our wickets while trying to make a big score at the same time. Sometimes it can be a bit hit-and-miss and occasionally some of our batsmen falter, but we try to hit as many sixes as possible, which keeps our team and their supporters happy,” he said.