An analysis of the factors contributing to the growth of the aviation sector in Africa, including increasing demand, improving efficiency, and expanding investment opportunities.
Africa comprises 2.2% of the global market in terms of Revenue Passenger Kilometers (RPK). According to Boeing’s recent Market Outlook, to service the continent over the next 20 years, 1190 new aircraft with an expected value of $170 billion will be needed.
This bodes well for the continent although there are aspects of Africa’s aviation industry that are challenging. The overall state of air travel and aircraft finance on the continent remains positive, with many carriers managing to weather the political and economic storms of the past few years very well – despite the poor general economic performances of the two biggest economies, South Africa and Nigeria.
Ethiopian Airlines is Africa’s biggest airline and one of the few turning a profit on the continent. In the financial year 2017/2018, Ethiopian Airlines made profits of $245m (£187m) and carried 10.6 million people. Founded in 1945, the airline has made strides in the aviation industry and is the 4th largest in the world in terms of destinations serviced. Beyond its operations, the airline has also been helping other African national carriers. It revived and owns a 49% stake in Malawi Airlines and a 45% stake in Zambia Airways and has announced plans to help re-launch a new airline in Mozambique. It is also in talks to establish smaller regional bases in Djibouti, Chad, and Equatorial Guinea. It already operates hubs in Malawi and Togo.
At the time of writing, the former number one African airline, South African Airways (SAA) is under business rescue. The country continues to battle with SAA, the country’s national carrier, as one of its poorly functioning State-owned Enterprises.
Despite economic challenges, overall, Africa’s various domestic carriers exist in a robust, well-functioning market. This is particularly true for low-cost airlines which have enjoyed steady annual passenger growth of around 4%.
The future of Africa’s airlines lies in maintaining a load factor of well above 80%. It is important to note that growth figures are not universal across the continent. In North Africa, passenger growth figures are even better, with an average annual increase in passenger demand of over 5.75% year-on-year as of the end of 2018. Overall capacity growth of airlines has increased by approximately 3.9%. This is a strong signal regarding the improving efficiency levels being achieved by many of the carriers on the continent, and it is supported by a 1.2% increase in the load factor on African routes.
A key factor in the growth of the aviation industry on the continent is that Africa is becoming an increasingly appealing investment destination. As the population grows and the continent’s middle class expands, continental and global investors are increasing their trip frequency to explore opportunities. Aviation is due to be a huge beneficiary of Africa’s population and economic growth.
