Covid19 has affected each region differently. Southern Africa appears to have taken one of the biggest blows in Africa. With 3 airlines under administration and many more others struggling to survive.
In this installment of the JAA Interview Series we speak to Chris Zweigenthal (pictured above) the Chief Executive Officer of the Airlines Associations of Southern Africa (AASA) on the status and way forward for commercial aviation in Southern Africa.
- How has the COVID-19 pandemic affected Southern African airlines and the greater African aviation market?
CZ : The COVID-19 pandemic has had a devastating impact on the airlines of Southern Africa and indeed throughout Africa. As the COVID-19 virus began to spread around the world from the beginning of January 2020, and it became apparent it was not a short term crisis, States began to discourage airlines from operating and passengers from travelling both internationally and domestically. From the World Health Organization (WHO)’s declaration of COVID-19 as a pandemic on 11 March 2020, air traffic drastically declined as States imposed immediate lockdown restrictions on airline operations. By the end of March 2020, traffic global traffic had declined 60% from February 2020 levels and African airlines by over 90%. In certain States such as South Africa, and some of its neighbouring States, scheduled air traffic went to zero. The only flights permitted were cargo flights, essential services flights and eventually repatriation flights to enable citizens to return to their home country.
This shutdown has caused a massive liquidity crisis for the airlines, which under normal operating conditions, would have on average two months cash. The focus has therefore been on cash preservation with a requirement for significant cost savings, leading to, amongst others, staff layoffs, salary reductions, unpaid leave and retrenchments. Compared to 2019, IATA’s current estimates for 2020 are for African airline revenue to decline by 60%, passengers by 58%, for airlines to make a loss of US$ 2 billion compared to $200 million in 2019, with up to 3.3 million jobs at risk. This has also severely impacted the travel and tourism sector across every country on the African continent.
2. AASA in partnership with other regional and international organizations recently called for financial support for the aviation industry. What sort of support are regional governments offering the aviation industry?
CZ: There has been a concerted call on African Continental Financial Institutions and Governments to provide financial relief to African airlines. On the back of the initiative mentioned above, AASA has approached Governments of the States of its domiciled airline members and proposed support for the airlines in the form of loans, loan guarantees, tax relief, cash injection including equity support or assistance to deal with liquidity challenges. Governments are currently reviewing these proposals and we trust their will be a positive response. We are not currently aware of specific aid having reached the airlines themselves. We appreciate that Governments have many important priorities to assist with socio-economic challenges facing their communities and financial aid is critical in this area. We do, however, believe that aviation, travel and tourism will provide support for an economic recovery through the re-emergence of businesses, both large and small to energize the creation of jobs and enable these industries to make the significant contribution to the State’s GDP as in the past.
In addition, approaches have been made to infrastructure service providers and Government Agencies to consider not taking increases in user charges, to consider waivers and reductions of user charges as well as deferment of payment of accounts without penalties and interest. Certain organizations have reacted positively to these requests, but some are in the same position as the airlines of not receiving revenue due to no flight or passenger activity, and hesitant to provide concessions. This is an ongoing discussion.
3. Given the fact that some of your members are under liquidation or business rescue. How are you supporting your members during these tough times?
CZ : AASA is not mandated to get involved in the internal affairs of its individual member airlines. Clearly, whilst understanding the reasons and need for a lockdown, the priority of airlines and aviation organizations has been to restart operations as soon as possible with the authority of the respective Governments. In addition to the measures mentioned under 2 above, AASA has interacted regularly with its airline members, providing them with updates on the development of COVID-19, obtaining updates on their particular situations where possible and interfacing directly with Government impress the collective impact of the lockdown on the industry. In South Africa, AASA has coordinated submissions to Government to motivate for the re-opening of aviation operations. This has had success with the restart of limited domestic air services from June 2020 to unrestricted domestic services from 18 August 2020. The focus is now on the re-opening of borders and the re-start of regional and international air services.
“African airlines need to work together in the interest of African Aviation”.Chris Zweigenthal Chief Executive Officer, Airlines Association of Southern Africa.
4. Has the SADC region taken heed of the harmonized approach in reopening the regional airspace?
CZ : The ICAO CART has been published and calls for a harmonized approach amongst States to reopen the airspace. COVID-19 has impacted each State to a different extent and the process to contain the spread of the virus has taken different forms. Also, there is much advice out there from many experts, and several States have taken on board different views and ways of dealing with the re-start of aviation e.g. quarantining or taking of tests, before or after a flight, etc. Currently, not every State has the same approach, but it is important to respect different views and try to work out bilateral solutions where possible. The important issue is to open up the borders, and for airlines to encourage passengers to start flying and to show that this can be done in a safe and healthy manner through mitigation of the risk of transmission of the virus by complying with approved protocols, regulations and standard operating procedures.
5. During the resumption period we witnessed airlines using smaller single aisle regional jets. TAAG Angola recently took delivery of 2 Dash8-400 aircraft. How important are these type of aircraft during this period and in the immediate future?
CZ : When lockdown was implemented, scheduled air services were prohibited and in most States went to zero. It is acknowledged that as services re-commence, the take up by customers will be gradual and loads on the aircraft would be expected to be lower than normal for some time. It is expected that domestic air travel may take at least one year to eighteen months to return to pre-COVID-19 levels, possibly longer, and international traffic could take up to 2023 or 2024 to return to pre-COVID-19 levels. From an airlines perspective, high load factors and frequency are important and therefore the utilization of smaller single aisle aircraft especially on thin markets will assist. On busier routes, combinations of both smaller single aisle and larger aircraft would provide a mix to satisfy a market as it grows towards its former levels.
6. Several Aviation Bodies have called on African States to implement SAATM as way to stimulate traffic post covid19. Considering only 7 Southern African states are signatories and only Mozambique has fully implemented SAATM in the region, what is AASA doing to encourage the implementation of SAATM in the region?
CZ : AASA has joined the efforts of AFCAC, AFRAA and IATA to promote the implementation of SAATM throughout Africa. The priority of African airlines now is one of survival and many are trying to recover to a point where they can re-commence operations and ensure a sustainable future. Airlines are in very different states of financial health across the continent, although most if not all are expected to report losses during 2020. SAATM would assist in markets being served which due to current COVID-19 circumstances, may not be well served. However, for SAATM to be accepted by airlines it is imperative that all States that have signed up implement the principles of SAATM on a reciprocal basis in terms of rights and value with no exceptions.
7. What challenges do you see in rebuilding passenger confidence during the post COVID-19 period?
CZ : The biggest emotion to overcome is one of fear – fear of contracting the virus through transmission of the virus between passengers or from people locally and from a foreign land. Governments, airlines and partners, need to promote the safety, health and reliability of airline operations. The aviation industry has probably the most comprehensive health protocols, regulations and Standard Operating Procedures in place, overseen by the aviation authorities, which must be complied with. The low risk of transmission, of the safety of being on board an aircraft with the most efficient air reticulation system, must be promoted to the customer. Customers also need to be sure that there is little risk of a sudden decision to reverse the decision to permit operations, resulting in them being stranded in a foreign destination. Government, airlines and the rest of the industry, need to work in partnership to deal with such issues and ensure all are part of the solution to beating this virus.
8. How long do think you it will take for African aviation to recover from the COVID-19 pandemic?
CZ : Africa showed the way by enforcing a hard lockdown. Whilst many States have reintroduced domestic air travel, the recommencement of regional and international travel has been slow. I believe that this will start to gain momentum from September / October 2020, but believe that full recovery to pre-COVID-19 levels will not take place before 2023. It will take time for African airlines as well as international airlines serving Africa to ramp up their services to previous levels.
9. How can African Airlines build resilience to survive future challenges?
CZ : This is a challenge for African airlines, many of which are in a dire financial situation. Each airline probably needs to review the impact of COVID-19 on its operation and financial sustainability, and to undertake a full review of its business strategy. Business post COVID-19 will not be the same as before, and it will be necessary to determine what needs to be adapted within each airline to make it possible to operate profitably and compete more effectively with its African airline counterparts as well as international airlines if it intends to operate in that space. Most airlines probably need recapitalization, and financial aid to address a liquidity crisis, and if the State is not able to support the airline, it should consider private equity partnership, investment and involvement to set up the airline for a sustainable future. A tough challenge.
10. Do you think there is a need for African airlines to consider Joint Venture (JV) post COVID-19 pandemic?
CZ : I believe that the formation of alliances, commercial agreements and joint ventures are a way to develop an integrated network and increase the market reach through Africa. This would enable larger airlines to work closely with smaller, niche airlines to develop a network to service markets which may not otherwise be served during the COVID-19 recovery period. The principles of SAATM would assist this process but as noted above, the principles must be applied in a fair, reasonable and equitable manner.
11. How does AASA support Southern African businesses and what is your plan for the next generation of African aviation professionals in the region?
CZ : AASA supports the transformation of the aviation business as well as the development of small and medium enterprises. AASA acknowledges that the success of these businesses, some of which are suppliers and service providers, are essential to the sustainability of the airlines. In the area of next generation of African aviation professionals, AASA has supported several initiatives such as Wonders of Aviation in South Africa. AASA is directly involved in the management of Wonders of Aviation, which aims to bring the magic of flight to those who have not been exposed to aviation in the past, as well as to support entrepreneurs in aviation.
12. What is the one thing you would want to see African airline improve on?
CZ : African airlines need to work together in the interest of African Aviation. In many areas, African airlines appear more hesitant to work with each other through alliances, commercial agreements and partnerships, than with international / global airlines. Such arrangements are more likely to be short to medium term than lengthier agreements with global airlines. For example, when African airlines have joined a global alliance such as Star, OneWorld or Sky, this is long term, but there is a tendency for arrangements between African airlines to be more of a short term nature. African airlines need to work together to strengthen the collective and thereby position themselves better to compete more effectively in the global market.
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