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African Airlines Not Yet Out Of The Woods, But Lower Fuel Prices Helping – IATA

African Airlines Not Yet Out Of The Woods, But Lower Fuel Prices Helping – IATA

While the global airline industry is seen cruising to record profit this year due to lower fuel cost, African airlines are still forecast to post a loss in 2016, the only region expected to do so according to International Air Transport Association (IATA) projection.

IATA’s revised projection for the year showed that African carrier will continue generating an overall loss of about $500 million by the close of the year.

This is a narrower loss than in 2015 when carriers from the continent posted a $700 million dip.

Whereas net profits per passenger for North American airlines in 2016 is forecast to be about $25, it is forecast to be $8 in Europe and a loss of almost $6 for every passenger flown by African airlines, the IATA report showed.

According to IATA African airlines continue to confront “a plethora of challenges including intense competition on long-haul routes, political barriers to growing intra-Africa traffic, high costs and infrastructure deficiencies”.

The association said many major economies on the continent have been hit by the collapse of commodity prices, and the impact that it has had on revenues and the inflow of hard currencies.

“Lower oil prices are certainly helping– though tempered by hedging and exchange rates. In fact, we are probably nearing the peak of the positive stimulus from lower prices,” Tony Tyler, IATA’s director-general and chief executive, told delegates at annual general meeting in Dublin on Thursday.

“In December, our projections were based on the cost of oil being $51 per barrel. Our revised position is based on $45 per barrel and this makes a significant difference.”

Forex Controls

IATA also called for countries with tight currency exchange rate controls, including Venezuela and Nigeria, to release $5 billion worth of local ticket sales revenues owed to foreign airlines or risk losing their services, The Nation Reported.

“The efficient repatriation of revenues is critical for airlines to be able to play their role as a catalyst for economic activity,” Tyler said.

In Nigeria, Africa’s largest economy and leading oil producer, it became difficult for foreign businesses to repatriate hard currencies from the country since the second half of 2015 after the Central Bank of Nigeria introduced currency controls to stop the naira from Tanking.

Lufthansa is unable to access $20 million of ticket revenues in the West African nation because of these foreign exchange controls and has warned it could cut capacity if the situation is not resolved soon.

IATA said that the Nigerian authorities were in talks with the airlines to seek possible measures to make the funds available.