Africa: Airlines Forecast to Fly Into Bigger Losses on New Covid-19 Variants

Airlines are expected to make significant losses this year as International Air Transport Association (IATA) revises its forecast issued in December because of challenges in containing new coronavirus variants and slower vaccination in some regions.

IATA is projecting a post-tax losses of Ksh5.1 trillion ($47.7 billion) in 2021 from their initial Ksh4 trillion ($38 billion) projection in December.

“Financial performance will be worse and more varied this year than we expected in our December forecast, because of difficulties in controlling the virus variants and slower vaccination in some regions,” said IATA.

According to IATA, large airlines have raised sufficient cash to cover for these losses with the aviation sector expecting a cash burn of Ksh8.6 trillion ($81 billion).

“Many smaller airlines haven’t and will need government aid or to raise more cash from banks or capital markets – adding to the industry’s debt burden and balance sheet leverage problem,” the agency said.

Kenya Airways and other regional carriers such as RwandAir have suspended flights to India due to high cases of Covid-19 in this Asian country.

The airlines woes will be compounded with the rising cost of fuel, which is expected to have a negative impact on the airlines.

“We now expect much higher fuel prices with jet at $68.9 per barrel from $49.5 and oil rising to $64.2 per barrel from 45.5 previously as the stronger global economy pulls all energy prices higher,” IATA said