Targeted interventions by the state such as tax waivers and wage subsidies will be crucial to revive the airline industry after it was dealt a blow by the Covid-19 crisis, says Wrenelle Stander, the newly appointed CEO of the Airlines Association of Southern Africa, the industry body that represents all carriers in SA and the region.
The health crisis has grounded many airlines throughout the world and left most employees in the sector without an income. Before the pandemic, the local industry supported close to 500,000 direct and indirect jobs and contributed 3.2% to SA’s GDP.
“Access to funding and cash is what the airline industry needs, but we appreciate that governments throughout the region face competing fiscal demands,” Stander said.
Stander, who took over the reins from Chris Zweigenthal after his retirement earlier in July, is a former CEO of Comair, the operator of British Airways and Kulula flights in SA.
She says there are various opportunities for the government to support businesses in the airline industry over the short to medium term. These could include tax waivers and deferrals; reductions in the various statutory user-fees tariffs and levies applied to airlines and passengers; and employee wage subsidies.
The government recently announced the extension of its income-protection scheme, the Temporary Employer/Employee Relief Scheme (Ters), to workers affected by the latest lockdown restrictions. Payments are expected to resume on Monday.
Stander said while the government made R200bn available in 2020 through its Covid-19 loan guarantee scheme, take-up was poor across the economy as banks imposed onerous lending requirements.
“A closer compact between government, business and banks is required for such initiatives to make a difference,” she said, highlighting that airlines, whether they are operating or not, continue to burn cash on their fixed costs.
As a result, those airlines that have not yet managed to reduce their cost base or secure funding — whether grants, subsidies or new loans — may not survive long enough to compete in the post-pandemic market.
“Any further losses would be a huge blow to its [SA’s] competitiveness and its socioeconomic aspirations,” Stander said.
Support should also be provided at local and provincial government level through jointly sponsored marketing and promotion campaigns for specific routes and markets, to boost the airline industry’s recovery.
Stander said airline operators were left frustrated by the recent government decision to restrict travel to and from Gauteng — the country’s economic hub and epicentre of the third wave of the pandemic — without taking into account the views of the industry. Local airlines had to reduce their weekly capacity by about 30% of pre-pandemic levels as a direct result of the restrictions.
Industry players insist that safe travel is possible. Aircraft cabin air is continually filtered to a similar quality as found in hospital operating theatres, Stander says.
Big players — including state-owned SAA, which was already struggling before Covid-19, and the previously profitable Comair — recently faced potential liquidation as the pandemic took hold. The latter returned to the skies in December, operating a limited schedule, until the recent restrictions on leisure travel to and from Gauteng forced it to temporarily cease operations. Lift, the new airline launched in December at the height of the pandemic, has also grounded its flights.
The industry’s recovery has been hampered by a slow start to vaccination campaigns in SA and many other countries in the region. Last week’s civil unrest in KwaZulu-Natal and Gauteng also sent shock waves through domestic and cross-border markets, Stander said.
Furthermore, many companies have shifted to working from home and videoconferencing, which has reduced demand for local air travel.
Stander said notwithstanding further setbacks, the industry body estimates that domestic markets in the region will recover to 2019 levels in 2023 and international travel will bounce back in 2024.
The immediate focus should be on the full and safe resumption of scheduled airline services as soon as possible, including lifting the ban on leisure travel to and from Gauteng, she said.
“Although we cannot eradicate Covid-19, vaccines will allow us to exist with it and to travel again.”
On the future of the airline industry, Stander agreed with most analysts that the global market was likely to contract, with smaller and fewer airlines. She said, however, the airline industry in Africa may not follow the same pattern.
“Many airlines are owned by their respective states. Unlike other regions, Africa’s drivers of air transport are undiminished, namely rapid population growth, few navigable rivers, no fast long-distance rail networks, and large distances between markets which are best connected by air.”
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