African airlines battling high costs and low profits

African airlines are struggling against high operational costs and a low propensity for air travel expenditure in many of their home markets.

Infrastructure and connectivity challenges also hinder the industry’s expansion and performance. In 2024 the net profit per passenger of African airlines was only $0.90 and is expected to increase to only $1 per passenger in 2025.

This is below the expected airline industry average profit of $7 per passenger in 2025.

The industry, key to the revival of the tourism sector, ground to a halt during the Covid-19 pandemic and is only starting to recover.

The issue of creating more affordable air travel in Africa was a bit of a “chicken and egg” situation due to the general economic challenge on the continent, according to Willie Walsh, director-general of the International Air Transport Association (IATA).

In SA the affordability of airfares was recently put in the spotlight when parliament’s portfolio committee on trade, industry & competition called for an official inquiry.

“Aviation facilitates economic investment and economic growth, which tend to raise the quality of life and the standard of living. However, the reality is that African airlines face very high fuel charges and very high infrastructure charges as governments still look to the airline industry as a source of income,” Walsh told Business Day at IATA’s global media day in Geneva on Tuesday.

“The price of airfares in Africa reflects the cost of operating. If the costs can be reduced, it can reduce ticket prices, but there are a lot of moving parts.”

Globally, IATA is expecting airlines to deliver a total profit of $36.6bn in 2025. Lower oil prices and resulting fuel costs are expected to be major drivers of improved prospects for airlines in 2025.

Thin margins

Should these not materialise for any reason, and considering the industry’s thin margins, the outlook could change significantly, cautioned Marie Owens Thomsen, IATA’s chief economist. 

Walsh said with margins so thin, airlines must continue to watch every cost and insist on similar efficiency across their supply chain — especially from “monopoly infrastructure suppliers”.

He said issues such as persistent supply chain challenges, infrastructure deficiencies, onerous regulation, and a rising tax burden were beyond the control of airlines.

While fuel is the biggest cost for airlines, the cost of labour is the largest non-fuel cost and IATA found that there has been “intense” salary pressure on global airlines in 2024 as well as one-off expenses related to several airline employee strikes.

Owens Thomsen said that as costs go up, ticket prices would go up and it would depend on how individual airlines chose to operate and maximise their profits.

IATA expects all regions in the world to show improved financial performance in 2025 compared to 2024 and to deliver a collective net profit in both 2024 and 2025.

However, the collective net profit margin of African airlines is expected to be the weakest of all regions at 0.9%, while the Middle East’s is most likely to be strongest at 8.2%.