Virus threatens to blow some regional budget carriers off the radar for good

Kenya Association of Air Operation Chief Executive Eutychus Waithaka. [File, Standard]

When the coronavirus dust eventually settles down, many businesses will not emerge from the rubble, among them several local airlines that ply local and regional routes.

Though they may not feature prominently in the country's aviation news, the carriers have been critical in building perhaps the most robust aviation sector in the region, supporting numerous industries and relief operations while offering jobs.

The airlines have been hit hard by the pandemic. Covid-19, however, was not what drew first blood in the industry.

Some of the operators have been grappling with a myriad of problems going back to 2018.

A series of accidents, some of which saw a number of fatalities, over the two years cast a spotlight on the aviation sector, with some of their frequent passengers questioning the safety of the carriers.

The regulator - Kenya Civil Aviation Authority (KAA) - suspended some of the carriers and opened a probe, while the United Kingdom in November last year warned its citizens about the safety of the carriers operating from Wilson Airport, advising them to review an aircraft’s safety record before boarding.

Then came Covid-19, possibly at the worst possible time. In addition to the usual business, the industry was gearing up for the tourism sector’s high season running between July and October.

The season coincides with the wildebeest migration in the Masai Mara and recently the humpback whale migration at the Coast, both peak between July and September.

The airspace remained closed, understandably so as the country tried to contain the spread of Covid-19 at a time when the carriers would have been crisscrossing the country to take clients to these and other destinations.

While the local airspace was reopened in July, there are a number of the small carriers that are yet to restart their operations.

The Kenya Association of Air Operators (KAAO), a lobby for local carriers, while maintaining optimism that things might look up noted that it is not all rosy.

“The industry is not fairing very well, although it is not dead as such. We are at the start-up and recovery phase after the Covid-19 impact, but it is slow mainly because of several reasons among them the lack of confidence by the flying public as well as such issues like cash flow issues due to the few passengers that we are getting currently,” said KAAO Executive Secretary Eutychus Waithaka.

“I cannot rule out that some will close down, but there are also opportunities that others will become bigger. It is a question of reviewing one’s position and starting anew.”

While the carriers are yet to reassure their customers that they are safe in the skies in the era of the coronavirus, they are also struggling to keep up with their financial obligations, including servicing their loans.

“We are in a bit of a crisis… it is not just domestic but international; we are all facing the same problems,” explained Mr Waithaka.

“It is something that the global aviation sector is struggling with. The difference is that in some other markets, governments have taken different remedial actions. We have been hoping that our government will consider us. We have put in a few requests but so far we have not seen anything.”

Among the requests that the association has put to the government is a review of taxes and licence fees to give the operators some breathing space.

Specifically, the lobby has asked for a waiver on Value Added Tax (Vat) on aircraft spare parts, as well as the reduction of landing and parking fees by the Kenya Airport Authority. They also want a review of some licence fees by the Kenya Civil Aviation Authority (KCAA) for the carriers and their staff.

Waithaka noted that in the past, tax breaks granted by government enabled the industry access newer and modern aircraft, which enhances both earnings by players and safety in Kenyan skies.

Other than tax breaks, Waithaka said, the government should seriously consider injecting cash into the industry.

“One of the most critical things that can lift us easily and quickly is a stimulus package,” he said.

“The aviation sector has been the most hit, but we have not received any incentive even after other industries got Sh56 billion stimulus. It appears that the government forgot the enabler because if we stop flying, even those that received the stimulus funds will not move. We are talking about hotels; how would they get guests?” he said.

Several African governments have given their aviation industries some kind of a boost through cash injections.

Among the countries that have offered money are Rwanda, Senegal, Cote d’Ivoire, Burkina Faso and Cape Verde.

They have provided their industries with a combined $311 million (Sh33 billion) indirect financial support, according to the International Air Transport Association (IATA).

This, the Association said, has helped save thousands of jobs and will enable some airlines to restart operations as economies continue to open, albeit cautiously.

Iata and other air transport lobbies such as the African Airlines Association (Afraa) have been pushing governments to give their respective industries stimulus packages to enable them to restart travel.

They said without financial help, many African carriers will fold up.

“Four airlines across Africa have ceased operations due to the impact of Covid-19 and two are in voluntary administration, with many more in serious financial distress,” said the International Air Transport Association (IATA) Regional Vice President for Africa and the Middle East Muhammad Al Bakri in October.

“Without urgent financial relief, more carriers and their employees are at risk as is the wider African air transport industry, which supports 7.7 million jobs on the continent. 

“Continued financial and regulatory support, particularly financial relief that does not increase industry debt levels through direct cash injections, credit or loans and deferrals or discounts on user charges are essential to support airlines over the restart and recovery period.”

In recent estimates, IATA pointed out, the situation for Kenya’s aviation industry has been getting worse.

Despite reopening its skies in August, the number of aviation jobs in the country at risk had gone up to 223,600 in August. This is compared to 207,800 that the association had estimated to be at risk in April.

Due to the decline in aviation, according to IATA estimates, Kenya lost more than Sh190 billion ($1.8 billion) in August compared to $1.6 billion (Sh172 billion) in April.

IATA noted that the impact of Covid-19 on the region’s aviation industry would be felt for years to come, with its devastation on the economies having the potential to take Africa’s development back by a decade or more.

“The impact of the pandemic on the airline industry is severe and unprecedented. An immediate cash injection is needed to avoid insolvency or bankruptcy of African airlines that are expected to lose $8.1 billion in revenues for the year 2020,” said the AFRAA Secretary General Abderahmane Berthe.

Waithaka, on his part, said it could take the local airlines as much as three years to regain their footing. While globally the industry is expected to start recovering in 2021 and post fairly good performance in 2022, the local industry has to contend with the 2022 elections. This might mean subdued travel during the year.

“We expect to see recovery in not less than three years. And that is not when they will start to make profits but return to where we were at the end of 2019,” he said.  

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