2025 financial outlook
The financial outlook for 2025 by the International Air Transport Association (IATA), which highlighted that total airline industry revenues are expected to be $1.007 trillion, representing an increase of 4.4 per cent from 2024, is heartwarming and shows the speed at which airlines have recovered from the devastating effects of the pandemic.
Equally impressive is the disclosure that passenger number is expected to reach 5.2 billion in 2025, a 6.7 per cent rise compared to 2024 and the first time that the number of passengers has exceeded the five billion mark. Cargo volume is expected to reach 72.5 million tonnes, a 5.8 per cent increase from 2024.
According to the Director-General of IATA, Willie Walsh, who spoke last week at the IATA Media Day held in Geneva, Switzerland, “in 2025, industry revenues will exceed $1 trillion for the first time. It’s also important to put that into perspective. A trillion dollars is a lot, almost one per cent of the global economy.
That makes airlines a strategically important industry. But remember that airlines carry $940 billion in costs, not to mention interest and taxes. They retain a net profit margin of just 3.6 per cent.” “Put another way, the buffer between profit and loss, even in the good year we expect in 2025, is just $7 per passenger.
With margins that thin, airlines must continue to watch every cost and insist on similar efficiency across the supply chain, especially from our monopoly infrastructure suppliers who often let us down on performance and efficiency,” said Walsh.
Contrasting fortunes
While all these signposts an industry that is ready for a bumper harvest next year, the same cannot be said of airlines in Africa that are struggling to exist and battling so many challenges. This contrasts sharply with another report from IATA which beamed its searchlight on the continent’s airlines.
While the global picture is one of strengthened profitability and a 3.6% net profit margin, the picture in Africa reflects the current environment of sustained demand against high operational costs – including many statutory taxes and charges on air transport – relatively weak economies and low foreign exchange reserves.
However, the International Air Transport Association (IATA) expects that African carriers will achieve $0.2 billion profit in 2025 with a net $1.00 profit per passenger. IATA, in its global outlook performance for the continent’s airlines, made available to New Telegraph, says Africa’s carriers face high operational costs and a low propensity for air travel expenditure in many of their home markets.
It added that a significant issue was a shortage of US dollars in some economies, which, along with infrastructure and connectivity challenges, hinder the airline industry’s expansion and performance. Despite these obstacles, there is sustained demand for air travel, which is expected to improve the region’s profitability marginally in 2025.
‘Exceptional’ African carriers
While virtually all African airlines are in the red except Ethiopian Airlines, Kenya Airways, EgyptAir, Air Maroc and South African Airlines, global airline revenue is expected to hit $1 trillion in the New Year representing an increase of 4.4 per cent from 2024. Today, 80 per cent of air traffic in Africa is handled by non-African companies.
However, the continent represents more than 17 per cent of the world’s population. Encouraged by a promising market, African companies set out to conquer African airspace, hitherto exploited mainly by their European or Gulf counterparts. The reason some airlines perform better than others especially African airlines can be attributed to both the market context and to airline-specific factors.
For instance, some airlines may operate in more established markets where capacity growth is in line with underlying demand growth. Other airlines may excel in areas that are crucial for attracting customers or maximising asset productivity, such as ancillary sales, a unique network portfolio, and operational excellence. Nigerian carriers are not known to have made a profit over the years.
Their performances are shrouded in secrecy and since many of the carriers are not in the stock market, it becomes very difficult to know if they are profitable. With the high mortality rate of airlines in Nigeria, it doesn’t take long to know that the airlines are struggling just as many of them are said to be on life support.
Empty skies
The extent of the challenge facing African airlines can be grasped simply by finding a flight tracking website and zooming out to see a global view of aircraft movements in real time. Much of Europe, North America and some parts of Asia are obscured by dense clouds of slowly moving aircraft icons.
But the map of Africa is punctuated by just a few lonely planes making their way across the continent Africa’s share of the global air travel market stands at only around two per cent – a level that has remained largely static over the past 20 years.
African airlines remain financially vulnerable. While the potential of Africa as the “last frontier” of global aviation has often generated excitement in airline boardrooms, many African carriers have struggled with financial chaos, political interference and haphazard management over many decades. Indeed, despite a healthy rise in passenger numbers, a worrying number of African airlines are still loss-making.
The continent’s overall net profit margin was negative three per cent in 2023, compared to a global total of +6 per cent. Recently, however, there have been unmistakable clues that things may be looking up for some of Africa’s leading airlines.
Expert’s view
A former Managing Director of the Federal Airports Authority of Nigeria (FAAN), Dr. Richard Aisuebeogun, noted that the potential of aviation in Africa is underutilised, which means that there are huge opportunities for sustainable airlines to thrive, but for the region to realise these latent possibilities, aviation – particularly, commercial air transport – must be prioritised by government.
According to him, Africa has the potential to be a significant force in aviation on the back of robust economic growth forecasts, with Africa having among the fastest growing economies worldwide, but African airlines carry only l.3 per cent of global air cargo.
Last line
The failure of governments in Africa to implement, most often, ideal policies has given rise to the failure of airlines in the continent and the dominance of foreign international carriers in the region.
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