Middle East and African airlines to post profit in 2022 as demand recovers

 

Kamil Al-Awadhi

Airlines based in the Middle East and Africa will end the year in the black, despite macroeconomic headwinds, as air travel demand outstrips available seat capacity, the International Air Transport Association's regional chief said.

Passenger traffic has reached 80 percent of 2019 levels before Covid-19, lifting revenue and pushing operators into profitability, Kamil Al-Awadhi, regional vice president for Africa and the Middle East at Iata, told The National on the sidelines of the Bahrain International Airshow.

“To be quite frank, I'm quite proud of them. Having run an airline myself, I know how complicated it is on a normal day, without all these variables and uncertainty and lack of visibility,” Mr. Kamil Al-Awadhi, the former chief executive of Kuwait Airways, said.

“Where they're at right now is evidence that they've done a good job in surviving on their own predominantly.”

“When it comes to revenue, it will be positive for the airlines because as the demand outstrips the supply, they're reaping some of the cash that compensates some of the losses.

“It doesn't compensate their losses from 2020 and 2021, but at least it keeps them afloat, adds some cash for them to recover some issues like routes that they shut down, aircraft they parked and maintenance they suspended.

“They will return to the black for this fiscal year, not overall, that will take a few years to recover the losses they've had in 2020-2021.

“In 2022, they will probably make a better profit than 2019, but that doesn't cover the losses made in 2020 and 2021.”

This is because demand in 2019 was lower than the available seat capacity, whereas in 2022, there is higher travel demand and fewer seats, which drives up the air fare and the airlines make more profit per flight, Mr Al-Awadhi said. This latest update on the regional airline's profitability is an improvement on Iata's last industry report in the summer.

In June, Iata upgraded its outlook for the global airline industry’s 2022 financial performance as the pace of recovery from the Covid-19 crisis quickened.

Middle East-based carriers' net losses were expected to narrow to $1.9 billion this year, from a $4.7bn loss last year, while travel demand is expected to reach 79.1 percent, Iata said at the time.

In the Middle East, the reopening of international routes and long-haul flights, in particular, will provide a “welcome boost” for many airlines, it said in June.

For Africa-based airlines, net losses are forecast to be $700 million this year, with demand expected to reach 72 percent of 2019 levels, Iata said.

Major airlines in the region have reported record profits so far this year.

Emirates, the world's largest long-haul airline, reported a record profit in the first half of the current financial year on strong travel demand during the peak summer season as international borders reopened and coronavirus restrictions eased.

The airline posted a Dh4bn profit in the April to September period, compared with a loss of Dh5.8bn in the same period last year, Emirates said on Thursday. It cited its ability to increase capacity in response to the surge in travel demand.

Budget carrier Air Arabia, the UAE's only publicly listed airline, posted a record third-quarter profit amid strong air travel demand across its six hubs.

Net profit for the three-month period that ended on September 30 nearly doubled to Dh416m, from Dh209m in the same quarter last year.

Tags: Kamil Al-Awadhi,  Middle East and African airlines