Business & Finance

Despite Fewer Cases of Coronavirus, Africa’s Air Sector Hit Hardest

At the beginning it was a secret, time passed and the mouths could not hold it, China had to let the world know about the COVID-19 outbreak.

Shockingly, what started as mild cold (flu) with very little signs of a cough has turned into an epidemic clamping down major impacts on all sectors of the economy.

COVID-19, an infection that is caused by Coronavirus, is believed to have killed more than 2,800 people and infected over 84,000 worldwide; hitting China most; allegedly from an animal market in the central Chinese city of Wuhan in late December 2019.

Daniel Roeska, a senior transport analyst from Europe described the impact of the Corona Virus crisis as a reminiscent of 9/11 or we could relate it to the major sleeping sickness that hit several parts of Uganda in the 90s. We note that it wasn’t an economically driven issue for travel.

It was more fear, quite frankly, and I think that that is really what is manifested this time.

Lots of media houses have mainly shone the light on the spread, prevention and the cure of this disturbing outbreak; with many not paying attention to the bigger impact it has had on the aviation business.

For a long period, airlines – globally, have consolidated and tightened operations, taken advantage of changing travel habits and created new offerings for passengers, engineering an extended stretch of profitability.

Now, the coronavirus threatens to put all of that to the test. The International Air Transport Association (IATA) warned that airlines could lose up to $113 billion in 2020 because of the coronavirus crisis. It is also believed that most large airlines would not need rescuing in the near future, but the likelihood of that happening increased the longer the coronavirus outbreak dragged on.

For low-cost airlines, most of the tickets are non-refundable, so as long as those airlines don’t agree to hand tickets back, actually, the revenues for the next two or three months will not be catastrophic.

Larger legacy airlines are likely to diminish by the minute but will be bolstered by their financial strength, while the leverage of state-owned flight operators lingers in a shadow.

More obvious signs indicate that if the demand drops, airlines will down-size and close shop or seek financing very soon.

The latest example of the outbreak’s toll on the industry came on Wednesday, March 4, when United Airlines became the first U.S. carrier to announce a widespread cut to domestic service, signalling that fear of the virus was starting to erode ticket sales far from the hot spots of the epidemic.

In a letter to employees, the airline’s top two leaders announced plans to cut international service in April by about 20 percent and domestic service by about 10 percent, with similar cuts possible in May. They also announced a hiring freeze through June and said workers in the United States could apply for voluntary unpaid leave.

Similar close to shutdown incidences have been registered among other prominent airline companies like Emirates group and China’s Hong Kong Airlines. According to the South China morning post, Hong Kong airlines is at the brink of collapse and in a desperate attempt to cut costs, several employees especially flight attendants have been sacked.

Read the full text of this article from Zam Quitah on Red Pepper.