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African airlines back to US$100m profitability

 African airlines are expected to return to profitability this year, for the first time in eight years, despite earlier predictions that losses were bound to persist.

The International Air Transport Association (IATA) said Monday the African carriers were expected to post a US$ 100 million profit, their first since 2002.

“This reverses the US$ 100 million loss previously forecast in March and the US$ 100 million that the region lost in 2009,” IATA said in its global focus released Monday.

IATA Director-General Giovanni Bisignani said the association was happy to note the continental airline’s return to profitability.

“Seeing black on the bottom line is a great achievement. The resilience of the industry has been strengthened by a decade of cost cutting, restructuring and re-engineering processes,” he said.

IATA’s programmes have contributed to this with US$ 47 billion in cost savings since 2004, with efficiencies in safety auditing, fuel management, infrastructure costs and simplifying the business,” said Bisignani.

Internationally, airlines are expected to return a record US$ 2.5 billion, which could further boost the incomes of the African carriers that depend on a fraction of the global passenger volumes.

“The US$ 2.5 billion profit comes with some important health warnings. First, this represents a net margin of just 0.5 per cent, which is a long way from sustainable profitability,” Bisignani said in a statement.

The IATA chief noted that a major part of the global industry is still posting big losses.

“A stagnating economy, strikes, natural disasters and a currency crisis have left European carriers struggling with an anticipated US$ 2.8 billion loss,” said Bisignani.

This is a downgrading from the US$ 2.2 billion loss previously forecast in March, although it is an improvement on the US$ 4.3 billion the region lost in 2009.

Europe’s Gross Domestic Product (GDP) growth of 0.9 per cent is not enough to support a recovery and the currency crisis clouds the future with uncertainty.

Moreover, 70 per cent of the US$ 1.8 billion loss in revenue as a result of the volcanic ash crisis was borne by European carriers.

A series of labour strikes and strike threats have also impacted the region’s performance.


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