According to the International Air Transport Association (IATA), the forecast for 2009 is looking gloomy than it was last year. Last year saw the airline industry grappling with record-breaking high oil prices and reduced demand for air travel. This ultimately led to scaled-down operations for some airlines. Those that could not contain sky-rocketing prices of Jet A1 fuel subsequently collapsed and shut down.

Industry analysts note that the current state of affairs in air transport gets even gloomier as demand for air travel continues to plummet. The Geneva-based IATA has indicated that passenger traffic is likely to drop by 5.7% while cargo traffic will go down by 13%.

African carriers such as South African Airways, Air Zimbabwe, Ethiopian Airlines, Kenya Airways and Air Malawi, to name just a few, experienced a drop of 12.9% by October 2008. This was a few months after the beginning of the global economic crisis which began in the United States as a sub-prime mortgage crisis.

IATA revealed that passenger demand for air traffic transport fell to 11.1% below March 2008 levels. IATA also announced that airlines cut international passenger capacity by 4.4% resulting in an average load factor of 72.1%. This is 5.4 percentage points below the average load factor recorded in March 2008.

Revenue

IATA’s Director General and CEO, Giovanni Bisignani, said the global economic crisis had continued to reduce demand for international air travel. “Airlines cannot adjust capacity to match demand. Load factors have dipped sharply from last year. All of this is hitting revenues hard,” he said.

For a country like Zambia which has had no national or state-owned airline since the liquidation of Zambia Airways in 1995, regional carriers operating in the Southern African nation have either cut down on their flights into Zambia or are in the process of doing so due to the current global economic down-turn, AfricaNews reporter said.

The drop in air travel demand spurred by slowing economies worldwide, amid fears of recession is creating uncertainty in Zambia’s airline industry.

South African Airways, which has the largest flight frequencies into Zambia than any other airline operating in the country, has already reduced or suspended some of its flights globally. This drastic move is aimed at ensuring the viability of the airline’s business. The airline recently announced that “some flight frequencies on European and United States routes would be reduced and aircraft moved to profitable African routes”.

Air Namibia, that country’s national airline, suspended all flights to the United Kingdom last May. The decision was taken as the London-Gatwick route had been making the most losses since February this year.

The airline said the decision was taken in light of the current recession and its effect on aviation worldwide. “Air Namibia was strained to re-assess its route network and offering to ensure the equilibrium between supply and demand,” said Thea Namases, Acting Managing Director of Air Namibia.

She said Air Namibia has been monitoring the performance of the route and records show that it has a 92% market share. “The 92% market share is significantly less than the required break-even load factor. The current economic slow down has constrained demand for air travel services on this route even further. In order to minimize losses as a result of these facts, Air Namibia has decided that the two flights per week operated on the Windhoek/London-Gatwick route be withdrawn with effect from 3 June 2009,” said Namases.

Changes

Other changes on Air Namibia’s route network include four return flights per week between Windhoek and Luanda as from 1 July, the flight between Eros and Katima Mulilo will depart from Eros Airport at 7h00 and will return from Katima Mulilo on the same day at 16h00 on both Mondays and Thursdays with immediate effect.

But Kenya Airways, which operates 12 flights into Zambia every week, maintained that it would not cut down on its flights into the country despite the economic down turn. The airline’s country manager for Zambia, Rose Kiseli, admitted that the worldwide economic crisis was having an overall effect on the entire airline industry globally.

Kiseli explained that as part of Kenya Airways’ strategy to sustain its operations despite the low demand for air travel in Zambia, the airline had initially deployed aircraft with smaller passenger capacity on its service route in January and February this year.

Kiseli said the airline had since reverted to full normal operations without cutting down on its weekly flights into Zambia.
“We will not reduce our flights into Zambia. All we did was to rationalize in January and February but we have now resumed normal operations. When we rationalized, we were providing aircrafts depending on the volume of the passenger load. However, this has now been normalized,” she said.

Independent studies have shown that despite having some of the continent’s best tourist attractions, Zambia has failed to take advantage of these resources. It is therefore unlikely that airlines like South African Airways will consider the Zambian routes as “profitable” as it relocates flights, from European and U.S routes.

The local airline industry is not immune to the current global economic crisis. The country’s privately operated airline, Zambian Airways, grounded its aircrafts early this year due to financial problems. The airline was the only Zambian carrier with flights across the country and to some parts of the southern African region since the demise of Zambia Airways decades ago.

Initially, the airline suspended its Lusaka-Mfuwe route after contending that the prices of jet fuel were much higher in Zambia than in the rest of the region. This was despite a slight reduction in the prices of fuel on the international market. Within a period of about five months, Zambian Airways announced that it was suspending all its operations until further notice because of financial constraints. The International Air Transport Association (IATA) lists the local airline as one of the 29 international airlines to suspend operations because of the current global economic crisis.

Since 2007, IATA has suspended 42 airlines for failing to meet financial liabilities. Of the 42, 35 were suspended in 2008 and three in 2009, including Zambian Airways. A total of 29 carriers ceased flying, including two because of mergers.

Other airlines that service local routes such as Zambezi Airlines, Airwaves Zambia and Proflight Zambia have continued to operate despite a slowdown in Zambia’s economy. It is believed that the operating airlines have either cut costs by grounding some of their aircrafts, reduced capacity, cut flights or have restructured their operations to suit the current situation.

Cushioning the impact

As a way of cushioning the impact of the global economic meltdown, Zambian authorities are encouraging economic diversification. It is understood that developing economies like Zambia’s are likely to feel the biggest pinch of the crunch. This is because they lack the capacity to formulate stimulus packages to rescue or even bail out ailing institutions. Under its diversification model, Zambia is launching robust marketing and developmental reforms in sectors such as agriculture and tourism.

While most observers welcome plans to diversify the Zambian economy and possibly cushion the effects of the global crisis, others argue that it will be impossible to develop tourism without an established national airline. It is argued that a global decline in international demand for air transport will not do any justice to the Southern African nation. International tourists, 85% of which use air transport, are opting to spend holidays to destinations nearer to their countries because they no longer have enough financial capacity for a holiday to distant places.

Since the demand for Zambian air transport is locally driven, it is likely that the industry is in for a turbulent time in view of the global recession. This could, in turn, adversely affect its contribution to national economic development. It is not known how stable the Zambian aviation industry is to date or how secure it is from the current economic crisis but the International Air Transport Association (IATA) estimates that the global airline losses may total US$ 4.7 billion this year, almost 90% higher than the previous forecast of US$2.5 billion.

IATA also says the deepening global economic recession will likely wipe out revenue of about US$63 billion, far from what the Zambian airline industry would have banked on to sustain stable operations.

The Zambia Tourist Board, Tourism Council of Zambia and the Livingstone Lodges and Guest Houses Association have all acknowledged the implications of the economic crunch on tourism, hospitality and its linkage to the airline industry. Coupled with a gloomy picture in airline industry, Zambia is faced with a challenge of ensuring that an integrated formula is established.

Airlines across the world, Zambia included, are facing an unprecedented global crisis due to the current global recession. The sharp drop in passenger and cargo demand is reshaping the airline industry with drastic changes from capacity cuts to cost cutting measures.