An Extraordinary Year For The Southern African Aviation Industry

AGM ZOOM

As many of you know, even in times of the worst crisis, the AASA Annual General Assembly has always been an occasion to look forward to, as an event where competitors and friends could travel away together to wrestle with the common issues of the day in a collegiate and collaborative spirit.  Never in our most surreal imaginations did we foresee ourselves conducting our 50th Annual General Meeting on a ZOOM video call!  

We were already at an advanced stage with arrangements to hold what would have been our 50th annual assembly at Skukuza in the Kruger Park, when the COVID-19 pandemic and lockdowns were declared.  Given the financial impact of the pandemic on our members, our partners, stakeholders, the economy and our communities, I’m sure you all agree that cancelling those plans was both the appropriate and prudent thing to do.  From a practical and logistical perspective, we had no certainty on when South Africa’s borders would be re-opened or if actual, rather than virtual, conferences would be permitted.    All being well, we will meet again in person next year, to celebrate AASA’s half-century and, hopefully, a significant recovery of our industry.

AASA was established in 1970 to represent the region’s airlines and work together with industry leaders and senior government policy makers, legislators and regulators on matters affecting the common operations and sustainability of its member airlines.   Today we represent most of the SADC-based airlines and lead industry’s position in the region on airport, airspace and civil aviation issues, consumer legislation, environmental and tourism matters, and other important industry issues.  We work in tandem with the UN International Civil Aviation Organization (ICAO) and International Air Transport Association (IATA) and support their initiatives in the region.

Airlines are not alone in facing the present crisis.  Our industry partners, including infrastructure and other service providers and safety regulators have been equally affected.  Over the past seven months the constructive working relationships AASA has forged over decades with all of its industry partners and stakeholders, has proven invaluable and we have been able to find common ground and solutions on most of the issues that we usually and routinely need to address to ensure that air transport in our region is safe, efficient, viable, accessible and affordable.   A comprehensive report on these activities is contained in the annual report and my AGM notes which follow as the second part of this address.

Nevertheless, COVID-19 and the accompanying devastating effects for our entire industry have demanded much of our attention and energy this year.

COMMERCIAL IMPACT OF THE COVID-19 PANDEMIC

Pre- COVID-19, Southern Africa’s airline industry was operating under increasingly challenging financial conditions.  Only a few -  mostly privately-owned -  airlines in the region were profitable.  Others relied on state support of some form or another.   Two of our airline members, South African Airways and SA Express, were placed in business rescue last December and this February respectively.  And in April, shortly after the lockdowns brought business to a virtual standstill, Comair voluntarily followed them.

The pandemic and lockdowns have been catastrophic for aviation.  The health and safety of our customers and staff have always been our primary concern and so we supported the initial “hard” lockdowns.  They were intended to flatten the infection curve and create the breathing space for public health services to roll-out testing, educate and change peoples’ social behaviour and to prepare facilities to cope with the rise in infections and deaths.  

But the restrictions inflicted severe harm across many sectors of the economy, not least on aviation, travel and tourism.   The numbers provide evidence of the impact and reflect the phased re-start of domestic, regional and international operations (statistics are 2020 vs 2019):

COMMERCIAL IMPACTGLOBALAFRICASOUTH AFRICA
    
ECONOMIC CONTRIBUTION  SUPPORTED$1.8tn (51%)$37 bn (58%)$4.7bn (51%)
Jobs at risk (aviation related)46m (52%)5.0m (58%)270,000 (57%)
JOBS AT RISK (AVIATION DIRECT)4.8m (42%)172,000 (39%)40,000 (57%)
AIRLINE PROFITABILITY-$85.3bn vs +$28.3bn-$2bn vs $200 m-$1bn vs $200 m
Passengers-66%-70%-68%
[Reference: IATA Economics, ATAG]

EXTENT OF IMPACT OF COVID-19

Not a single aviation industry stakeholder has been spared from this pandemic’s impact.  Airlines and any organizations relying on revenue from airline operations and passengers have been affected.  This includes tax authorities, civil aviation authorities and other regulatory bodies, infrastructure service providers such as airports, air navigation and weather services, industry suppliers and partners in the travel, tourism and all other associated sectors. 

The inability to trade and generate revenue while continuing to incur fixed costs, triggered an industry-wide liquidity crisis, forcing organisations to rapidly implement drastic cost saving measures.  The social and financial distress has been particularly hard.  Many employees have taken pay cuts, been placed on paid or unpaid leave, temporarily laid off and, in the worst-affected businesses, retrenched.  These have been traumatic experiences especially where alternative employment is extremely limited.

AASA has been lobbying governments to provide financial relief for its member airlines.  We supported the global call made by IATA and approached governments in our members’ countries, requesting relief in the form of loans, loan guarantees, tax relief and cash injections - either as equity, or to assist with liquidity challenges, for example with subsidies for wages and other essential expenses. 

Unfortunately, many governments have only provided limited direct support.  Some have offered assistance in the form of debt, which becomes an additional and often, unbearable burden for airlines already borrowed to the hilt.  We acknowledge governments’ responsibilities to assist communities and small businesses that are desperate for financial relief.  But they should not ignore the vital role that aviation, travel and tourism will play in driving the economic recovery through the jobs they create, both directly and indirectly, and the hundreds of thousands of livelihoods they support.

AASA, together with IATA and BARSA, has also sought other opportunities for financial relief, including waivers, discounts, deferrals and suspension of user charges by our infrastructure service providers that derive revenue from user charges payable by airlines and passengers.  It is not lost on our airline members that many of these entities are themselves feeling the crunch.  Some have been open to finding mutually workable solutions and many of the proposals we have made are being considered – I shall deal with this later. 

Considering the economic benefits airlines provide to the markets and communities they connect, it is important that where governments provide assistance to certain state-owned companies and agencies, they ensure some of these benefits are passed on to the airlines - both public and privately-owned - by way of reduced user charges.  This will provide some much-needed relief to airlines.

This crisis is the most severe test for the aviation industry.   In South Africa, aviation has worked through the Captains of Industry Forum - convened by the Director Civil Aviation of SA Civil Aviation Authority - to lobby the Government to enable the resumption of air services.  We thank Ms Poppy Khoza and her team for their leadership in this area.  

In all respects, we are all trying to navigate in unchartered territory.  What we must take away from the experience over the past months, is the necessity for industry and governments to engage directly with each other openly in all appropriate departments at Director-General and Ministerial levels.   This is essential if we are to address strategic, policy and practical issues that will ensure a safe and viable restart of airline operations so that aviation can support the region’s economic recovery without compromising public health and safety.   

TOWARDS RECOVERY OF THE INDUSTRY

The lockdowns provided governments with opportunities to better understand COVID-19 and arrest its spread.  They also prompted the definition and implementation of risk and infection-mitigating biosecurity measures, protocols and  procedures by airlines, airports, tourism businesses and other service providers, in accordance with guidelines and regulations formulated by Aviation, Health and Tourism authorities.  This enabled the restart of domestic air services. 

A set of guidelines for the safe resumption of air travel and tourism was developed jointly by the International Civil Aviation Organisation-led “Civil Aviation Recovery Taskforce” (CART), together with the UN World Health Organisation (WHO), the International Air Transport Association (IATA), the Airports Council International as well as public health and leading medical research institutions from around the world.   

However, the move to allow intra-Africa and inter-continental travel has presented a big challenge.   The CART’s guidelines require all states to harmonise their implementation without introducing arbitrary measures that would create inconsistencies, confusion and deter travel, similar to what happened after 9/11 with some authorities creating their own security standards and procedures.  Unfortunately, despite the CART’s intentions, governments are developing their own standards for testing of passengers and crew, quarantining and determining principles for approving who may travel and between which countries.  This does not bode well for the aviation, travel and tourism industry, potentially putting even more jobs at risk, creating hardship and delaying the economic recovery.   

The opening of South Africa’s borders effective 1 October 2020 is welcomed, but there needs to be clarity on the risk classification of states, by which leisure travellers are either approved or denied entry.  Government should take us into its confidence and explain why it has superimposed these additional restrictions on the set of risk-mitigating health and safety protocols it had already developed and approved for the safe reopening of the borders.    We are also appealing to Government to explain its criteria for reducing or, better still, scrapping these lists, and opening the borders without restriction.   

If these latest leisure travel restrictions are maintained, our industry and the entire economy will face a much slower and arduous recovery

In conclusion - our industry is in crisis and while we have achieved much, we must do more. Going forward, our work is cut out for us in removing obstacles in our way, re-building our industry and enabling the recovery of the economies we serve and connect through the vital connections we provide for trade, commerce and tourism.  We must foster trust between governments and our industry and engage more directly with each other.  We cannot exist without each other and must work together to strategise, plan and set about repairing the damage that has been done and preparing for a stronger, healthier and better future. 

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