From Kenya Airways to Uganda Airlines and Air Tanzania, airlines have been in the news this past week.
The African Airlines Association, AFRAA, estimates that African airlines will chalk up $10 billion in losses this year. The airline club attributes this to a spike in the price of aviation fuel, which has almost doubled since the travel rebound started last year, the lag effects of Covid-19 lockdowns on economies in the region, and lingering travel restrictions that deny African carriers access to some key markets.
One can add closed African skies and cumbersome borders — which suppress intra-African travel — and the corruption, incompetence and mismanagement that bedevils African airlines as perhaps more vicious inhibitors of performance than global crises.
Yet AFRAA remains upbeat about the prospects of African aviation for good reason. Remove these encumbrances and you would have one of the most promising frontiers for air transport. Underdeveloped Africa is the only market with plenty of headroom for growth.
Paradoxically though, the majority of policy makers and airline managers don’t appear to believe this. The managers appointed to run state-owned carriers often see them simply as cash cows and fiefdoms for self-enrichment.
Presented to the public as symbols of national pride and essential infrastructure, African airlines are bleeding national treasuries dry. Save for a handful of exceptions, their accounting is mostly opaque.
The notion of airlines as extensions of critical national infrastructure has become dogma for lame-duck political decision makers who, unfortunately, wield disproportionate power to appoint managers. It was first advanced by remote and isolated island communities, which rely heavily on tourism flows to balance their books. In such cases, a loss at the airline level, is averaged to zero by their overwhelming contribution to national accounts through enabling other sectors.
That generally applies to any economy but can only be realised if the airline as an asset is soundly managed. The sudden flip from profitability to deep losses at Kenya Airways, which the management is still struggling with seven years on, is a lesson on the vulnerability of an airline to predatory management. The current drama and revelations at Uganda Airlines show how old habits die hard. Cronyism has trumped merit and good governance, while an overbearing political figure casts a wide shadow over contrary thought.
Recent revelations of how managers of parastatals in Tanzania took loans from financial institutions to swell balance sheets and reflect artificial profits also demonstrate how an entire system can be reduced to an echo chamber in which everyone gets used to hearing only their voices.
Contrary to dominant economic thinking, state-owned enterprises need not be failures by default; it takes bad men and women to fail them. If the public officials selected to run them focused on safeguarding them instead of self-aggrandisement, Africa would be telling a different story.
