The global aviation industry – including Africa’s fast-growing region – is struggling to cope with the economic fallout from the Iran war.
One of the most immediate pressures comes from the cost of jet fuel, which constitutes a significant portion of airline operating expenses.
Jet fuel, a kerosene-based product refined from crude oil, is the primary fuel used by airlines.
However, disruptions related to the Iran war caused prices to double in some markets, leading to supply shortages.
“This has an impact on how much aviation fuel African carriers purchase for their operations,” Dominic Andoh, managing partner of online aviation news portal AviationGhana, told DW.
Concerns about energy security have driven up global oil prices.
Brent crude oil was trading near $98 a barrel in early trading on Wednesday, Reuters reported – up more than 30% from the day the war began.
Analysts say the increase is due to fears that a fragile truce between the United States and Iran could break down, especially after the US seized an Iranian cargo ship and shipping traffic through the Strait of Hormuz remained largely halted.
And oh note that the burden of increased fuel prices has essentially been passed on to passengers.
“Ticket prices have increased,” he told DW.
“If you look at the fuel surcharge margin on almost all tickets sold since the war started, especially in April, the fuel surcharge has increased by various percentages.”
Financial losses increase due to flight disruptions
The severity of the crisis has raised concerns among African business leaders.
“Most African airlines will not be able to survive the current increases in fuel costs,” Nigerian billionaire Aliko Dangote, owner of the Dangote refinery near Lagos, told an audience at the Semaphore World Economy Summit in Washington, DC, on Monday.
In addition to fuel costs, airspace restrictions around the Gulf countries have forced airlines to reroute or cancel flights, driving operating costs even higher and reducing route efficiency. These disruptions have also contributed to higher air ticket prices.
Ethiopian Airlines is the most affected. Last month, airline executives revealed that the carrier was losing about $137 million every week as a direct result of the crisis.
“The airline has canceled more than 100 flights a week, some destinations previously operated three flights a day, and we have lost about $137 million in a week,” the airline’s business manager Lemma Yadecha told local media.
Last week’s announcement of a ceasefire had raised some hopes in the aviation industry that conditions would improve. However, the optimism was short-lived amid fears the fragile agreement would unravel.
Airlines turn to new survival strategies
In response to increasing challenges, some African airlines are adopting alternative strategies to maintain operations.
For example, Kenya Airways says it is rerouting more European passengers through its Nairobi hub instead of traditional Gulf transit points.
“We took advantage of the current situation and re-routed many customers, mainly from Europe, through Kenya through our hub in Nairobi, rather than re-routing them through the Gulf,” Kenya Airways CEO George Kamal told reporters.
Despite the turbulence, Andoh believes African aviation can weather the storm if airlines take preventive measures.
Andoh said, “Airlines could probably stockpile more aviation fuel; that is, if it’s available. Possibly hedge against price gouging so that if the war drags on, they might have some fuel to survive.”
But Willie Walsh, head of the IATA airline trade association, cautioned that even if the Strait of Hormuz were reopened and kept open, “it will still take many months to get supplies back to where they need to be.”
“Given the disruption to refining capacity in the Middle East, which accounts for a significant portion of the global supply of refined products,” Walsh told reporters.
“And not just jet fuel but other products as well. So it will probably take several months.”
The impact on the tourism sector is being felt
The aviation crisis has also impacted tourism, an industry heavily dependent on air travel.
In South Africa, tour operators like Cape Town-based tour operator Imran Rood say cancellations and uncertainty are already impacting livelihoods.
“Cape Town has been named one of the best places in the world for travelers to come and visit, and because of the war, Cape Town is also suffering overall. I’m basically talking about the tourism industry, and a lot of tour guides and tour companies are suffering as well,” Rood told Reuters.
Flight cancellations on Middle East routes have also hit businesses that rely on frequent international customers.
Rood stressed, “In the past few months alone I have lost 350,000 to 500,000 rand ($21,000-$30,000) due to the war in the Middle East. This has had a direct impact on my business, especially because many customers who return regularly have not made any plans this year due to the uncertainty.”
However, Andoh is confident that both aviation and tourism will eventually recover.
“The aviation sector, the tourism sector will remain in business,” he told DW. “If anything, COVID-19 proved that the tourism and aviation sectors are very resilient. People will still travel.”
Edited by: Keith Walker