Chris Zweigenthal, CEO of the Airlines Association of South Africa (AASA), talks to ATW's Victoria Moores about how COVID-19 has compounded the challenges faced by airlines in the region and what can be done to help carriers survive.
This interview is part of Air Transport Month, a detailed examination of the future of the air transport industry as we begin to climb out of the COVID-19 crisis.
Rush transcript:
Victoria Moores: Good morning, afternoon or evening, depending on where you are in the world. My name is Victoria Moores. I'm European bureau chief for Air Transport World. And with me today is the Chief Executive of The Airlines Association of Southern Africa, Chris Zweigenthal. Good morning, Chris.
Chris Zweigenthal: Good morning, Victoria. Great to join you. Thank you.
Victoria Moores: Chris, you just had your annual general assembly yesterday and like a lot of associations and businesses at the moment you've had to do that meeting online because of the COVID crisis. Your members are specifically southern African airline members, so that goes beyond South Africa into countries like Namibia, etc. So I'm curious to know, just in terms of the overall situation that you're seeing among your members at the moment, how have they been affected by COVID?
Chris Zweigenthal: Thank you, Victoria. Yes, certainly the members have been affected. Even if you take pre COVID-19, there were a lot of problem areas and challenges that airlines in Southern Africa were experiencing. We had probably only a number of mostly privately owned airlines that were in a profitable situation and the others were either in close to break even, or in a negative situation. And obviously COVID-19 impacted everybody completely, even pre-COVID 19, we had South African Airways and SA Express going into business rescue and following COVID-19 one of the most successful airlines in South Africa, Comair, went into voluntary business rescue and they're still in that situation at this moment in time.
If we go along the region, I don't think there's probably an airline now in South Africa or Southern Africa, that will make a profit during this financial year, given the fact that from the end of March, all states effectively introduced a lockdown mostly on domestic travel, although some states did continue to have domestic travel, but definitely on international travel. And so from that perspective, it introduced a liquidity crisis because there was no revenue coming in. And then you had a situation where they had to look at severely curtailing costs because cash was king. And, so, we had a situation where certain costs, particularly on the fixed cost side which is roundabout up to 40% of an airlines expenditure, which had to be continually funded. You had a situation where probably, in the main, the employees have suffered significantly and obviously many had to be put on unpaid leave or paid leave. There was retrenchments that took place, or even layoffs that took place.
So very, very poor situation and really a tough situation, which is going to lead probably to a situation where around the region, we're going to have a loss of around about a billion US dollars for this year compared to probably what happened last year, which was about a 200 million US dollar loss. So, not a good situation and hence the importance of getting recovery started and getting aviation going not only under domestic, which is pretty much on the run now in most of Africa, but regionally and internationally as well.
Victoria Moores: Mm-hmm (affirmative). And in terms of the restrictions that you're seeing across your specific area at the moment, how many countries are still limited in terms of international flights and how many are now allowing that and opening up?
Chris Zweigenthal: I think around the region most are opening up to international and regional travel. From a South Africa perspective, they've completely opened up to Africa. So no state in Africa is restricted from flying into South Africa, or to bring any passengers to South Africa, so that's pretty good. I think one of the biggest issues at the moment for us is to try and get harmonization of the measures that the states are actually implementing to allow travelers to come into South Africa and around the region. Some areas, there have been some requirements for quarantining and then others just requiring COVID-19 PCR tests to be negative before you're allowed into the country.
I think there's definitely also some other positive moves that are starting to happen, where they're talking about the antigen tests that are coming in and being implemented in certain states, so that if you do not have a test, that's positive - a negative test - available to show the authorities when you arrive in South Africa, for example, they're looking at now introducing antigen tests, which are tests requiring about 15 minutes before you will know the result, whether it's positive or negative. And so that's very good.
If you arrive here and you're found to be COVID positive, then you will unfortunately have to go into quarantine. But I think we're certainly supporting the global view that quarantining is not the way to go because it is absolute a 100% deterrent on travel. If you look at tourists traveling around the world and going in for visiting various states, the normal average stay is around about 10 to 12 days. And if you're required to do a 14-day quarantine on arrival in a country, then there's absolutely no incentive for you to travel to that particular country and wait for the quarantine to stop.
Victoria Moores: Mm-hmm (affirmative). And you mentioned about uniform responses, obviously this is more a situation for health ministers at the moment, that's very much a national decision. But have you seen any uniformity for aviation coming from a body like AFCAC, which tends to oversee aviation within the region, or has it been very much state-by-state?
Chris Zweigenthal: No, I think certainly from ICAO and AFCAC and AFRAA and IATA, and ourselves, as AASA, we are united in supporting the International Civil Aviation Recovery Task (CART) Force work that was done. So the CART, as they call it, has been implemented which really advocates for harmonized regulations between states and to ensure that they're no different type of regulations that are implemented to probably give travelers a problem in terms of trying to make sure that if they're going to visit a specific state, they have to make sure that they comply with certain regulations and not others. So the problem, of course, is that many states are - notwithstanding the CART guidelines - are actually introducing their own individual restrictions and that is causing problems for passengers and making passengers think twice before they actually make the decision to travel and just thinking, "Well, maybe I'll just delay my trip a further three months, four months, five months, six months."
I think we, as aviation, the work that's been done through ICAO and World Health Organization and all the work that's been done by the individual civil aviation authorities to put guidelines in place whereby protocols and standard operating procedures have put place, that's fantastic. And we are really saying that the passengers, in terms of all these protocols that we must comply with, and as you know we're a very regulated industry, so compliance is an issue, if we operate according to those protocols, it's absolutely safe to fly. It's going to be a new experience to fly, as with those who have flown and will know, because of obviously wearing masks on board and going through the various sanitization and social distancing measures within an airport. But once you're onboard the aircraft with the fantastic and probably the best air particulation system in the world onboard an aircraft, if we behave ourselves, we sit there, it's absolutely safe to fly.
So we're encouraging governments to say, "Look at all these fantastic measures you've put in place and you've approved. There's no need for additional restrictions to make it difficult for travelers to move around between the countries." And obviously from an economic perspective, it's absolutely essential that we get aviation travel and tourism going to the fullest extent, so that we can help the economic recovery, because around the world, we're seeing that at risk is around about 50 to 51% of the economic contribution of aviation to the economy is at risk. And we obviously need to reverse that trend.
Victoria Moores: Mm-hmm (affirmative). And you mentioned about the significance, the importance, of aviation to Africa and to overall economies, earlier on we were talking about South Africa and the situation there seems to have been quite severe in comparison with other African countries. Perhaps that's a reflection of how established the aviation industry is in South Africa versus some of the other countries that you had so many airlines, but we've seen a lot of them going into business rescue, which is roughly the South African equivalent of administration. Do you think something specific has been going on in South Africa that hasn't been going on in other countries?
Chris Zweigenthal: Are you referring to specifically to why we got such a high infection rate or something like that?
Victoria Moores: …to why we're seeing so many airlines immediately, even like Comair which is very strong airline, go into business rescue, where we've not necessarily seen that yet in other countries?
Chris Zweigenthal: Well, I think the other countries, you probably have got state-owned airlines. And so therefore they're obviously in close contact with their shareholder, which is their state, and they're probably finding ways to prop them up and to assist them with some cash or loans, etc. On the Comair side, as an example, they are a privately owned airline, and obviously only their shareholders, which are private shareholders, have the ability to fund the airline at this moment in time. We, as AASA, did apply and make requests to the government for financial relief for all airlines in South Africa, both public and private. And unfortunately we haven't necessarily got their responses yet. I think there's still some discussions ongoing. So the problem with Comair was, as they published at the time, was to go into voluntary business rescue to restructure the airline and obviously to protect themselves from creditors, which you can understand.
And on that basis, they restructure, and it looks like the shareholders and the creditors have approved a business rescue plan and I think the funding and the investment side is being dealt with at the moment and we're hoping to see them fly probably before the end of the year. But on the case of South African Airways and SA Express, that actually happened before business rescue and we're still in that situation of trying to resolve their business rescue situation, which is also a matter that has been in the media space as well, quite a lot.
Victoria Moores: We've already seen that business rescue plan come forward for SAA, it seems to be a real issue of funding at the moment. And then, also, in terms of SAA Express [SA Express] there's this bid from the employees. So what's your sense around all that? Do you think we will see these airlines up and running again?
Chris Zweigenthal: Oh, it's a difficult question to ask me. Obviously my interest is the sustainability of the industry in Southern Africa. And we've come from a situation of going off a precipice where we got everybody down to zero overnight, effectively, by the end of March. And so really starting from scratch now, we've only seen four airlines start operating in South Africa, such as CemAir, Airlink, Mango Airlines and FlySafair. The other three airlines are not operational at the moment. And obviously it would be great to see an industry back to normal, but I don't think…everybody talks about a new normal, and I'm not sure how that will pan out. But until such time as government and the board and the shareholder of those two airlines address their issues and particulars revolving around funding, I think we just need to wait and see how that will pan out.
Victoria Moores: Mm-hmm (affirmative). And are there any other airlines that are - I mean, I know that everybody is in financial difficulties right now, because you can't not fly and then end up not in financial difficulties for the vast majority of airlines - but are there any other cases of concern across the continent at the moment where they may not fly again?
Chris Zweigenthal: I am not aware of that. And the interesting aspect is now that we've been going through a situation where we went to zero and now we are starting to ramp up and we're going quite slowly. So I think every airline is probably in difficulty. The importance is to get the markets open and get flying again, so that you can actually generate the revenue and start paying off a lot of the debt that you've got. If we have a slow recovery, slower than even what's been projected at this moment in time, you could see airlines getting into financial difficulty. And that's basically because they will not be able to fund their debt off or to finance their debt. They may have taken on loans now, but when you take on loans, you've got to repay those loans and probably with interest as well.
And if you're not able to fund that debt at some point and when the debt starts to become due, then you could land up in problems. And so I think this year, you probably won't see many casualties, but when the rubber hits the road and you have to start paying back some of that debt, maybe in 2021, we could start seeing some trouble. I just hope, as I say, that's why we are so passionate about pushing to reopen the markets, that we don't put airlines into a position that it's an irrecoverable problem of not being able to come back and start operating in a sustainable fashion.
Victoria Moores: Yeah. And absolutely it's as we go down the line that we're going to continue to feel the impact of this. Africa as a continent tended to be, from what we're seeing here, one of the last to be hit by COVID in a very strong way. Obviously we saw it originating in Asia, moving very strongly into Europe, moving into the US. Comparatively how do you think Africa has been impacted compared with the other regions? And also what's the view for Africa in terms of the recovery? We've heard a lot of numbers in terms of the global recovery, but what about Africa?
Chris Zweigenthal: I think Africa's done remarkably well and one of the reasons, if you remember the lockdown, when you looked at the Flightradar24, for example, you could see still lots of flying over the USA, Europe and Asia. And yet in Africa, we had hardly anything going on. There were only some domestic flying in some of the states around, but certainly no international, or intra-African flights, other than cargo flights and essential services flights. So, I think the lockdown was very hard on Africa. And I think that's one of the reasons why many of the travel, tourism and aviation companies are in such difficulty, because there was no other source of revenue other than the cargo revenue.
But now that we've got that situation, I think the recovery has been remarkably good. We went through the peak and particularly in South Africa, as you mentioned, it was probably more than half of the rest of Africa combined. But we went through that situation and every community was exposed to the virus. And, on that basis, you got a situation where the risk of a second wave is probably not there and we hope it doesn't obviously occur. So, I think we've done remarkably well and I think that's why it's the basis on which South Africa has, for example, said all African States can fly to South Africa. They're really looking at some of the other international states, we don't understand all the high-risk lists that South Africa's put together. And we're asking obviously, questions, to try and understand how we got that list and what we can do to get states off the list.
But I think in general, it's been a very good response and Africa hopefully is in a position to take its lead and get going. Intra-African travel has started, and we need to find ways to actually ramp up that travel.
Victoria Moores: Thank you. And my final question, and it's actually moving away from COVID and it's, what about the topics that are being overshadowed by COVID at the moment like the Single African Air Transport Market (SAATM)? In the background of all of this, while all of the states have been rallying to address the pandemic. Has everything stopped in terms of African air transport liberalization, or have things still been moving forward?
Chris Zweigenthal: I think the focus when COVID hit us was very much on surviving COVID. As you start to get to a question of restarting and particularly intra-Africa, SAATM, I think will start to get focus again. And in fact, I've certainly seen the moves from AFCAC and from the African union to re-energize that process of getting SAATM going again. I think a little bit of work is going to have to start again, because you're going to have to assess where some of the countries that were ready to implement SAATM are with regards to their own aviation market, because it's all well and good to go for SAATM, but SAATM does require commitment from states. And obviously needs the support of the airlines to do that and there's obviously a lot of liberalization and much more freer flow of traffic.
But, again, it comes back to the problem of Africa saying, "I need to make sure that my state is ready for this, because I may not have an aviation market. So how do I do this? How do I commit to SAATM and give away rights when I would like to make sure that my airline is back on track, so that it also can compete in that market and obviously provide a service."
So, yes, I think SAATM will start to get energy again and impetus and that's one of the reasons why we're committed to participate in the process to ensure that we make sure everybody's ready for SAATM and to get going and make sure that there's good reciprocity between states, that it happens. And obviously, I think it's 33 states at the moment that have committed, which I think we probably have to go through the process of making sure that those 33 are still committed and see if we can't get more on board. And then obviously the process of implementation of SAATM which was a process which was starting to really get momentum before COVID, we'll have to restart that. So I think it's been hiatus a bit unfortunately, and then we'll see how we go from there on.
Victoria Moores: Absolutely. Because once we get past this particular crisis, Africa still has that issue of connectivity that needs to be addressed.
Chris Zweigenthal: Without a doubt.
Victoria Moores: Thank you so much for joining me this morning, Chris, this is Victoria Moores, reporting for Air Transport World. Thank you.
Chris Zweigenthal: Thank you Victoria.
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