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Nigeria’s air travel: From recession to boom

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Nigeria’s air travel: From recession to boom

The travel industry remains strong as recent growth is attributed to solid business confidence.WOLE SHADARE dissects IATA’s report

 

The International Air Transport Association (IATA) last week in its passenger traffic figure released, said the region’s two largest economies- Nigeria and South Africa- have continued to experience increased traffic growth.

The clearing house for over 280 global airlines attributed the situation to business confidence, which it said has risen sharply over the past 15 months while a reduction in political uncertainty in South Africa contributed to an environment in business confidence there for the first time in more than a year.

Capacity rose 3.3 per cent and load factor climbed 1.9 per cent to 67.8 per cent according to IATA. It added that monthly capacity increased by 6.3 per cent and load factor rose 0.9 per centage point to 80.4 per cent, surpassing the previous record for the month of 79.5 per cent, which was set in February 2017.

The IATA’s Director-General and Chief Executive Officer, Alexandre de Juniaca, stated that the growth was supported by solid business confidence especially in Africa.

Crisis period

Many are of the view that the Nigerian aviation industry, which suffered from relatively low patronage due largely to softer demand in the wake of the recession the country entered into, is picking up very fast. In the height of the recession, personal travels fell drastically as average purchasing power dropped abysmally vis-a-vis rising cost of tickets.

However, business travel continued to drive air passenger traffic across the country. Analysts adduced high operational costs as cause of the in creased ticket fares, saying that aviation fuel accounts for about 40 percent of operational costs. Industry sources indicate that the price of aviation fuel currently stands at N265/l.

They noted that the airline business is often the first hit during recession and improves once the economy picks up or recovers. For international travel, they noted that forex sourcing issues had a severe negative effect on airline operators, as they could not repatriate funds.

Over $500 million of international airlines funds were trapped in Nigeria. Funds repatriation is extremely important for day-to-day activities for the airline industry, which operates on a thin profit margin.

Affected carriers were in dire straits. The situation affected their operations. Some of them like Iberia and United Airlines from Spain and the United States closed shop.

They stopped operations into the country. Some others cut their frequencies from 21 weekly frequencies to seven. That was how bad the situation was in 2016 and 2017.

The rebound

The situation brought panic to the government. But the swift intervention of the Federal Government through the Central Bank of Nigeria (CBN) helped to ameliorate a very bad situation.

Airlines’ funds were released in tranches until the government cleared the entire backlog. That singular situation brought sanity to the sector.

Domestic carriers also got a window where they accessed foreign exchange at reasonable cost. Carriers such as Emirates quickly resuscitated its Dubai-Abuja flight. There are indications that the carrier may re-open its second Dubai-Lagos flight very soon. Delta recently announced its commencement of New York-Lagos route.

RwandAir is connecting more Nigerian cities. New routes are opening up both for domestic and international airlines. During those difficult days, Nigeria became less attractive for operators and a few airlines reduced the frequency of their flights. For domestic players, the forex shortage has led to scarcity of imported aviation fuel.

Marketers have complained about the challenge to source dollars to import aviation fuel. There is a school of thought that suggests that oil marketers intentionally import less oil than is needed to meet demand.

This created an artificial scarcity and keeps the price high. Jet A1 fuel prices are approximately 70 per cent higher than they were in 2016.

BA predicted boom

Like a soothsayer, Country Commercial Manager for British Airways, Mr. Kola Olayinka, had predicted that Nigeria would experience a boom in air travel this year going by marginal improvement in air travel. Speaking exclusively New Telegraph in Lagos last year, he stated that Nigeria would also experience increase in passengers going by the huge travel needs, occasioned by situation, which has led to improvement in the economy.

His words: “Let’s be very honest, as a Nigerian looking at this economy, almost everybody is rationalising. Let’s take it from the family unit. Sometimes I say to the kids ‘you are not going for summer this time; this is what I can afford.’ “Everybody is doing that.

The small businesses need to travel. Business is still transacted, not on the phone, but by shaking hands and no matter how much you use technology, you cannot do without shaking hands.

You have to be there to sign the deals. Children who are in school must come home. The school will close. They can’t sleep on the street. It is an indication that things are getting better.”

Experts’ positions

Experts had predicted that Nigeria’s traffic figure could rise to 17 million in 2017 from 15.2 million last year despite tough economic reality that affected businesses in the country.

The BA chief explained that airlines’ trapped funds in Nigeria and some other countries equally did an incalculable damage to air travel in the country, just as it affected many other frequent travellers. During the period, frequent travellers on premium classes downgraded to economy and other classes of travel.

Spokesman for the Nigerian Civil Aviation Authority (NCAA), Sam Adurogboye, admitted that there is huge improvement in the aviation sector in terms of growth and passenger traffic; an indication that the worst is over. He disclosed that over 24 prospective airlines are at various stages of acquiring the all-important Air Operator Certificate (AOC)

Last line

There is a consensus from an economic point of view that the situation can only get better. It is important to point out that even though there was an economic and foreign exchange crises in 2017, the travel demand remained very strong.

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2 Comments

2 Comments

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