In half-year 2018, aviation sector has benefitted from sound policies, commitment and great drive never seen for a long time. WOLE SHADARE writes that the sector is on the right footing
If there is one sector in Nigeria that has done well in the half year 2018, it is the aviation industry. Between 2015 and early 2017, the aviation industry in Nigeria recorded what seems to be the worst period since civil aviation started. This was occasioned by recession, which led to job losses and scarcity of foreign exchange, among others.
But one thing that has worked for the sector, which in no small measure led to stability of the industry, was the careful planning by the Minister of Transportation, Chibuike Amaechi and the Minister of State for Aviation, Hadi Sirika, in ensuring that not too much change were made when they assumed office. This quarter has seen significant improvement and the culmination of the clear path the duo charted for the sector. Government, despite pressure refused to tinker so much with the personnel they met in the agencies, save for those that they brought into strategic positions in the sector and those they felt were going to add value to a sector as sensitive as the aviation industry.
AIB releases more crash reports
The release of six additional accident reports by the Accident Investigation Bureau (AIB) early this year has engendered confidence in the sector. Among the reports released was the accident involving an Associated Air aircraft with registration number, 5N-BJY, carrying the corpse of erstwhile Governor of Ondo State, Dr. Olusegun Agagu, which took place on October 3, 2013, minutes after takeoff from the Murtala Muhammed Airport, Ikeja, Lagos.
Commissioner, AIB, Akin Olateru, an aircraft engineer, who has been doing excellently well since he took over as the agency and one who has restored confidence to the agency and conformed with international best practice.
His words: “When I assumed office, we met 27 accidents and serious incidents whose investigations needed to be conducted and safety recommendations issued to relevant agencies or organisations and of course, the public. We have released 10 already, meaning we have 17 left. As I speak today, we have six safety recommendations to be released anytime soon. If we release these six that I just promised, then we are going to have 11 left. But we have three accidents that recently occurred under my watch involving Dana Air and Delta Air, which we are still investigating and which I have not added to the 27 that I inherited. ”
Single African Air Transport Market
The Single African Air Transport Market (SAATM), a flagship project under the Agenda 2063 of the African Union (AU), seeking to liberalise and unify the African skies was launched during the 30th Ordinary Session of the Assembly of Heads of State and Government of the AU on 28 January 2018 in Addis Ababa, Ethiopia.
Benin, Botswana, Burkina Faso, Capo Verde, Central African Republic, Chad, Republic of Congo, Côte d’Ivoire, Egypt, Ethiopia, Gabon, Ghana, Guinee Conakry, Kenya, Liberia, Mali, Mozambique, Nigeria, Rwanda, Sierra Leone, South Africa, Swaziland, Togo and Zimbabwe are signatories to the project.
A fresh twist was added to the importance of SAATM when Nigerian airlines under the aegis of Airline Operators of Nigeria (AON) asked the Federal Government to backtrack on the immediate implementation of the open skies programme encapsulated in the (SAATM) propounded by the African Union Heads of State and Government.
It was cheery news that over $600 million foreign airlines’ trapped funds had been cleared by Nigeria. The Director-General of International Air Transport Association (IATA), Alexandre de Juniac, made the disclosure at the recently concluded IATA AGM in Sydney Australia.
He said, “We have had some recent success. The $600 million backlog in Nigeria has been cleared and we made $120 million of progress from a peak of over $500 million in Angola. I encourage the government of Angola to work with airlines to help reduce this backlog further.”
He disclosed that given the deepening economic crisis in Venezuela, a resolution appears to be unlikely in the short term.
“We are encouraged by the recent developments in Nigeria and Angola and hope other states will also move quickly to address blocked funds”, he added.
Aero Contractor’s foray into aircraft Maintenance Repair Overhaul (MRO) excited airline operators and the sector generally. Airline operation without an efficient maintenance facility is a big drawback to a carrier. Many of the country’s airline operators travel around the world in search of available slots to carry out due maintenance on their airplanes. Most times, the amount of money spent on carrying out such maintenance checks on aircraft is almost double of those in Europe and America, yet, the most profitable airline in the world earn just 5 per cent profit annually. Several stakeholders and professionals in the sector had over the years canvassed for the establishment of a viable MRO facilities, which they said would further reduce cost of operations for the airlines especially in Nigeria where operators and other private investors claimed is hostile to business growth.
One of the greatest help the Federal Government did to airlines was removal of Value Added Tax (VAT) on air transport. Described as a lifeline to sustaining their operations, which has a very low life span of between 10 and 15 years, operators told New Telegraph that it is indeed a welcome development following over 20 years agitation by Airline Operators of Nigeria (AON), umbrella for all operators in the country.
President Muhammadu Buhari had on June 6, 2018 signed Executive Order for the removal of VAT from “All Forms of Shared Transportation.”
The decision taken at the Federal Executive Council meeting, experts said presents a veritable opportunity for the aviation industry to immediately take advantage of the decision to expedite a White Paper to that effect. VAT on commercial air transportation is a huge departure from what obtains worldwide and an increased burden on the Nigerian travellers.
The Nigerian Civil Aviation Authority (NCAA) has raised its oversight functions with going tough on air carriers that violated safety. Many airlines have been suspended and fined. But the high profile suspension done recently was one involving FirstNation Airways. The aviation regulatory body discovered that the airline had disregarded warnings and continued with the unauthorised and illegal operations in violation of its AOC terms and conditions of issuance.
There is no doubt, Nigeria’s aviation sector, in the half year 2018, looks good and it is hoped that administrators would sustain the tempo to make it a better year for the sector.
Tweaking aviation business model to stay afloat
To pare down their colossal operating costs, Nigerian carriers must restructure operations and eliminate complexity. WOLE SHADARE writes
One of the major problems of Nigerian carriers is the inability to tweak their operations when the model they start with appears not to be working. Yes, no airline goes into service with the sole aim of losing money or close shop quickly.
But the dynamics of the business makes it very important for the carriers to quickly adapt to changes to propel them sustain the highly capital intensive operations.
Any time a new airline signifies its intention to begin flight operations, the response of stakeholders is always not a cheery one.
The tendency is to see any start up airline as an oddity out of a magician’s hat, a kind of illusion that will soon fade away.
Those in aviation business and the general Nigerian public roll their eyes and say, “they have come again.” There is a sense that this too shall pass and hopefully, like the plague, pass over us.
An alternative to this posture of sceptical paralysis is to find a renew commitment on how to do business and see aviation as serious business and not as status symbol or one, which gives them access to huge loans and foreign exchange that are mostly diverted to issues not related to their core aviation business.
Low market penetration
Beyond the prevailing harsh operating environment, the faulty business models airlines’ operators often adopt may be responsible for the perennial low market penetration and short lifespan of local carriers in the country.
Poor extant policies of regulators are not encouraging niche markets and other innovations to maximise the potential market at large.
Rather, an environment is created where all operators converge on the small viable high traffic routes, with gross under-utilisation of available equipment and neglect of potential traffic.
The consequence is that less than seven per cent of the population travel by air till date, with perennial low turnover for operators and steady decline in terms of viability and lifespan of airlines.
Records made available by the Nigerian Civil Aviation Authority (NCAA) show that no fewer than 40 registered airlines, scheduled and non-scheduled, have collapsed in the last 15 years.
Overland stands out
A few of the airlines such as Overland Airways are sincere with their services, just that the enormity of the business is taking a huge toll on many of them, as they soldier on. Overland is the only airline in right that is somewhat optimally utilising and using the right equipment, ATR for its service. The aircraft are fuel efficient, less expensive to maintain and light efficient airplanes. That may have led to huge strength of the airline in its niche market.
The question is how long can airlines go in the face of hostile operating environment, tough economic reality, difficulty in accessing foreign exchange coupled with huge competition posed by mega airlines that are eating deep into their market.
Fact is that at least 90 per cent of airplanes in commercial operations in the country are the B737 series, which is considered fuel inefficient and runs at a loss without 90 to 95 per cent load factor per flight.
The new order is competition and deregulation. These are the twin monsters that have perpetually put the carriers down or made them to struggle. How long can they struggle before something snaps?
Since 1980s, several airlines have evolved, operate and collapsed in Nigeria as a result of unfavourable business conditions.
The major operational issue identified with airlines is incoherent manipulation of the components of their business models in response to competitive pressures and external factors within Nigeria’s air transportation systems.
Airline business is highly challenging and involves complex and capital intensive operations. Regrettably, the traditional business models (Full – Service, Low – Cost, and Charter Carriers) that have been deployed elsewhere do not adequately address the dynamics of air transport environment in the developing Nigeria economy.
The air transport services in Nigeria has been on the increase since 1980s that has brought about 50 airlines between mid-1980’s and early 2000 including domestic airlines in the likes of Aero Contractors, Afrijet Airlines, Arik Air, Air Nigeria, IRS, Nicon, etc.
According to Air Transport Action Group, the air transport industry generates and supports 6.7 million jobs in Africa and contributes $67.8 billion to Africa Gross Domestic Product (GDP) – direct, indirect and induced impacts.
Low traffic penetration
Indeed, Nigeria has about 180 million population and one of the lowest air traffic demands by population. For instance, the air travel sector in 2017 transported a total of 11.3 million passengers, which is a dip from 12.2 million that travelled in 2016, as shown by the NCAA’s factsheet. By implication, less than seven per cent of the population travel by air.
Meanwhile, there are 26 airports scattered across the country with more than two-third of the 36 states, including the Federal Capital Territory (FCT), having at least an airport.
Former Assistant Secretary General of Airline Operators of Nigeria (AON), Mohammed Tukur told New Telegraph that it is not that people in Yola, Sokoto, Jalingo, Jos, Markurdi, Minna, Yenogoa, Ibadan, Akure, Maiduguri and so on, don’t want to travel by air, being the fastest and safest mode of transportation. “But we all get frustrated having to sleep in airport for two to three days waiting for an airline that may not even come,” Tukur lamented.
Fact is that it makes no economic sense for airlines to fly to an airport where there is no guarantee of at least 80 per cent load factor as the Lagos, Abuja, Port Harcourt and, sometimes Kano, routes offer.
Chief Operating Officer of one of the popular airlines said that it costs at least N800, 000 to N1million to fuel a Boeing 737 aircraft to do a frequency of two landings. “Imagine if all you have as passengers are 20 persons going and 10 on the return with each paying N24, 000 for ticket (N720, 000). Is that a profit or loss, on fuel alone?”
But route viability, as a determinant, was hardly the case in the 80s and 90s. Group Captain John Ojikutu (rtd), recalled that the defunct Nigerian Airways in its hey days strategically covered most parts of the country, including regional and international routes.
For example, the national carrier flew the B727 and B737 to Kano where it already positioned the Fokker F27 turboprop that would fly passengers destined to Sokoto, Kaduna and Jos twice daily and also to Makurdi and Yola. Besides, there were direct flights to Yola and Maiduguri from Lagos, once a day. There were 50-seat capacity F27 flights from Lagos to Ibadan and Benin too.
“Nigeria Airways was flying F28 aircraft mainly to other places such as Enugu, Port Harcourt, Calabar at least twice daily. The airline had 32 aircraft and could in addition fly the west coast. In addition, Nigeria Airways was flying to New York, London, Frankfurt, Amsterdam, Rome, Jedda, Nairobi, and so on.”
As it stands, situation is forcing carriers to think outside the box and find new ways — outside of just bookings — to generate revenue and remain relevant in the industry.
NAHCO signs new deals, posts N418.5m HY’ 2018 PAT
Nigeria’s foremost ground-handling service provider, nahco aviance, has announced new business deals.
The announcement came on the heels of the publication of a decent 2018 half year financial performance.
The company in a statement said that it had signed a series of new contracts with both local and international airlines.
The signings with local airlines includes Max Air, which had since started smooth operations from Lagos and Kano, and handling of Hajj operations for Medview, one of the largest operators in the country.
Aside handling of International and Hajj operations for Flynas, NAHCO also handles domestic and of recent, regional operations for the nation’s largest operator, Air Peace and Aero World, delivering service to the delight of the airlines.
It will be recalled that NAHCO, which handles most of the airlines in the country, last February began handling the Rwandan international airline, Rwandair, providing ground-handling service for the fast rising operator at the Nnamdi Azikiwe International Airport, Abuja.
In the results announced for the half year 2018, the group posted a turnover of N4.64billion against the N3.71billion posted for the same period last year. The results showed a 25 per cent increase over the same period in 2017.
Profit Before Tax stood at N500.97million as against N203.08million reported as at half year 2017, a 147 percent increase over last year.
Profit After Tax for the half year 2018 stood at N418.57million – a 137 percent increase over the N176.32million reported for the same period of last year.
As Nigeria is seen among fastest growing aviation…
It is an exciting time one again for Nigeria, as the country remains a major force in aviation regionally and in Africa. For this to be sustained, the country needs to right the wrongs. WOLE SHADARE writes
It has been projected by the International Air Transport Association (IATA) that Nigeria would rank among eight fastest growing markets by 2034, just as the country remains a major force due to her population on the continent and will thus continue to have a fair share of the growing market regionally.
Bride of the world
Nigeria is Africa’s most populous country, home to vast resources of minerals and oil – and it’s a burgeoning commercial hub. Could this vibrant nation be the next global aviation powerhouse?
Currently, big-brand flyers including British Airways, Virgin Atlantic, Emirates, Lufthansa and many other mega carriers operate in and out of Nigeria. But it is domestic and pan-Africa carriers that need to take flight to consolidate Nigeria’s status as a business center to be reckoned with.
The nation is ideally located for pan-African flights, but currently there are few options available. The country’s privately run domestic terminal can handle over four million passengers a year, but only a handful of domestic carriers are in operation. Some 40 domestic airlines have failed in the country – including big names such as Virgin Nigeria.
The financial turbulence of the past few years threw a spotlight on many key industries and their respective roles in growth or decline of the Nigerian economy.
Little notice was taken of the aviation sector that has consistently been creating and supporting jobs while making significant, to say the very least, contributions to the global economy.
It is against this backdrop that the country is taking steps to rejig, revamp and re-strategise aviation to achieve maximum benefits. But how quickly the country revamps its aviation is very crucial. The signs of a better aviation industry where airlines and others can be profitable seem not to be in sight for now because of decades of rots that pervaded the entire aviation system.
In the Middle East, visionary leaders have long realised the aviation industry’s potential to drive economic growth and consequently invested heavily in establishing world class airlines that, in no small measure, create jobs, facilitate global trade and stimulate economic growth. ATAG’s data on the Middle East paints an incredible picture: by 2010, the region’s air transport industry created direct and indirect employment for 2.7 million people. It also contributed $129 billion to the region’s Gross Domestic (GDP).
In the UAE, which is home to three carriers that are expanding at an exponential pace — Emirates, Etihad Airways and flydubai — government has committed itself to facilitating this growth. This commitment is apparent in the UAE General Civil Aviation Authority (GCAA)’s sustained efforts to enter into air transport agreements with countries across the globe.
The main issue that the sector needs to address is lack of infrastructure. The aviation industry has grown over the years in Nigeria but most them have died. Infrastructure has remained stagnant. It is just recently that the Nigerian government started looking at airport buildings renovation but they are yet to look at the airside, which has to do with the tarmac expansion, finger expansion, the taxiway expansion, runways and all the likes. The country has also not looked at infrastructure such, as landing aids and landing at night. These will increase the utilization of the airports that will give the airlines profitability because they will be operating at different number of hours. What we also tend to forget is that the parastatals must be re-engineered to face modern reality. Air navigation service should be commercialised. The regulators should regulate in such a way that they don’t choke the airlines.
Bilateral air pact
There is the need for the country to protect domestic airlines whenever the issue of Bilateral Air Services Agreement (BASA) comes up, so that the small market they have is protected from the airlines that are coming in. In Nigeria, carriers are paying 17, 18 or even 21 per cent interest rate, while their counterparts outside the country are paying 3 to 4 per cent or at most five per cent and they are enjoying tenure of about 15 years.
Challenges of the region
There is a definite need to develop Africa’s airports, improve safety and security. The strong growth of air travel puts pressure on airport infrastructure to adapt to the growing demand and changing technology and consequently requires investments. To meet the growing demand, governments are challenged to seek for sources to finance new and better infrastructure.
In recent years, Africa’s hope of prosperity was challenged by economic, security and health crises. While growth remained strong at an average of 5 per cent, and African nations have managed to maintain their image, as land of opportunity for foreign investment, the economy of some countries dropped significantly. To make matters worse, the prices of key commodities – including oil – exported by the continent plunged. Countries such as Nigeria, Algeria, Angola and South Africa found themselves in a difficult position. These countries lack the capacity to finance these huge projects with capital intensive assets. But despite the challenge of poor funding holding them back, it is vital that African airports meet their technology needs. They must be aware and learn of the latest and most efficient technologies, as there is no substitute to safety.
The air transport industry is a very fragile source of economic growth in Africa. It requires a collective awareness and willingness to break up the barriers of protectionism and the liberalization of intra-African airspace, as foreseen by the Yamoussoukro Decision. Investment in human resources, improvement of infrastructure and equipment, and the adaptation of national regulations with international standards are the pillars of a sustainable aviation industry in Africa.
Nigeria, which has large market for aviation, has not yet tapped into the full potential of this critical sector, which can raise the country’s GDP. It is high time the government declared emergency in this sector before it collapses.
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