Business

Still in search of hope for airlines

For now, airlines are preparing for a long, lonely fight for survival, a development that has prompted the question of capacity to hang on, WOLE SHADARE writes

 

Unforeseen crisis

 

An industry that is intimately familiar with failure confronts a crisis unlike any other. No amount of foresight could have prepared the industry for the COVID-19 crisis, even as operators say they have no idea when passengers will return. Many of Nigerian airlines started 2020 celebrating with promises that the year would be better than the previous year.

 

Expectations were high. With so much out of their hands, airlines have focused instead on what they can control. Vanished optimism Although many of the airlines do not open their books to scrutiny, the carriers were optimistic of a better 2020.

 

However, with air travel nearly shut down by coronavirus, airlines are now losing cash and have dropped more schedules from their network. With dramatically slashed schedules, they are averaging an anemic 25 passengers on each domestic flight and losing several millions of naira a day as expenses like payroll, rent and aircraft maintenance far exceed the money they are bringing in.

 

Passenger traffic is down by about 70 per cent and half of the industry’s 80 airplanes are parked at airports. Yet, devastating as the downturn has been, the future is even bleaker.

 

With much of the world closed for business and no widely available vaccine in sight, it may be months, if not years, before airlines operate as many flights as they did before the crisis. Even when people start flying again, the industry could be transformed, much as it was after the Sept. 11 terrorist attacks.

 

Airlines’ demise, losses

 

Airline executives need only look in the not-distant past to see how lesser crises sank carriers that were household names like Chanchangi, ADC, Virgin Nigeria, Bellview and IRS, among others.

 

The current crisis could push some airlines into bankruptcy or make them takeover targets. In the United States, Southwest Airlines, which reported its 47th consecutive year of profitability in January, lost an average of $30 million to $35 million a day through June. American Airlines, the most indebted large company, got its own losses down to $50 million a day by the end of last month. Delta and United Airlines, which were riding high after several profitable years, are prepared for a full year with virtually no passenger revenue.

 

Fear of COVID-19 on planes Consumer fears about catching the virus on crowded planes could lead to reconfigured seating. Carriers may initially entice wary travelers with discounts, but if they can’t fill up flights, they may resort to raising ticket prices. Raising ticket prices is not an option for many that have shown apathy to air travel because of the huge challenge the economic situation has had on their lives.

 

At this juncture, air travel becomes huge luxury to them. To get through the next few months, airlines have unsuccessfully lobbied for a huge federal rescue. The bailout is very slow in coming. A sum of N27 billion has been promised to the sector by the Federal Government. The Federal Government, in March, restricted local and international commercial flight services to slow the spread of coronavirus.

 

The lockdown crippled the aviation sector. Industry estimates showed that the sector lost about N180 billion, with airlines being worst hit. Over 5,000 registered travel agencies furloughed their    entire staff, while airlines retained only 20 per cent of workers at slashed salaries.

 

Delayed stimulus Apparently to salvage the sector from collapse, Minister of Aviation, Hadi Sirika, had earlier said that the Federal Government was working on a bailout package for airlines and other operators. But Airline Operators of Nigeria (AON) said its members were not just requesting cash as bailouts from the Federal Government, but necessary support to enable them go back to operation and sustain their business.

 

The Chief Operating Officer of Dana Air, Obi Mnabuzuo, recently said Nigerian airlines were not necessarily asking for cash from the Federal Government, but the support that would enable them go back to operation as well as to ensure that they don’t lay off their staff. In addition, he said the airlines were seeking access to forex to help them pay for aircraft spares, conduct training overseas and maintain their aircraft.

 

Furthermore, he said the airlines also wanted the right pricing of aviation fuel now that the price of crude oil has plummeted in the international market, yet, marketers still sell the product at the old prices as if nothing has changed. “We don’t know what nature of bailout government wants to give the aviation industry, but contrary

 

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