The trouble with Nigeria’s Aviation industry
The Nigerian aviation industry is troubled. Highly troubled. Owners of airlines are feeling the heat. Patrons of airlines are feeling the heat too.
The other day, the CEO of United Nigeria Airlines, Dr. Obiora Okonkwo, in a media interactive session with Aviation Correspondents in Lagos, said the high cost of flight operations had made it difficult for airlines to operate profitably in Nigeria, noting that high cost of aviation fuel and foreign exchange has become very challenging for Nigerian carriers.
So for those who do air travels business, for students, that is Nigerians studying outside our shores, and their parents, who have to pay school fees, it is a hell of headache for them finding their ways round air travels challenges. The challenge is not even limited to the ones listed above – there is also energy challenge – 26 percent rise in energy cost in the UK for instance, and spike in other parts of Europe!
Talking about challenges, one needs to cite Dr Obiora Okonkwo, who said at the press briefing in question that “it is important that we refer to this exchange rate in all these discussions because 99 per cent of aviation component is foreign exchange denominated; even the reason for the increase in fuel is because of foreign exchange because the product is imported”.
He explained: “But you cannot deal with safety in isolation from efficient operation, which has to come with proper financing of your operation. Because it is only when you are properly financed that you will be able to have the resources for spare parts, maintenance as at when due. And the only thing now that covers that aspect is only sales of tickets. And how much these tickets are sold is very, very important. And you see, aviation is a chain, there are a whole lot of players in that chain business. But the cashiers in that whole chain are the operators.”
Challenges of Airline Operations
Two academics –Waribugo Sylva and Chiedu Florence Amah, of the Faculty of Management Sciences, University of Port Harcourt, Nigeria, have done a fine-tooth comb research on this aviation issue. They titled it ‘Challenges of Airlines Operations in Sub-Saharan Africa: An
Empirical Investigation of the Nigerian Civil Aviation Sector’.
Findings:
Exploratory Factor Analysis led to the retention of 27 items, representing five factors – Descriptive analysis reveals these challenges, as follows (in order of importance or severity): Infrastructural, Financial, Corporate Governance and Managerial, Policy and Regulatory, and Safety, Security and Environmental challenges.
Conclusion
The dons stressed that managers and policy makers need to pay the most attention to infrastructural challenge, followed by financial challenge, Corporate Governance and Managerial, and Policy and Regulatory, while safety, security and environmental challenge should not be traded-off even if it is the least challenge. They pointed out the study’s limitations and suggested generation of more items and investigations of hypothesized models on the nexus between these five factors and organizational performance, or other criterion variables.
Pedigree of Aviation Industry
According to the dons: The civil aviation industry plays a key role in the upstream and downstream sectors of the global economy. It reduces the cost of trade and facilitates tourism and the smooth operations of supply chains across continents (OECD, 2020). Aside its role in fostering the flow of goods, people, capital, technology and ideas (IATA, 2020), the airline industry is also praised for its complementarity and substitutability with other forms of transportation, thereby promoting integration and rapid development on a planetary scale.
Specifically, the industry transports more than one-thirds of the total value of goods and services. Also, for the past 10 years, the sector has enabled governments to annually generate over $111 billion as tax income. Moreover, the aviation industry contributes $3.5 trillion (4.1%) to global Gross Domestic Product (GDP) and supports 87.7 million jobs around the world (ATAG, 2020).
Unexplored Opportunities
Following the above, scholars and governments of developing countries acknowledge the need to exploit the enormous opportunities that the airline industry offers. With air transportation, land-locked countries
of Africa and South America need not link third party countries to import components and parts to drive their extractive industries, or export their goods (most of which are perishable) for increased foreign exchange earnings. Taking Nigeria as an example, the aviation industry serves as a great catalyst of socio-economic transformation. Aviation recorded the fastest growth in the transportation sub-sector at the close of 2019, with a 0.14% GDP contribution which amounted to N198.62 billion (NBS, 2019).
Thin and Fragmented Routes
Despite the enormous benefits of the airline sector – such as the promotion of trade, tourism, innovation and the creation of employment – its growth and development in Africa, and indeed Nigeria, is far behind other countries.
Al-Kwifi, Frankwick and Ahmed noted that “over 800 airports are distributed across the African continent, yet only one-tenth receive scheduled services. Apart from the few routes that link the major cities of the continent, most intra-African routes are thin and fragmented markets”. This seems to be a contradiction as the landlocked nature of most of the countries in Africa and high population of the continent offer advantage for the growth of the industry.
It remains a conundrum among aviation enthusiasts that Africa is still far behind other continents and captures just 3% of the global air travel ecosystem, in spite of the fact that it is the abode of 15% of the global population and comprises 20% of the planet’s landmass (IATA, 2020).
Challenges of the Nigerian Airline Industry
They have the following to say on the encumbrances of the Nigerian aviation industry: Generally, the performance of the Nigerian Air transport system is sub-optimal. Uhuegho (2014) investigated the effects of economic deregulation on domestic airlines and found that most Nigerian Airlines perform poorly compared to their counterparts in other parts of the world. A review of literature shows that the challenges faced by the civil aviation industry in Nigeria could be grouped into: Infrastructural, Financial, Policy and Regulatory, Corporate Governance, Managerial, safety, security, and environmental challenges…
Lacks Commercial Simulator Facility, etc
Furthermore, the industry lacks commercial simulator facility, thus warranting airlines to spend not less than 16 million USD annually to conduct recurrent simulator training for pilots. The industry also lacks standard Maintenance Repairs and Overhaul (MRO) hanger. The absence of an MRO is also responsible for the rapid rate of deterioration of the carriers, which lifespans are cut-short to an average of 10 years. Worse still, the country has some of the oldest fleets on the planet, with more than 70% of all aircrafts above 10 years of age.
Higher Maintenance Costs
This scenario translates to higher maintenance costs, increased fuel consumption, more pollution, increased downtime and low safety/ reliability. Another nagging issue that constitutes a bottleneck to the smooth operation of the airline industry is inadequate provision of power (Adebukola & Fagbemi. Government’s negligence to provide reliable power via the national grid makes the airport authorities resort to alternative power (e.g. diesel powered generating sets), which is very costly and non-sustainable. The cost burden arising from this scenario is transferred to passengers in the form of increased airfares. This increase in airfare leads to sparse demand.
Inadequate Number and Sizes of Aircrafts
Another infrastructural challenge is the inadequate number and sizes of aircrafts. According to Adebukola and Fagbemi, many Nigerian airlines have only few aircrafts on their fleet. Apart from the major air traffic routes, there are several others that offer reasonable traffic potential. However, due to the small number of aircraft on their fleet, most operators prefer to stick to the more populated routes thereby limiting the available options to travelers.
This ultimately translates to reduced quality of service. Although market potentials exist along several under-utilized air corridors, the smallness of airlines does not permit them to explore these potential routes. Airlines may not be able to break even given the low load factors that are likely to exist on such routes.
Moreover, the small fleet size of most of the carriers makes them powerless to bargain for favourable rates with fuel suppliers. Small size of carriers also constrains capacity to compete on regional and international routes. Nigeria’s domestic airlines are therefore not strong players in the international and regional markets.
