Aircraft Utilization: New Solutions, Innovation Amid COVID-19

The COVID-19 crisis is forcing airlines to think out of the box by adopting small aircraft model amid dwindling passenger number, prompting likely paradigm shift in aircraft utilization. WOLE SHADARE writes

Changing model

The airline industry in Nigeria may have a new business mantra: Smaller is better. The COVID-19 outbreak is gradually leading to airlines taking painful but right decision to reduce their fleet size or changing entirely their business model to smaller and efficient aircraft. As the pandemic swept through the industry, many airlines were trying to sustain their daily operations as demand for passenger flights hit an all-time lows from March, April and July 2020. The situation has not significantly changed for the better up till now. While some carriers resorted to layoffs, operations’ down-scaling and restructuring of their business, major passenger airlines explored a new service – cargo transportation on passenger aircraft later known as “preighters.”

Nigerian carriers did not do much cargo because of lack of capacity and capability to offer that service. The only airline that attempted one or two cargo operations was Air Peace which helped to bring some medical equipment from China. The current situation in, and the short-term outlook for, the aviation industry in Nigeria is challenging, as it is elsewhere in the world.

The International Air Transport Association (IATA) predicts that African airlines will lose $6 billion in revenue this year due to the Covid-19 pandemic, with passenger numbers more than halving. In the highly fragmented sector, Nigerian operators are succumbing to the effects of travel restrictions and border closures.

Rightsizing

The presumption was that domestic air travel will rebound sooner than international routes. As airlines rationalise their fleets as part of their survival strategies, narrow body and regional aircraft may become more important to their immediate recoveries. Many of them are walking a tight rope with prediction that only two airlines in Nigeria may survive the deadly effects of COVID-19. Ibom Air has a great future with the type of aircraft they operate. It is a smart airline.

While it uses the right size of airplanes, virtually all other carriers with B737 classics and few Next Generation (NG) aircraft could say Mayday to them. The longest distance in Nigeria by air is one and half hours. In places like Europe, one and half hours distances are operated by trains, which is more economical. But, when you want to fly to such distance in Europe, you use a turboprop aircraft. A CRJ900 aircraft is same minute a B737 in terms of speed and the fuel consumption is about 30 to 40 per cent less than bigger airplanes.

The lease payment for big geriatric airplanes idling away on airport tarmacs signpost the precarious situation they face at a time passenger traffic has dwindled and still dwindling.

Wrong decisions

Leases on bigger and fuel guzzling airplanes do not make sense any longer. The lease rental on these aircraft is expensive and the reason the lease is expensive is because many Nigerians have violated the Cape Town Convention agreement which Nigeria is a signatory by refusing to release airplanes to their owners through litigations that tend to paint Nigeria as a risky country to do business with. Anybody leasing aircraft to Nigerian companies double the price because of the risks of getting the aircraft impounded by Nigerian operators.

That is why lease costs are too high. Nigerian airlines are bleeding as over 35 charges levied on airlines by different aviation agencies are no longer sustainable in the midst of low passenger traffic, high cost of aviation fuel among others at a period carriers are operating less than 50 per cent of their capacity.

Experts’ views

Chief Executive Officer of Ropeways Limited and a former Managing Director of Virgin Nigeria, Capt. Dapo Olumide, who spoke to Woleshadarenews said airlines’ problems are self inflicted with use of wrong type of aircraft for domestic operations. He predicted that by the end of this year, there will be no more than two airlines flying because of their overhead, querying how many of the aircraft are owned by the operators. His words: “You are leasing these aircraft in dollars.

You are not leasing them in Naira or India Rupees. The dollar that you leased them at the time was probably N360/$, now the dollar is N500. The problem of the airlines as they are now is self inflicted wound. They have wrong type of aircraft for domestic operations.

“There is a CRJ that is doing direct flight from South Africa to Lagos. The CRJ only has 70 seats and it is doing nonstop from Johannesburg to Lagos and you are doing B737 with 120 seats Lagos to Abuja. Apart from burning more fuel, you don’t have the passengers. Abuja-Kaduna is 30 minutes in a B737. What type of economics is that?

Arik Air

What is wrong with you? We understand that the reason many people set up an airline is not the reason we all know. They have their reasons such as getting foreign exchange and loans”. “Why do you think Ibom Air is doing well? Ibom Air is doing well because they are having efficient aircraft. Even if you fly with 50 per cent load factor, that is just 30 or 40 passengers; does it mean you can’t find 30 passengers? Ofcourse you can.

“You don’t have to charge so much because your fuel burn is less than the B737. Your landing fee is less because of the size. Your parking fee overnight is less because of the size. That is why Ibom Air is making money and they have the infrastructure.”

Director of Maintenance, Ibom Air, Lookman Anumashau, an aircraft engineer, told our correspondent that the best option left for airlines was to re-fleet and come up with good business plans that could make them to remain in business post COVID-19.

He urged airlines with lease  aircraft to return them and renegotiate with the company to see if they can give them Embraer or CRJ planes or 50 or 60-seater aircraft. “That will make them to manage their losses because the majority of operation costs go into fuel. All the passengers they are carrying in those big aircraft cannot buy fuel. If they are carrying 30 or 40 passengers how much is that at the rate of N25, 000.

They are at a loss. Thirty passengers can’t pay for fuel of N750, 000 to and fro Abuja. “They should rethink their business model now in the face of COVID-19.

There is no way they can carry 100 passengers again for a very long time. Aviation fuel from Lagos is N205 per liter. From Abuja, it is N218. B737 uses three tonnes of fuel per hour which is about 3, 500 liters amounts to about N750, 000. The airlines will pay charges to FAAN, NCAA and what do they have left? Restructuring Many airlines may take the painful decision to restructure their underlying businesses. In the short term, dealing with the immediate cash flow crisis has become the priority.

What the Nigerian aviation sector will look like once lockdown measures are fully lifted is very much dependent on the form exit strategies they take, how they are implemented and how economies are reactivated. The government is unlikely to have the fiscal space to fund significant rescue packages for airlines when the deployment of fiscal policy should be concentrated on supporting health services.

In the short-term however, the carriers will need government support to remain viable and to keep important trade routes open. Government’s support Some African governments have already responded to financial assistance requests from their carriers with Air Senegal and Rwandair reportedly benefiting from government stimulus packages aimed at the transportation sector.

Whilst the reliefs of rent deferrals and government support may ease immediate cash-flow issues, if the country’s aviation industry is to be sustainable in the long-term, creative and bespoke strategies need to be devised and implemented that cater to its unique challenges.

Last line

Not being a homogenous entity, solutions and strategies may need to differ from country to country, and it will also not be a case of replicating what has been successful elsewhere

Wole Shadare