Aviation 2021: Mixed Outlook For Carriers, Sector

Aviation faces grim future amid COVID-19 that ravaged the sector in 2020. The year 2021 promises to see a small lift, but not yet Uhuru as the sector picks the pieces to return to profitability, writes WOLE SHADARE

A year like no other

The aviation industry in Nigeria like others suffered so much in 2020. It was a year COVID-19 wreaked havoc on a sector that was before now on life support and one that is not likely to rebound in the next five years. Nigerian carriers lie prostrate. The aviation sector remains in doldrums, hopes are fast fading with the strong trying to see if 2021 would hold any promise of survival. Notwithstanding the situation, some see faint hope in the survival of the industry and a quick rebound.

The airline industry is starting to lower expectations for a robust recovery this year following signs that travelers just aren’t ready to get back on planes so soon like we witnessed pre-COVID-19. Analysts, airlines and trade groups are warning that passenger traffic could be down as much as 50% compared to 2019 levels, at least for much of the year.

Long road to recovery

A meaningful recovery could take even longer depending on how long it takes to develop and distribute a long-awaited COVID-19 vaccine. So many companies supporting aviation, airlines are in dire straits. If and only if, there is consensus around the international communities; that is the countries to make international travel mandatory for people to get vaccines that if they get the vaccines, they can travel.

That might bring back at least the kind of normalcy to about 70 per cent but the effect of COVID-19 may be with the sector for over 10 or more years.

Some companies have shutdown completely. They might not come back again even in Nigeria and outside Nigeria. Some airlines have gone down. The country is not going to see travel the same way it saw pre-COVID-19.

Some aircraft have been retired like the famous A380 and B747 to limit bleeding of airlines. In the New Year, there is a general belief that the price of tickets might drop a little bit, but not to pre-COVID-19 because of the high rate of the United States dollar against the Naira.

It is likely to come down to between N45, 000 and N50, 000 to reflect the dollar-naira disparity. It is certainly not going to be at N90, 000 that was witnessed during the Yuletide for an hour flight.

New entrants to provide fillip

It is projected that if there are no new entrants, that could force demand to be high, outstripping supply because many of the airlines cut capacity by over 50 per cent immediately after flight resumption in August 2020. With new entrants, capacity may increase to cope with demand.

It is not clear when the new airlines would debut but it is expected that one or two may resume flight operations first quarter 2021. The economy may equally play a role to the rebound of domestic air travel because a large number of people no longer have disposable income for air travel.

When the economy was good, many people had money to afford air travel and they found it easy to travel by air to any part of the country. Business and leisure travel boomed but not anymore. It is expected that two airlines are at the verge of starting operations early this year.

They are United Nigeria Airline and Green Africa. United Nigeria is a start up carrier to be based at Enugu Akanu Ibiam International Airport. The start-up airline which already had its Air Operator Certificate (AOC) aims to commence domestic services in first quarter 2021.

The airline plans to operate a fleet of four Embraer E145s initially with services from Enugu to Port Harcourt, Abuja and Lagos. The launch date for Nigerian start-up Green Africa Airways (Q9, Lagos) has been delayed to early 2021, with the airline had long been issued its AOC.

The problem with start-up airlines in the country is their propensity to hire professionals to do their business case. After that, they totally push it aside and they don’t care if it is good or not. The new airlines that are coming, they might succeed.

Concession, ANSP

Managing Director, Aero Contractors, Capt. Ado Sanusi, said 2021 would usher in moderate growth, adding that “what I see is that there might be increase in the aircraft flying in the country because COVID-19 grounded so many aircraft.”

He said he hoped to see reform of the Nigerian Airspace Management Agency (NAMA) Air Navigation Services Provider (ANSP) by way of commercialisation, adding that ANSPs all over the world were going that way.

According to him, “They have to commercialise it and look for ancillary income for NAMA. Same with the Federal Airports Authority of Nigeria (FAAN), they have to. I am totally in support of concession. I hope 2021 will bring in concession. I don’t think airports around the world that are very good are built by the government. They usually give them to private people to manage.”

AIB gets commendation

He commended the Accident Investigation Bureau (AIB) for what it has achieved since the assumption of duty by the Commissioner, Akin Olateru. “I can see that they are trying to do safety awareness. It is accident prevention rather than accident investigation. I think they are doing very well,” he said.

Bull by the horns

Chief Executive of Aglow Aviation Services Limited, Mr. Tayo Ojuri, said the challenge was how ready the sector is to take advantage of the growth it expects to see, affirming that aviation would not die with the readiness by new entrants to fill the yawning vacuum.

Ojuri is of the opinion that there would be much stronger rise in 2022, tying his optimism on the International Air Transport Association (IATA) projection of rebounding of aviation to between 2023 and 2024. “Unfortunately, business travel will still be slower.

In 2021, the outlook is mixed. We can’t say it is going to be running on all cylinders, there are a lot of challenges but by third quarter we see how it improves. The challenge is how ready we are to take advantage of the growth we expect to see. Aviation will not die, there will only be a vacuum which will be filed by the new entrants,” he added.

Infrastructure

Director of Maintenance, Ibom Air, Lookman Animashaun, an aircraft engineer, lauded the Minister of Aviation, Hadi Sirika, for the provision of infrastructure in many of the aerodromes across the country. He said he was confident that before the end of 2021, the airports would see better facilities.

The Enugu airport runway, which was riddled with pot holes, was fixed in record time while many others are receiving attention of government. FAAN says the new terminal at the Murtala Muhammed International Airport, MMIA, Lagos, currently under construction will be inaugurated by February 2021.

The first airline interline is equally expected to take off this year as Dana Air and Ibom Air are in strategic talks to make flying flexible and less cumbersome. Usually, if two airlines have an interline agreement in place, they will handle the check in and baggage for each other’s passengers.

That means travelers only have to check in once for all the flights on the itinerary, and that their baggage will be transferred by the first airline to the second airline, without them having to manually collect it and drop it off again. When two airlines enter into an interline agreement, it’s the most basic form of partnership.

In essence, it allows passengers to book through itineraries on multiple airlines with less hassle than booking each one separately. It simply means that airline A passengers can travel to another destination with airline B without the former operating the flight but still make money because their operations are collapsed into each other.

Foreign exchange crisis

Scarcity of foreign exchange has put airlines on the edge. Many airlines have had to buy dollars at black market rate because of the difficulty in sourcing it. The profit from airline business is so marginal government has been tasked to look at the issue including that of multiple designations with operators appealing to government to limit their entry in Nigeria to just cities.

Last line

Airline financial performance is expected to see a significant turn for the better in 2021, even if, historically, deep losses prevail. Passenger numbers are expected to grow to 2.8 billion in 2021. That would be a billion more travellers than in 2020, but still 1.7 billion travellers short of 2019 performance. The projection is that aviation will rebound slowly until 2023.

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