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For aviation, COVID-19 has clearly delivered the largest exogenous shock the sector has ever faced. The financial and performance metrics are startling. The Nigerian aviation is showing recovery, albeit very slow. The Q1’21 shows signs of recovery of a sector badly hit by a scourge. WOLE SHADARE writes
Slow recovery path
Domestic air connectivity in Nigeria, which is still decimated by the on-going COVID-19 is slowly recovering, giving more hope of survival for the airlines. Worldwide, air travel is beginning to pick up, but not at the level it was in the first quarter of 2020 shortly before nations began to shut their airspace due to the devastating effects of coronavirus. Both airlines and passengers expect the COVID-19 vaccine to help the aviation industry to bounce back quickly.
However, analysts at the International Air Transport Association (IATA) forecast that despite the COVID-19 vaccine and testing procedures rolling out worldwide, demand for air travel would take several years to pick up and would not reach the pre-crisis level before 2024.
Industry’s worst financial year ever
For the Nigerian aviation industry, like its counterparts overseas, the sector suffered a huge setback despite stimulus by the Federal Government to cushion the impact of the virus suffered by the airlines, aviation agencies, travel agents and car hire operators, among other beneficiaries. COVID-19 crisis challenged the aviation industry for its survival in 2020.
It was not clear the actual amount the sector lost, but it is estimated the sector in Nigeria may have lost over $100 million. Globally, as revenue dropped from $838 billion in 2019 to $328 billion in 2020, air carriers were forced to fight to stay afloat by cutting costs from $795 billion in 2019 to $430 billion in 2020. However, the cash burn is projected to continue until at least the end of 2021, based on the latest IATA data update.
“The history books will record 2020 as the industry’s worst financial year, bar none,” stated Alexandre de Juniac, former Director- General and CEO of IATA. “Airlines cut expenses by an average of a billion dollars a day over 2020 and will still rack-up unprecedented losses.
Were it not for the $173 billion in financial support by governments, we would have seen bankruptcies on a massive scale,” he added.
Virus dwarfs activities
The impact of the virus dwarfed other activities that occurred. Great strides were made in the first quarter of 2021. Despite that, the seemingly slow recovery by the sector as a whole made the strides less visible.
Many things have been put on hold, no thanks to the deadly virus. Some of the events were the appointment of a new Director- General of the Nigerian Meteorological Agency (NIMET), Prof. Bako Mansur Matazu, Captain Modibbo Alkali Mahmud as the new Rector of the Nigeria College of Aviation Technology, (NCAT) Zaria.tion Technology, (NCAT) Zaria. Commissioner, Accident Investigation Bureau (AIB), Akin Olateru, was reappointed for another four-year tenure. Aside that, airports infrastructure took the attention of the Federal Government as the completion of many of the terminals are nearing completion.
The Murtala Muhammed Airport 2, otherwise known as MMA2, equally got a massive infrastructural boost as the managers of the terminal invested over a million dollars to retain its status as best run airport terminal in Nigeria.
Declining tickets, revenue
To underscore the precarious situation of the sector as regards to slow recovery, the effects of COVID-19 on air travel and its attendant effects on the country and economy was made manifest as total tickets sold for the first quarter 2020 decreased by $151 million. This is a sharp reduction to $282.35 million sold in 2019 by foreign carriers that operated in and out of the country.
A data obtained from the National Association of Nigeria Travel Agencies (NANTA), captioned: “BSP Nigeria-R&S Monthly Reports – Market Data April 2020,” shows that $57.79 million worth of tickets were sold in January 2019 alone.
Ticket sales figures for February of the same year stood at $51.52 million; March $80.55 million; April $92.59 million bringing the total to $286.36 million.
In contrast, the January 2020 figure was regarded as the best month for air travel and one that surpassed the expectations of travel agencies and other catalytic interests in aviation and travel industry as the month saw high travel demands that amounted to $70.03 million.
February 2020 saw ticket sales of $59.16 million; March figure stood at $23.26 million when COVID-19 crisis got to its peak and nations started closing their borders, including restrictions that crippled travel April 2020 saw a sharp decline of air travel as tickets sold amounted to $-1.36, a deficit for that month as BSP recorded more refunds than new sales in April.
As a result of that, the month of April became negative. The total tickets sold for first quarter 2020 decreased to $151million.
President, NANTA, Mrs. Susan Akporiaye, told Aviation Metric recently that COVID-19 brought the entire sector to a halt, stressing that January 2020 was one of the best months for aviation because of huge sales made by foreign carriers.
A former Managing Director of Virgin Nigeria, Capt. Dapo Olumide, stated that the number of delayed flights had increased astronomically, stressing that in fact, passengers these days take it for granted that their flight would be delayed.
According to him, airlines are transporting at least 60 per cent fewer passengers, noting that this is directly attributable to COVID due to the fact that in 2020, there were massive layoffs, retrenchments and working from home on half pay in both the public and private sectors, which reduced the earning power and disposable income of the same passengers that were flying this time last year.
He said: “I don’t see the situation improving before Q4 2021 at the earliest. Let us also be cognisant of the fact that the vast majority of passengers don’t have N30,000 to spend on a ticket and, with COVID, the industry is unlikely to attract a new crop of first-time flyers. Everyone is now very cash-sensitive and this problem will persist until businesses fully reopen and Visiting Friends and Relatives (VFR) returns towards the end of the year.”
Olumide further stated that with the introduction of more airlines into the scene, it means that there’s going to be a serious excess capacity dilemma, which will further deplete the airline’s already meagre revenues.
Government, he disclosed, had waived certain duties and taxes since Q1’20, but lamented that with the paucity of foreign exchange in the market, combined with a runaway exchange rate means that the airlines would not notice any improvement in their P&L, if anything the bottom line will be much worse when they publish their H2 financial reports by year-end.
He disclosed that airport terminal infrastructure has improved markedly between the two quarters in review. “Unfortunately, COVID protocols whilst one is in the terminals are no longer stringently adhered to, ironically, the worst offenders are not the passengers,” he added.
A former Director-General of Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren, stated that the industry globally, including Nigeria, suffered greatly, admitting that although the sector had picked up, but still a far cry to the growth witnessed first quarter 2020 before nations started shutting their borders as a result of COVID-19.
Demuren noted that airlines were springing up, but has not translated to growth in the real sense of it because the carriers are running on low capacity as a result of many of their aircraft that are in storage, while many others have been ferried abroad for routine maintenance and are yet to return to service.
He noted that with the procurement and administration of vaccine, the sector could see a return to profitability towards the end of the year.
The coronavirus pandemic has decimated the aviation industry, with many airlines being effectively grounded as a result of severe restrictions on air travel, with demand being significantly curtailed