Infrastructure, airlines’ growth to shape aviation in 2019

As we look ahead to 2019, WOLE SHADARE writes on the most anticipated developments for the sector

Deepening gains of 2018

In 2019, the industry will take real strides towards realising and deepening some pf the gains of 2018. Year 2018 brought hope and great expectations with steady climb of statistical records on the use of air transport service in the country. Increased passenger traffic was recorded in the major Nigeria airports. The industry continued with its drive for improving operational safety, building greater confidence in flying with unrelenting efforts for safety certification of the major airports.

New order

A new order was introduced with the continuous review of incident and accident records and a campaign for nothing to be swept under the carpet for lesson learning also where no part of the aviation industry should be left behind in safety oversighting this has continued to showcase Nigeria seriousness in the international aviation best practise with recognition from International Civil Aviation Authority (ICAO), Airport Council International (ACI), IATA, World Metrological Organisation and National Transportation Safety Board (NTSB).
While the airports subsector may have done well economically, the airlines cannot be said to have. Nigeria indigenous and domestic airlines are still weak with short operational lifespan with over 70 per cent of the total revenue generated in Nigeria’s aviation sector coming from international airlines operating in Nigeria.

Twin issues

Two issues will definitely define the sector in 2019. They are infrastructure and the state of Nigerian airlines. Infrastructure is critical to the development of the aviation sector. Over the years, the government has done some work in assessing the current state of the airports and some improvements have been made at some of the aerodromes in Lagos, Abuja, Port-Harcourt and Kano and other places.

It sought to improve aeronautical facilities like the terminals, taxiways, runways, parking bays and navigational or the guidance systems to improve safety, increase capacity and ensure efficiency in service delivery and on-time performance for airlines that operate out of these airports. Aside Lagos airport, the Nnamdi Azikiwe International Airport has seen development with the launch of a new terminal linking a rail system that makes if not the best in Africa but in West which aims to ease congestion and expected to help facilitate tourism growth in Nigeria.

The $500 project being built by Chinese based Construction firm has been completed while that of Lagos and Kano are nearing This projects will serve as a boost for the local economy, generating an estimated 800 jobs with plans to sustain a further 760 permanent jobs into the future.  The terminal expansion in Lagos and Abuja are vital to infrastructure investment where the private sector will help fulfil the country’s quest to raise Nigeria’s profile as a regional hub.

The infrastructure improvements completed earlier in Abuja and Port-Harcourt airports are key measures implemented to make travel cheaper for passengers and increase the country’s attractiveness to foreign airlines operating in the region. Tourism is expected to be a key beneficiary of airport expansions in Nigeria. The art, entertainment and recreation, trade, transport, accommodation and food services, administrative, support and other services account for 34 per cent of GDP in 2017 and about 20 per cent of employment.

All eyes on airlines

Can Nigerian airlines take a bite out of the chunk of monies carted away by foreign airlines year in year out by these mega carriers? The answer is a resounding no. Nigerian airlines are weak, fragmented and lack capacity. They lack the finance to compete with the least airline in Europe and the United States. Over the years, they are yet to come out their self-inflicted pain. They lack the wherewithal to conduct businesses professionally. Foreign airlines sold tickets worth $800 million (N288 billion) in the first half of 2018, according to the International Air Transport Association (IATA).The figure was a great improvement on 2017 when the airlines recorded a total of N503 billion from the Nigerian market, out of which about N259 billion was realized in the first half of the year under review.  Over 70 per cent of the total revenue generated in Nigeria’s aviation sector comes from international airlines operating in Nigeria. Domestic airlines are also unable to utilise about 70 per cent of Nigeria’s entitlements as contained in the Bilateral Air Services Agreement which the country signed with other nations of the world in the business of aviation.

Operators told our correspondent that the lack of capacity had stopped Nigerian airlines from taking advantage of their rights in the BASA deals, adding that the country’s aviation sector was grossly under-utilised when it comes to bilateral air services with other nations of the world.

It was further gathered that the limited revenue being generated from indigenous carriers was mainly due to the unwillingness of the local airlines to make adequate remittances to the Federal Government.

This, it was learnt, had made the Gross Domestic Product of Nigeria’s aviation sector to be less than one per cent, a development that had impacted the industry adversely.

Operators, therefore, stated that to remedy the poor GDP contribution, unutilised bilateral air services and abysmal remittances from local airlines, it was important for the country to ensure the full establishment of its national airline.

National carrier question

According to them, the establishment of a national carrier will not only enable the country to take advantage of BASA deals, but also to create jobs, as well as grow the GDP through the industry. President, Air Transport Services Senior Staff Association of Nigeria, Ahmadu Illitrus, “You see the foreign airlines coming into Nigeria and moving out seamlessly but our domestic airlines are unable to do that because they don’t have capacity. So basically as an industry today, I can confidently tell you that even in terms of revenue generation, 70 to 80 per cent of this revenue is drawn from the operations of foreign carriers”.

Illitrus stated that Nigeria’s aviation sector was under-utilised in terms of reciprocal rights under the BASA deals, adding that the sector had also seen the demise of many local airlines.

Next year could see a slight change of things with Nigerian carriers bracing up for a little challenge. Of all the carriers, Air Peace appears to be only one prepared. Other airlines are coming onboard to add to the existing carriers in operation. However, Air Peace stated recently that the carrier has capacity to operate its designated foreign routes but is being frustrated by international aero politics. The Federal Government had given approval to Air Peace to begin long-haul flights to London, Guangzhou-China, Houston, Mumbai, Johannesburg, Dubai and Sharjah. The Chief Operating Officer of Air Peace, Oluwatoyin Olajide urged the Federal Government to protect its flag carriers by engaging in international aero politics with governments preventing Nigerian airlines from flying into their countries.

The airline’s long time plan saw it place order for 10 B737 MAX, which will serve its regional operations. The African carrier operates a fleet of 13 Boeing 737-300/500s between major cities in Central and West Africa. It also operates two Embraer ERJ-145 on a domestic basis.

Next year would see some of the waivers given to airlines come yield more results for the carriers. Domestic airlines has said the recent Value Added Tax (VAT) waiver given to them by the Federal Government estimated to be about N50 billion annually would give them relief financially, provide them with fund for lower air fares, aircraft maintenance, and to create more employment in the sector.

VAT is the deduction of 5 per cent from the passenger airfare remitted to the Federal Inland Revenue Service (FIRS), while the airlines also pay 5 per cent charge to the Nigerian Civil Aviation Authority (to be shared by four other agencies in the aviation industry). The CEO of Aero Contractors, Captain Ado Sanusi said the waiver would bring down air fares and make more people to travel by air and increase airlines profit margin.

Last line

Every year Nigerian airlines pay several billions of naira as VAT. Nobody listens to airlines all these years until now. One hopes that 2019 will bring prosperity to Nigerian carrier and make it far better year than 2018 which was generally referred to as a year where bold steps and attempt were made in reshaping the industry.