New airlines to open space for competition, trigger travel demand

Few airlines are on the verge of joining existing ones to broaden space for competition. WOLE SHADARE writes that travelers will mostly take advantage of the glut for a better deal

Bitter pill

Nigerian airlines and by extension, the aviation industry in Nigeria suffered some grueling experiences that threatened the survival of the entire industry.

The coronavirus pandemic like every other part of the world affected the country. Even before the outbreak, the outlook for the world economy—and especially developing countries like Nigeria—was fragile, as global Gross Domestic Product (GDP) growth was estimated to be only 2.5 percent in 2020.

 

 In the face of the pandemic, the majority of world economies fell into recession. Getting out of the COVID-19 pandemic, the Russia-Ukraine conflict further created another round of crisis that the whole world is battling. The crisis is having a domin0 effect on all sources of livelihood but one that has taken a huge toll on aviation and air travel.

The consequences of that are the effects of the war on skyrocketing rise in the cost of energy and by extension Jet fuel.

Domino effect

The multiplier effects of high jet fuel made airlines in Nigeria adjust airfares by over 100 percent. That adjustment in airfares and raising of other costs have seriously impacted the number of people taking to air travel as many find it extremely difficult to afford at least N80, 000 for one hour fare. The cost is more depending on the time of purchase or the monopoly of certain routes by airlines.

The fare increase, according to an expert, is subject to many variables, which include the high cost of aviation fuel, otherwise known as Jet A1, and high taxes by different aviation agencies, among others.

Crises

Airline operators under the aegis of Airline Operators of Nigeria (AON) had raised the alarm early this year of the impending rise in fares. They blamed their action on the high cost of Jet A1 from N200 per litre that it sold for early this year to over N690 per litre or more than it is sold for as of today.

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Value Jet

Aviation fuel according to the operators took about 35 percent of airlines’ revenue but currently takes about 65 percent of their earnings.

The carriers were faced with most of their biggest headache yet; scarcity of FOREX, charges, and non-conducive operating environment made airlines like Aero Contractors suspend their operations with a view to re-organising themselves.

The management of the carrier had in July 2022 said the decision was due to the depletion of aircraft to run scheduled commercial services.

The airline said the impacts of the challenging operating environment on daily operations had made the temporary suspension of scheduled passenger services inevitable.

The shutdown did not affect subsidiary services at the Aero’s Approved Maintenance Organisation (AMO), the Approved Training Organisation (ATO), and the helicopter and charter services operations.

While Aero was out, another carrier, Dana equally left the scene. The Nigerian Civil Aviation Authority (NCAA) had in the same July 2022 suspended Dana Air operations indefinitely over its alleged inability to run safe operations.

The move, following an investigation by the apex regulatory body, saw to the immediate withdrawal of the airline’s Air Transport Licence (ATL) and Air Operator Certificate (AOC) indefinitely, with effect from midnight of July 20, 2022.

The Director-General of the NCAA, Capt. Musa Nuhu stated that the suspension was made pursuant to Section 35(2), 3(b), and (4) of the Civil Aviation Act, 2006 and Part 1.3.3.3(a)(1) of the Nigeria Civil Aviation Regulations (Nig.CARs), 2015.

Azman’s B737 aircraft

To further compound the problem, the NCAA had in September suspended Azman Air over the airline’s inability to renew its Air Operator Certificate. The aviation regulatory body had since lifted Azman’s suspension, but the effects of having three major carriers out of the system shrunk the travel space and put enormous pressure on the existing ones that equally tried to stay afloat amid serious tough challenges that they faced.

Equipment depletion

For those in operation, insufficient aircraft has further compounded the situation; most of the reasons for delays passengers go through at the airports.

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Aside from popular destinations like Abuja, Lagos, Port Harcourt, Enugu, and Owerri, many other routes that were hitherto serviced by airlines have been jettisoned, forcing people to make the tortuous journey by road to their destinations.

Those that dare to go to such destinations operate there twice or thrice weekly and this makes air travel cumbersome.

At a point, the carriers all faced a bleak future as little help came from the government that in itself needed help to attend to so many other issues affecting other sectors.

Expert’s view

Aero Contractors B737 aircraft

Chief Operating Officer (CEO), of African Aviation Services Limited, Mr. Nick Fadugba, recently said the country’s small fleet of aircraft will make it practically impossible for it to compete with foreign counterparts.

The former Secretary-General of the African Airlines Association (AFRAA) put the average fleet size in Nigeria at a maximum of 10 aircraft; a number he described as ‘too small’.

The comeback, new airlines onboard

However, the return of Azman Air, Aero Contractors, the planned decision of a new Nigerian start-up to commence operations on October 10, 2022, and the promising look of having Nigeria before the end of the year among other carriers that are on the verge of getting their Air Operators Certificates (AOC) could help broaden the space for competition, amid the country’s low propensity to fly.

ValueJet plans to commence operations flying domestic round-trip routes in Nigeria from its supposed hub in Lagos to Abuja, Asaba, and Port Harcourt.

The carrier’s domestic services will be backed by an all-Bombardier CRJ 900 fleet of three aircraft. Its latest CRJ 900, registered 5N-BXR was delivered to the airline in early September 2022.

In preparation for its planned resumption, Aero Contractors procured two aircraft in a new partnership with Umza Air in a Joint Venture (JV) to boost its services after the temporal suspension of operations.

The aircraft registered in Nigeria and owned by UMZA Air will be operated by Aero Contractors under a joint venture agreement between both parties.

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Some existing Nigerian airlines

Nigeria Air is set to commence flight services before the end of the year following an announcement by the Ministry of Aviation announcing Ethiopian Airlines as the preferred bidder for the Nigerian flag carrier.

 “After a careful, detailed, and ICRC-governed selection process, Ethiopian Airlines Consortium has been selected as the preferred bidder, offering an owner consortium of 3 Nigerian investors MRS, SAHCO, and other institutional investors (46 percent), Federal Government owning five percent and Ethiopian Airlines 49 percent,” stated one of the transaction records.

The much-anticipated Nigeria Air, Nigeria’s national carrier, is gradually gaining traction as the federal government said it is fast-tracking the delivery of the national carrier that has been in the works actively in excess of seven years.

Going by the presentation by the Minister of Aviation, Hadi Sirika, Nigeria Air may be delivered before 2022 comes to a close or by the first quarter of 2023. The minister has promised the national carrier will take to the skies before May 29, 2023, when the lifespan of this government will expire.

Optimism

The coming of these airlines is bringing back optimism that despite the gloom of a few years ago, many are still willing to invest in the sector which would bring back some lost jobs and stimulate again the sector.

With a glut on the route, this could engender competition and help to force down fares. Competition is a natural result of many players in an industry. However, as profit-oriented actors, airlines will not venture into an industry where there is a low propensity to fly.

Nigerian airlines

Last line

The lack of airline competition and the absence of regional airport hubs are some of the constraints identified in Africa’s aviation.

Hopefully, competitive prices and better quality will result and trigger increased demand for air travel.

Wole Shadare