Nigerian airlines bleed as Delta, Lufthansa cut flights
Airlines can’t pay salaries, debts
Renowned economist and Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, has expressed concern over the nation’s aviation sector concerning the present economic recession, lamenting that Nigerian airlines are bleeding.
In his monthly economic news and views bulletin made available to Woleshadare.net, he hinted that the airlines are unable to service debts and pay salaries; two issues that shows that the carriers are in dire straits.
The consequence of this, he reiterated, would lead to brain drain, as other nations, especially China, could poach over 600 highly experienced pilots and engineers who are out of job, from the country.
Rewane stated that Chinese airlines are paying huge salaries for pilots, especially experienced ones, to meet rising traffic demand.
This is coming as global network carriers are cutting back frequencies and capacity. Emirates has cut 50 per cent of its flight frequency to Lagos after United and Iberia exited the market. Lufthansa is reducing Abuja and Port-Harcourt frequency to four per week from seven this month.
The German carrier is contemplating cutting Lagos to five flights per week from December. Meridian now operates one flight per week from Milan to Lagos. Delta is cutting frequency from six per week to five on Lagos-Atlanta route. Round trip on economy fares to New York is now N450,000 – N600,000. Passenger load factors are declining compared to 2015, which now average 80 per cent inbound.
The expert noted that outbound load factors are falling much faster, as fares with more expensive dollars and declining income impact demand, adding that Nigerian airlines are cancelling flights to New York and London.
Rewane, however, did not explain in details the extent of the bleeding of Nigerian carriers.
But events in the past few months indicated that the carriers are having turbulent times with escalating foreign exchange against a very weak naira that has made acquisition of aircraft spare parts and aircraft very difficult.
The suspension of flight operations by Nigeria’s oldest airline, Aero Contractor, because of its inability to fix its five airplanes, coupled with a crippling debt running into over N30 billion, helped to put the airline in danger.
Rewane said global air passenger traffic rose by six per cent in first quarter 2016, adding that passenger load factor was up at 79.2 per cent in first quarter 2016, 0.2 per cent marginally lower than 2015.
He noted that premium class traffic is lagging economy, with airline profitability up marginally in 2016. The economic expert said that despite the consolidation in the domestic aviation, Aero and First Nation suspended flights, just as mounting bills are negatively impacting the airlines with declining revenue and static demand doing incalculable damage to their operations.
Nigerian airlines, he stated, are cutting back on maintenance and training because of lack of access to foreign exchange. The biggest problem airlines are contending with in terms of maintenance is the high cost of C-Check, which has compelled some carriers to abandon their airplanes in countries of repairs. Airlines periodically carry out checks on their airplanes.
The checks are A to D. The A and B checks are lighter, while C and D are heavier. The Nigerian Civil Aviation Authority (NCAA), in its wisdom, had imposed a calendar limit for a C-check at every 18 months and depending on the scope of work to be performed.
An average C-check costs $1 million. By today’s exchange rate of N310/$1, this can be conservatively N310 million per aircraft every 18 months.
The C-Checks became more problematic for the nation’s airline operators because most airlines were “unable to pay for the checks and eventually abandon the aircraft at the foreign MROs who usually refuse to release the aircraft to the airlines until all invoices are settled.
