Triangular market: Airlines’ undoing?
Most of the airlines in Nigeria jostle and compete for the triangular market of Lagos, Abuja and Port Harcourt considered to be the money spinner for operators. But concentration on this route has eroded other routes’ development, WOLE SHADARE writes
The clincher
The triangular route of Lagos, Abuja and Port-Harcourt seems to be clincher for big Nigerian airlines. But his triangular market has also led to saturation of the popular route; thereby becoming a huge loss for the carrier. They compete against themselves for the available seats on that route.
Many start-up airlines in Nigeria see that triangle as profitable. Yes, no one can begrudge them because that is where the bulk of travellers come and that equally forms the revenue base of the carriers.
Limited capacity had hurt the growth of the air transport industry, with many factors contributing to this. They include lack of incentives by the government and the disposition of airline operators to operating small instead of accepting other investors to partner with them to enjoy economy of scale. He also talked about the owner-manager syndrome.
There were many cities in Nigeria with no scheduled flights even when they have airports. Air travellers only travel to destinations that have flight service and use other means of transport to other destinations. According to him, more passengers will travel by air if many cities in Nigeria are connected by air. And more people will also travel by air if airlines have more operating aircraft, which means that air fares would be lowered to rates that would be easily affordable for the lower middle class.
Developing new routes
While very few of them are thinking of developing new routes, others have consigned themselves to the old order, thereby making a mess of everything and shooting themselves in the legs. Overland, one of the domestic carriers, which recently forayed unto the regional scene does not even compete on the key Lagos-Abuja route, preferring to focus on other domestic destinations.
Overland Airways is expanding its network with the acquisition of a fleet of ATR72s and the wet lease of a 737. The airline currently operates a domestic network of seven destinations, from Lagos and Abuja to Asaba, Ilorin, Minna, Calabar, Bauchi and Ibadan, using a mixed fleet of three ATR 42S three ATR 72s, two Beechcraft 1900-Ds and the 737.
Airlines around the world are constantly looking to add new destinations to their route network. They perform multiple route evaluations in order to know if a route will be profitable in the long term or not.
Before starting a new route, airlines want to know how many passengers will travel on their flight. Most airlines use aviation market intelligence tools to parse and analyse all available data.
This data comes from within the airline itself, as well as industry-wide passenger data that identifies trends in traffic. Essential data points to consider are fares, routes, airlines, and connections. Airlines deploy this data to determine how many passengers are travelling each day (including connections) between airport pairs.
Airlines profitability
Airlines can predict revenue and profitability on a route depending on different times of the day. If the flight is scheduled at a time of the day where there are no possibility of connections to other cities, then the airline might not do as good as a flight that is timed for inbound and outbound connections. Some flights have an optimal time for local traffic while other flights are timed for passenger connectivity.
An airline will have to source an aircraft when deciding to fly to a new destination. A major airline with a large fleet of aircraft might be able to find a spare aircraft and assign it to the new route.
It will be easier for an airline to pull an aircraft from its fleet for a 1-hour domestic flight than a 15-hour international flight. A regional aircraft might fly four to five flights a day to different cities while a wide-body airplane might only fly once a day on an 8-hour oversea flight.
Not all aircraft can fly on a particular route. Aircraft limitations are taken into account when aircraft are assigned to a route. For example, a 70-seater regional jet cannot fly from North America to Europe because it simply does not have the range to do such missions. Some aircraft perform better than others at airports with high temperatures and higher elevation.
The big issues
Nigeria’s aviation could best be summarised to be one of the problems bedevilling the sector in Nigeria. On paper, Nigeria should be a highly active and potentially profitable aviation centre. The nation, which has Africa’s largest population of 170 million people is oil rich; enjoys economic growth running at around seven per cent a year and has a growing middle class, with Gross Domestic Product (GDP) per capita of $2,600 – but unemployment of 20 per cent.
Nigeria was blessed with the biggest domestic aviation market on the African continent, bigger than South Africa, Kenya, Ethiopian and many other countries, but that it had yet to harness this market for the benefit of everyone. The beneficiaries however, remained the foreign airlines.
The country also has very small airline capacity because many people found it easy to establish airlines with little capital outlay that they could not sustain over time.
The airlines provide small numbers of aircraft, which currently are about 42, with airfares that are relatively high, making it difficult for a large section of the population to travel by air.
Last line
It is not only the responsibility of the airlines, it remains the responsibility of the government to transform the aviation industry to generate more money for the government, investors and boost the nation’s Gross Domestic Product (GDP) and above all, to create jobs.
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