Big market, small size

The sheer size of Nigeria’s aviation domestic market still considered one of the biggest if not the biggest in Africa makes one think deeply about the precarious state of the industry in Nigeria.

Air transportation, however, has failed to fill this gap and the market remains small by the standard of any other developing market.

The insecurity situation in the country particularly in many parts of the North and South East should have contributed to the buoyancy of the country’s domestic aviation sector but we see glaring signs that the carriers are no longer at ease as they are constantly under existential threat of collapse.

Viability

Nigerian aviation industry does not have good record of viable airlines. Many airlines that were established in the past went under within an average of five years.

Nothing indeed highlights the precarious nature of the sector than the fact that airlines launched with fanfare disappear from the airspace after operating for a few years.

The signs that many of the country’s airlines are beginning to buckle under the heavy yoke of the high cost of operations and regulatory oversight are just to say it mildly of the near extinction they are faced with and the gradual depletion of their fleet in the face of high forex impact, multiple taxation and selfinflicted decision and lack of planning that have put them under heavy stress.

Passengers are at the receiving end of the weakened capacity as vividly demonstrated these days as schedules are no longer reliable.

Challenges

The sector is currently undergoing one of its toughest challenges in years. Not that airlines have not gone under before, but the grounding of Dana Air over regulatory oversight by the Nigeria Civil Aviation Authority (NCAA) and Azman Air shows the precarious nature of the problem at hand.

There are indications that the promoters of Dana Air may have finally thrown in the towel and fed up with the airline business in Nigeria and as such have called it a day.

That of Azman although looks different but signs are that the carrier may also have called it a day with airline operations in the country. If that remains so, it is a further testimony that many others are in intensive care and are equally extinction crisis.

The domestic airlines in Nigeria today are very small. And, with very few exceptions, they are owned by single individuals, which is extremely unusual in the airline industry worldwide.

Experts’ views

Experts said the ownership structure limits their growth because their capital source is limited to acquiring expensive aircraft. The Late Chief Executive Officer of African Aviation Services and a former Secretary-General of the African Airlines Association (AFRAA), Nick Fadugba, recently said:

“African leaders and investors need to re-evaluate their policies and come up with strategies on how to move the region’s aviation industry forward, or they will continue to lag as international airlines make headways into the region’s airspace.”

The continent’s carriers, particularly Nigerian carriers suffer from weak economies and stiff competition from international players, especially in trade, a position that economists seem to agree with.

Global Chairman of Fairfax Africa Fund, a United States-based company, Zemedeneh Negatu, had, in an exclusive with a national newspaper, said: “Nigeria is the largest economy in Africa.

It’s the most populous country. If you look at standard benchmarking of transport logistics as one of the key drivers of economic growth and prosperity, Nigeria should have probably four or five very large multi-billion dollar airlines today each one having maybe 70 to 80 aircraft to adequately serve 220 million Nigerians.

“The domestic airlines in Nigeria today are very small. And, with very few exceptions, they are owned by single individuals, which is extremely unusual in the airline industry worldwide. The ownership structure limits their growth because their capital source is limited to acquiring expensive aircraft.

This has to change.” He further stated that investing in the airline industry in Nigeria was considered very high risk due to the numerous failures of airlines in the past and the struggling financial performance of most of the current operators.

“Therefore, lease costs, insurance and other expenses paid by Nigerian carriers are significantly higher than airlines in other parts of the world. These make it very difficult for Nigerian carriers to compete internationally on a sustainable basis,” he added.

A major challenge confronting Nigerian airlines is the disposition of the government to policies that tend to favour foreign carriers against local operators.

Aircraft in limbo

At the tarmac or ‘graveyards’ of many airports lies the carcass of aircraft that once adorned the skies while many more are waiting to be taken there; further depleting the number.

Despite the proliferation of airlines in the country, the entire fleet of Nigerian airlines combined is 40 per cent of Ethiopian Airlines.

In the past, some airports received four flights a day but now it has reduced to one as load factors have plummeted in the last few months. Flights have stopped coming because many airlines’ aircraft are on AOG (aircraft on the ground).

Most of the airlines’ aircraft don’t fly for the moment. It is the number of fleets owned by the airlines vs the airworthy ones.

Gradual depletion

It is now difficult to get flights to many domestic destinations due to the paucity of operating aircraft. We have a situation in Nigeria today where we have too many airlines which are too small, and their market is fragmented.

None of the airlines has a critical mass in terms of fleet or route network to become effective and to make money. Dana Air is out of operation.

Arik just came from the self-induced crisis that took it out of operations for nearly one week with just about three serviceable airplanes in its fleet.

Air Peace once reputed for having nearly 35 aircraft no longer has that number of serviceable aircraft in its fleet as some of them have gone for repairs and are yet to return while others are reported to be grounded and in disuse.

There are indications that 13 of Air Peace’s aircraft are AOG in maintenance facilities overseas and there are no funds to pay and bring them back.

Last line

Generally, Nigerian carriers are investing heavily in building, upgrading and expanding their airlines in what seems like attempts to catch up with competition regionally and globally.

But this, experts argue, may not be enough to move the country’s aviation business to the next level.