Fleet depletion, capacity cut, reduced travel put airline business on edge

The vacuum created by the temporary absence of some carriers has created capacity issues for other operators, writes, WOLE SHADARE

Scaling down

While airlines are scaling up and acquiring aircraft by way of expansion, the country’s airline industry has taken a hit; no thanks to the downturn in the economy and the purchasing power of many Nigerians.

Gone are the days when the middle-income earners could afford to engage in luxury and by extension see air travel as a quick means of commuting from one city to another. But times have changed.

The middle class seems to have been wiped off. At the same time, air travel is now categorized as a luxury in Nigeria unlike in Europe Asia and the United States where domestic air travel is one of the effective means of transportation.

The middle class has since jettisoned air travel and ‘gladly’ embraced road travel with the attendant risks of encountering marauders on the country’s highways.

Financial hurdles

The financial difficulty faced by airlines has impacted them negatively as they have scaled down operations, and aircraft. At the same time, poor services have gone a notch higher with many passengers bearing the brunt of escalating ticket prices for appalling services.

Airfares are said to be on the high side. The most trafficked route on the network, Lagos-Abuja has an average fare of N120,000 per passenger for an hour flight. This translates to about $83 at the current rate per passenger.

Meanwhile, flights on the B737 series in Europe offer $40 per passenger with the same equidistance. The influx of airlines could help to bring down fares, especially on routes like Lagos-Abuja; Abuja-Port-Harcourt; Lagos-Owerri; and Lagos-Enugu.

Customer confidence in Nigerian airlines is another reason air travel demand is deemed low. The aircraft stock shows that the average fleet age is about 20 years or more with a few exceptions. This contrasts sharply with fleet age for Africa’s best airline Ethiopian Airlines for example is said to have an average fleet age of five years.

Price elasticity

The basic concept of the own-price elasticity of air travel in different market segments suggests that if airfares are reduced on Nigeria’s domestic routes, demand for air travel is likely to increase since these routes are short-haul.

Nigeria has the lowest propensity to fly among countries like Venezuela and Egypt with almost similar demography specifically in population size range.

This story is a paradox of sorts, given that the geography as well as the demographic profile in Nigeria favours air travel. The country has a working population of over 100 million, which, in addition to the fact there are substantial inter-city distances, should favour propensity to travel by air.

The low GDP per capita probably provides some explanations for the low Propensity To Travel (PTF), but again, Pakistan has a lower GDP per capita and still manages to record a higher PTF than Nigeria.

The number of active domestic airlines is also lower in Nigeria than in other countries, again indicating the low demand for air travel.

Many of the airlines are finding it extremely difficult to bring in aircraft aside from Ibom Air which is ramping up capacity with new A220-300 airplanes.

Aircraft delivery for the local airlines has stalled. Rather than increase the fleet, they are rather depleting at an alarming rate.

The entirety of the fleet of Nigerian domestic carriers is less than 50 in the fleet of Nigerian airline operators. Some who have placed orders for new aircraft except Ibom Air have doused talk on when the airplanes would be delivered.

Heading for graveyards

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% of Ethiopian Airlines.

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.

Expert’s view

A renowned aviation consultant and Chief Executive of African Aviation Services, Nick Fadugba said, “When you look at Ethiopian Airlines, the combined fleet of all Nigerian airlines is about 40 per cent of the fleet of Ethiopian Airlines. We have approximately 40 aircraft as a country, all our airlines. Ethiopian Airlines has 120-plus aircraft and most modern you can imagine. Not only that, in the next few years, they will operate about 130 aircraft. So, you see Ethiopian is thinking on a bigger scale. You could say that in Ethiopia they have a monopoly, which is very different from Nigeria. ”

“And in Nigeria of course we have an economy which is not a monopoly. We have many airlines which are good in a way, but the problem is that none of them to the best of my knowledge is profitable. So, what I will recommend for our Nigerian airlines is that they need to work together. They can compete for example on Lagos-Abuja or Abuja-Port Harcourt. They can work together on training, maintenance, spare pooling, on spare parts purchasing. ”

Nigeria is blessed with the biggest domestic aviation market on the African continent, bigger than South Africa, Kenya, Ethiopia and many other countries. Surprisingly, Nigeria has not been able to harness this market for its benefit. The beneficiaries are foreign airlines. Nigerian airlines need to work together. The acquisition of 10, five or fewer aircraft is nothing in the world of aviation.

The Nigerian aviation sector is very vibrant. There are many airlines, which is a good thing in a way, but the problem is that none of them is profitable.

Small market

Nigerian airlines are small, with fleet sizes as low as four aircraft for some airlines. The actual market is equally small. Although market potentials exist along several under-utilised air corridors, the smallness of airlines does not permit them to explore these potential routes.

Last line

Not a few believe that increased demand for air travel needs to be engineered. While the demographics and geography are favourable to air travel, the prohibitive costs of air travel are traced to supply-side costs of operations, maintenance, taxes and other regulatory charges. The government has been urged to grant new entrants tax holidays and other regulatory charges to make for the stability of their operations for at least two years.

News Details

Fleet depletion, capacity cut, reduced travel put airline business on edge

Popular Post