Why Nigerian Airlines Are Struggling
Things have not been easy for Nigerian airlines plying domestic routes for some years now as they are held down by huge debt, wrong operating model and economic downturn among others. From the analysis of the sector by WorldStage Newsonline, the trend will continue in the foreseeable future if new strategy is not adopted.
The airlines currently operating domestic route in the Africa’s most populous country include Aero Contractor, Arik Air, Azman Air, Chanchangi Airlines, Dana Air, Discovery Air, First Nation Airways, IRS Airlines, Kabo Air, Max Air, Med-View Airline and Overland Airways.
Specifically, among the challenges facing the aviation business in Nigeria include high debt rate, inconsistent availability of aviation fuel, poor management, funding and unprofitable operating model.
With the grounding of Air Nigeria some months after the acquisition of Richard Branson’s Virgin Atlantic interest by a Nigerian businessman, Jimoh Ibrahim, two other big domestic airlines are technically owned by government after huge bailout fund injection by Asset Management Company of Nigeria (AMCON).
While some analysts believed that the sector still requires more bailout funds, other are of the opinion that the operators should look beyond money, without even ruling out possibility of merger.
According to an industry expert, “The debt rate is high, virtually all the operators are leaving at the mercy of the government. Imagine that for a country like Nigeria, as at today there is no airline listed in the Nigeria Stock Exchange. They are mainly run as a one man business and Arik Air which is the only one planning to approach the NSE for listing will find it difficult, considering the huge debt structure in the industry.
“For instance it will be interesting to know that none of the airlines has a hanger to repair their aircraft and most of their equipments are on lease agreement. It cost a lot to repair an aircraft. Whenever they are due for servicing, they have to be taking abroad and this has to be done with foreign exchange.
“There is no point in rating the various domestic airlines in the country because it is obvious that they are all struggling, coping with huge debt burden. And looking at all the criteria lay down as international standard; safety, maintenance, efficiency, consistency, among others, none of them can be said to have measured up.”
Mr James Adedoyin, a management consultant with the Lagos based Activ8 Limited, is of the view that the airline operators in Nigeria were never abreast of the risks involved before they came into the business, which had brought the country’s aviation industry to unending crisis state.
He noted that most of the routes operated by major airlines were not profitable, which is not helping their drive for operational profitability.
He said, “Apart from the Lagos – Abuja route, most of the operators are just struggling to cover their overhead cost in other routes.
“When you are going into any business you must have done your feasibility study to ascertain it profitability. It is compulsory that every business needs a very good business plan, but is obvious that operators of airlines in Nigeria are not only lacking in this regard, they also lack the managerial capacity to run the business.”
Passengers are the ones facing the brunt of poor services and frequent flight cancelations by the domestic airlines. In fact, it’s an open secret that besides the first early flights from the Lagos’ Muritala Mohamed Airport 2 hub of most airlines, no one can guarantee that other daily flights will keep to schedule.
The Federal Government has been addressing the issues of safety and standard in the aviation sector lately, which could be noticeable in the halt of the dangerous trend of the past when the nation suffered multiple air disasters.
While the past administration also initiated some airport modernisation projects which may not have direct correlation to airline profitability, experts believe that government can still do more in view of the role of transportation in the economic development of any nation.
According to Adedoyin, for Nigeria to take its place in the community of nations, every means of transport should be able to operate at optima level.
He therefore called on the government to play its role by providing the needed infrastructures.
“It needs to improve on the operating environment for airline business in the country to measure up with international standard,” he said.
“Government need to realize that adequacy of relevant transport infrastructure is an important determinant of the success of a nation’s effort in diversifying its production base.”
Dr Mustapha Muktar, Department of Economics, Bayero University, Kano in his report on “Impact of Transportation On Economic Growth” made similar argument saying, “One of the key factors that play a pivotal role in a region’s economic growth is the presence of a reliable and efficient transportation system, this is mainly due to the fact that a well developed transportation system provides adequate access to the region which in turn is a necessary condition for the efficient operation of manufacturing, retail, labour and housing markets.”