Business Hilights
Tracking Nigeria's Headline Business News Online

Nigerian airlines seek bailouts amidst yawning market potentials— Aisuebeogun

Leading analysts in global aviation business have chided Nigerian airline operators over regular request for government assistance when they operate in an environment filled with growth opportunities’.

Otherwise, experts say it is only domestic operators begin to look at mergers and alliances that they will begin to consolidate with efficient services and competitive edge.

According to the former Managing Director of the Federal Airports of Authority of Nigeria (FAAN), Richard Aisuebeogun, said airline operations around the world are high capital intensive and only strong carriers would attract investors.

He decried that local airlines hate merger talks which remains the best option in an economy where the strength and capacity of corporations tell al lot in growing both customer and investors confidence.

He said Africa has the potential to be a significant force in aviation on the back of robust economic growth forecasts, with Africa having among the fastest growing economies worldwide, he however, lamented that Nigerian and other African airlines, carry only 1.3 per cent of global air cargo.

A recent report of a survey carried out in May 2016, had revealed that Nigerian airlines desire to remain too individualistic is hobbling investors confidence and tend to weaken passengers trust in capacity development.

The report said nearly 37 airlines were launched in Africa in the last 12 years, with a total of 25 from Nigeria alone. Unfortunately, almost all the 37 have failed.

Looking at the report, Aisuebeogun said as at today, only about 12 African airlines have intercontinental operations, among a host of foreign airlines making high earnings from the continent.

He averred that “The earlier we realise that airlines are not a luxury but a necessity in our remote villages and city hubs, the more we can change our thinking and make sustained efforts to ensure that airlines are supported and developed for the accelerated development of our economies and improvement of our livelihoods.”

He further noted that the potential of aviation in Africa generally, is underutilised, which means that there are huge opportunities for sustainable airlines to thrive.

Business Hilights recalls that air transport is recognised as an important element in the achievement of the United Nation’s Vision 2030 Sustainable Development Goals, which seeks to improve individual livelihoods in all corners of the globe.

Even here in Africa, the mode is also vital to achieving the African Union’s (AU) Agenda 2063 that seeks to transform Africa’s economy from its current largely underdeveloped state to hugely develop economies.

Aisuebeogun noted further that “These small proportions contributed by Africa to global air cargo indicate that Africa has a huge potential to grow. But the performance of the African aviation industry is lagging behind those of the rest of the world at less than three per cent of global revenue passenger miles (RPKs).

“The growth is heavily constrained by the high industry costs, inadequate infrastructure at several airports, slow implementation of the Yamoussoukro Decision (liberalisation of Africa’s airspace), lack of a single traffic rights negotiating body with respect to third parties like the EU.

Nonetheless, demand for air transport has increased steadily over the past years with passenger numbers and freight traffic growing significantly.”

Today, the cost of operation in Africa’s environment is among the greatest challenges to African airlines and these include relatively high taxes, charges and fees. IATA has also pointed out that these high charges are part of the reasons why airlines have short life-span in Africa.

He however called on governments to encourage diversification to empower locals to stimulate patronage for carriers. He said improved infrastructure would not only turn cities into hubs, but stimulate passenger traffic.

 “Competition and liberalisation are excellent but airlines must be equipped to compete. With an economy already manifesting signs of adversity, with lower currency, high airport charges, taxes and fees in Africa, airlines are already at a disadvantage before they enter into competition.

That is why, even with the best aircraft among African airlines’ fleet, they can hardly compete but pull out of lucrative routes. This was responsible for Arik Air pulling out of Dubai. This factor will discourage more airlines from venturing into lucrative routes.

While calling on the regulators to audit the airlines to determine their debts or financial health and also the sustainability of their operations, Aisuebeogun queried “How can airlines that sell tickets not on credits but always on cash both on passenger and cargo seek intervention funds than those providing them safety services, which they hardly pay for?

“With the annual statistics on passenger air traffic and cargo freight produced by the Federal Airports Authority of Nigeria (FAAN), you will find out that the revenue generated by all operators in the sector is sufficient to sustain the operation of the industry, with no intervention funds from government.