25 prospective airlines mull operations in Nigeria
Nigeria’s aviation industry is experiencing a flurry of activities with new airlines coming up, as 25 prospective operators are in the process of marking their presence in the sky.
The wave of activities, BusinessDay learns, is driven by operators leveraging the opportunity of buying discounted airplanes, low cost of hiring staff and tax waivers on aircraft and spare parts, among others.
BusinessDay’s checks show that 25 investors are at different stages of acquiring Air Operating Certificates (AOC) for local flight operations from the Nigeria Civil Aviation Authority (NCAA).
According to Sam Adurogboye, general manager, corporate communications, NCAA, who confirms this to BusinessDay, these investors are at various phases of acquiring AOC, which includes expression of interest phase, issuance of guidelines to the applicants, taking concrete steps to demonstrate the capacity to operate safe operations and staging of demo flight before issuance of AOC on fulfilment of all requirements.
United Airlines, a few weeks ago, commenced operations using Enugu Airport as its operational base, while NG Eagle and Green Africa are at the final stage of getting their AOCs.
Stakeholders in the aviation sector describe these new entrants and prospective airlines as being propelled to invest in the airline business as a result of the viability of Nigeria’s aviation sector, discounted aircraft parked in other countries as a result of the COVID-19 pandemic, low cost of hiring staff who are currently out of jobs since COVID and tax waivers on aircraft spare parts by the Federal Government.
Seyi Adewale, CEO, Mainstream Cargo Limited, told BusinessDay that there were many factors responsible for airlines springing up at this time, and it could be strategic and opportunistic.
“COVID-19 forced economic downturns around the world. It has now empowered potential aircraft buyers to buy on better terms than before the pandemic. There are many aircrafts parked and available during this period and this could explain the potential long leasehold opportunities,” Adewale said.
He explained that new airlines had taken decisions to enter into the Nigerian airspace based on the viability of the market even before the economic downturn, as Nigeria remains a viable economy with over 200 million people, largest African Gross Domestic Product (GDP).
Furthermore, the Central Bank of Nigeria’s (CBN) support to the sector with forex for aircraft purchases has encouraged more investors, and the now signed into law Financial Act enabling airlines to pay zero percent duty on aircraft and its spares is encouraging as these are major costs to airline operations.
“Massive investments in airport infrastructure in Lagos, Abuja, Port Harcourt and state governments providing either incentives to attract airlines to their state or going a step further to construct new airports are also encouraging investors,” he said.
According to Olumide Ohunayo, an aviation analyst, airlines are not only springing up in Nigeria but all over the world, from UAE to Columbia, USA, UK, Italy, Vietnam, South Africa and New Zealand, because most airlines are taking advantage of the low cost of hiring and low cost of aircraft.
Ohunayo recalled that Vietnam stopped processing applications for new airlines, asking them to wait until 2022 in a bid to stop possible glut; a position Nigeria may be gradually approaching.
“Suppliers and aircraft lessors are giving good discounts because of this. Investors are propelled to go and get aircraft and their spares, engines and other components. Prices for aircraft leasing have dropped and this has encouraged people to put forward their plans.
“Again, a lot of manufacturers, airlines, training schools have downsized, so the cost of hiring professionals have dropped compared to what was paid in the past, and this cutting down has helped because the cost of starting a new operation is much lower than it was two years ago,” he said.
United Airlines acquired three aircraft to commence operations; NG Eagle has acquired two aircraft while Green Africa plans to acquire several low-cost carriers to feed local and regional routes.
The new airlines and even old airlines are now buying smaller aircraft and shifting their base of operations from major cities to smaller cities, thereby developing routes that were not traditionally profitable, Ohunayo noted.
“United Nigeria is now using Enugu as its base. In the past, every airline used Lagos as an operational base. What is also common is that they are all marketing low fares. They are coming at a time when the in-flight services have almost vanished and that is a big chunk from the cost of operations.
“Apps are now being introduced to enable people to book flights directly with their phones and negotiate for fares. The little interface between staff and airlines has reduced the cost of hiring,” Ohunayo added.
John Ojikutu, an aviation security consultant and secretary-general of the Aviation Safety Round Table Initiative (ASRTI), observed that while most airlines around the world were parking their aircraft on the shelves or selling them at low prices than their market values, ‘clever’ Nigerians were buying them to put them into operations at low fares despite the operational costs.
It is better for the aircraft to be put in the air by the one who can bear the operational costs than to be kept on the shelves or on the ground by those who cannot bear the operational costs, Ojikutu said.
To him, the cleverer airline operators are those going for cargo aircraft for cargo operations, adding that while the passengers’ airfares are crashing, the same is not true for cargo fares.