• Saturday, June 22, 2024
businessday logo

BusinessDay

Top issues that shaped Nigeria’s aviation sector in 2022

Stakeholders to discuss airlines’ survival amid tough environment

The Nigerian aviation sector, which was still recovering from the impact of the COVID-19 pandemic at the beginning of 2022, faced more challenges that threatened the operations of many airlines.

The year started off with some level of uncertainties on the survival of domestic carriers, especially with the scarcity of foreign exchange, which led to further depreciation of the naira.

Other issues that shaped the sector include aviation fuel scarcity, cost of aviation fuel, suspension of Dana and Aero’s flight operations, slow renewal of Air Operating Certificate, preparations for commencement of Nigeria Air, selection of Ethiopian Airlines as preferred bidder for Nigeria Air, airlines’ opposition to Nigeria Air, court case on Nigeria Air, foreign airlines’ trapped funds and Emirates’ suspension of flight operations.

The fallout of the tough operating environment saw two major airlines in Nigeria, Aero Contractors and Dana Air, suspend operations.

Aero Contractors cited the impact of the challenging operating environment on its daily operations as the reason for suspension.

Dana Air was suspended by the Nigeria Civil Aviation Authority (NCAA) because the airline was no longer in a position to meet its financial obligations and to conduct safe flight operations.

Airlines continued to struggle with operating costs such as taxes, surcharges and maintenance costs, which rose because of the scarcity of foreign exchange. At some point, airlines carried out most of their activities in US dollars, which was in short supply.

The aviation fuel crisis, which began in late February and deteriorated further through the months of March to May, further worsened and threatened the ability of airlines to continue operations, with the price of JetA1 rising from N200 in December 2021 to over N400 per litre in February. Currently, the price has skyrocketed to over N800 per litre.

Nigeria’s domestic airlines were in a struggle to secure the forex they needed to acquire their spare parts to maintain their aircraft. This was a major influence on how quickly a grounded aircraft can be fixed and restored to its flight schedule, which in turn has a huge impact on the schedule reliability of the domestic airlines.

The 25 prospective carriers that have submitted applications to process their Air Operating Certificates (AOC) to commence air operations have slowed down on the process as a result of current high operating costs.

With 27 prospective operators having applied to the NCAA to get their AOC, 25 carriers have been slow in meeting the requirements as requested by the NCAA.

Foreign airlines are also faced with challenges threatening their presence in Nigeria. As a result of their trapped funds in Nigeria, almost all airlines blocked all low-ticket inventories on their websites, making it difficult for passengers to buy affordable tickets.

Recently, the International Air Transport Association (IATA) disclosed that Nigeria is the top among the five markets with blocked funds.

IATA revealed that the top five markets with blocked funds (excluding Venezuela) are: Nigeria, $551 million; Pakistan, $225 million; Bangladesh, $208 million; Lebanon, $144 million; and Algeria: $140 million.

IATA warned that the amount of airline funds for repatriation being blocked by governments has risen by more than 25 percent ($394 million) in the last six months.

Emirates have had to suspend flight operations as a result of their trapped funds, as some airlines have had to sell tickets in dollars to mitigate the effects of the problem.

The sector also witnessed some agitations as regards the setup of the national carrier, Nigeria Air, and the selection of Ethiopain Airlines as preferred bidder.

The Federal High Court sitting in Lagos granted an order of interim injunction restraining the Federal Government from executing the proposed or draft agreement of the establishment of a national carrier between Ethiopian Airlines and Nigeria.

About eight domestic airlines sued the Federal Government to court, listing Nigerian Air; Ethiopian Airlines; Hadi Sirika, minister of aviation; and Abubakar Malami, attorney-general of the federation as defendants.

Read also: Nigeria and the aviation sector

Among the prayers the airlines want the court to stop the national carrier deal and withdraw the Air Transport Licence already issued to Nigeria Air by the Federal Government/Nigerian Civil Aviation Authority.

They said the firm which served as transaction adviser for the transaction was incorporated in March last year and alleged that the company was linked to the aviation minister. They also said the project was done without involving the airlines and key aviation stakeholders.

Experts say the court case on the national carrier will give any investor running into last-minute deals, to have a rethink and make sure all necessary processes are in place so they will not get their hands soiled in the nearest future.

Despite the woes, the end of the year came with some hope as domestic airlines increased fleet, opened more routes and increased frequencies, deepening competition in the market and the opening of domestic runway (18L) of Murtala Muhammed Airport, Ikeja, after 14 years.