Six issues that shaped Nigeria’s aviation sector in 2016

Nigeria’s aviation sector has been one of the most troubled sectors in 2016. Six major issues shaped the country’s aviation sector in 2016, which impacted its performance and led to the sector contracting in 2016.

The major issues include: scarcity of foreign exchange, scarcity of aviation fuel, exit of foreign airlines, declining passenger traffic, poor infrastructure and frequent flight delays and cancellations.

A severe dollar shortage and elevated black market rates left many Nigerian airlines facing losses on their routes and struggling to get foreign exchange for routine and scheduled maintenance.

Airline sources say consumable spares for planes became harder to buy and stock in large quantities, while repayment for lease rentals and loans have kept dragging as the dollar shortage worsens.

“Airlines operators are required to change their tyres on a weekly basis, pay for wear and tear on a monthly basis and fix old engines when the need arises, and this is often done outside the country and it requires dollars to foot these bills,” Nogie Meggison, chairman, Airline Operators of Nigeria (AON), told BusinessDay.

These routine activities that are mandatory for airlines are becoming very difficult for the airlines, as they have to be mainly done outside the country and it is getting increasingly difficult to get the dollars to do it, Meggison said.

Iberia Airline suspended its route to Nigeria on May 12, followed by United Airlines at the end of June because of dwindling passenger traffic and difficulties collecting payments. At a point, foreign airlines had more than $600 million stuck with the Central Bank of Nigeria (CBN).

Sources say the decision by United Airlines to stop flying into Nigeria, its only route to Africa like its Spanish counterpart, was due to the airline’s inability to repatriate money from tickets sold in Nigeria.

But it is not only foreign airlines that were affected by the scarcity of dollars. Nigeria owned airlines also took a hit because major checks are carried out overseas and payments for such services made in foreign currency, whereas they earn their revenue in naira.

Aviation fuel scarcity was also a major issue as it was always not available and when it was available, it was just too expensive to buy. The scarcity of aviation fuel, also known as JET A1, led to a more than 100 percent increase in the price of the product.

Aviation fuel, which was previously sold for N120 per litre, rose to a high of N240 and N350 per litre, due to the scarcity. This led to domestic airlines warning that if no urgent action is taken to improve the supply of aviation fuel, they may be forced to suspend their services.

John Ojikutu, secretary general, Aviation Safety Round Table Initiative (ART), explained that the scarcity of aviation fuel and sharp increase in price was due to the neglect in repairing the pipelines and failure to revive the Warri refinery’s Jet A1 pipeline –hydrant system for supplying aviation fuel.

Ojikutu mentioned that other reasons were costs of transportation, demurrage on the tankers and insufficient number of fuel dispensing trucks.

The situation led to significant increase in flight cancellations at the nation’s airports and high air fares, thereby discouraging people from flying. Many people had to put their cars in order for the long journey home during the festive season due to the difficulties encountered in flying.

But flight cancelations while a huge inconvenience and cost to passengers is also at a huge cost to the airlines. BusinessDay’s findings show that the nine domestic airlines operating in Nigeria lost over N27billion in revenue to flight cancellations in 2015 and this cost is expected to even rise further in 2016.

The 2015 figure was arrived at based on losses incurred due to 15,276 flight cancellations in 2015.
Poor infrastructure at the nation’s airports was another issue in 2016. It was common in 2016 for passengers to be stranded at the nation’s airports in heat as air-conditions malfunctioned or be stranded in darkness as the electricity failed.

“The sector’s challenges include the need to modernise and upgrade infrastructure and equipment such as terminal buildings, control towers, conveyor belts, instrument landing systems, communication equipment, runway lighting, fire tenders, amongst others,” Tayo Ojuri, industry expert and CEO of Aglo Limited, an aviation support service company told BusinessDay.
Declining passenger traffic despite rising cost of operations compounded airlines woes for the year.

“We are in a recession economy so we expect to witness high unemployment, inflation and low purchasing power. So people do not just travel now; there must be an important reason before you travel and it must have good return,” Simon Tumba, Industry analyst said.

“Traffic has depleted at the major airports and this has affected restaurants operating inside the airport and some of them are closing,” Tumba said.

 

IFEOMA OKEKE