As airports and airlines look to grow revenue, air cargo has become a major boost for income as operating costs continue to increase.
The current foreign exchange rate is straining the operations of several airlines, eating into their income as all spares and fuel are bought in foreign exchange currencies.
Findings show that aviation fuel currently takes about 45 percent of operating cost; labour, 17 percent; aircraft rent and ownership, 8.5 percent; non-aircraft rents and ownership, 7 percent; professional services, 4.5 percent; landing fees, 2 percent; food and beverage, 1.5 percent; maintenance materials, 13 percent, and transport related, 1.5 percent.
Following these challenges, it has become important that airlines look inward to drive revenue generation and experts in the sector say air cargo continues to be a low hanging fruit.
This is because in recent decades, the aviation industry has become the most effective means of transporting cargo in a safe and timely manner. Air cargo revolutionised the shipping industry, vastly reducing shipping times for freight across the world compared to popular alternatives such as trucks and boats. As goods could be shipped more quickly, companies around the world suddenly had access to supplies that were once, for time or price constraints, impossible for them to access.
This allowed them to reduce prices and make their goods more accessible to the general population. Companies could boost profits by taking advantage of these competitive prices, allowing not only for cheaper consumer goods but also offering more opportunity to enter other lucrative industries.
Another benefit of air freight is security. Air transportation is the safest mode of transport in the world, with accidents resulting in the loss of cargo happening far less than with transportation via road or sea.
Airlines have secure handling measures in place to ensure staff or third parties do not interfere with cargo. In conjunction with technological advances in cargo handling such as freight tracking, air cargo provides a safe and secure mode of transport for goods and products.
Considering these huge benefits of air cargo, experts say it has become imperative for major challenges hindering the growth of air cargo be addressed. Most of these challenges are centred around regulations and insurance.
This was why stakeholders in the aviation cargo and insurance value chain converged recently on Lagos for the 4th edition of Chinet Aviacargo conference.
Held at the Marriott Hotel, Ikeja, Lagos, CHINET is the only air cargo event in West Africa and organised by ATQNEWS Ltd.
Challenges of air cargo export
Speaking during the event, Frank Ogunojemite, the National President of Africa Association of Professional Freight Forwarders and Logistics of Nigeria, (APFFLON) said some of the major factors identified as impediments to successful export via Nigerian Airports are bureaucracies and protocols.
Ogunojemite said the government and its agencies must review and enforce a smoother process to export potentially multi-million dollars Nigerian goods.
Moreover, he stated that from not meeting standardisation, inefficient regulation, corruption to hiccups in cargo freighting from the nation’s airports, it is obvious that many facts have proven that it is Nigeria that is holding itself down from taking advantage of the huge market, whereas Nigerian farm produce and other products from Nigeria are in high demand from different parts of the world.
Ogunojemite said fact has emerged that for Nigeria to benefit maximally from the African Continental Free Trade Area (AfCFTA) agreement, projected to elevate 30 million people out of abject poverty, generate a market hub that will connect 1.3 billion people in 55 countries and also generate $3.4 trillion aggregate GDP, the country has to be adequately prepared to effectively compete in export trade.
He said for this to be achieved, there must be effective distribution channels in which logistics, which is movement of people and goods, play an indispensable role of bridging the gap between the dream and its reality.
He hinted that reference was made after a report carried out after a conference recently, which highlighted inadequacies within the export space, which include problems of limited export production, limited/ or no capacity for certification/packaging of exportable products, infrastructural deficiency in the logistics and evacuation of exports, low penetration and access to key markets.
However, another problem, he said, includes limited export production, as Nigerians are more interested in importation of goods rather than promoting export.
Most of these challenges will continue to exist until every agency of government will consciously aim at helping to mitigate and resolve some of these issues, and not seeing themselves as being up there, while every other person is down beneath.
However, certification is one of the major challenges exporters face, even to obtain certification from National Agency for Food and Drug Administration and Control (NAFDAC), which is a Nigerian agency, is difficult to get.
Possible solutions
Frank Ogunojemite listed possible solutions to include infrastructure development, automation and digitalization, efficient customs processes, capacity building, regulatory framework, Public- Private Partnership collaboration, security and safety, competitive pricing, and collaboration with international airlines.
Air cargo regulations
Chris Ona Najomo, the acting director general of NCAA during his presentation at the CHINET conference said it is imperative that air cargo regulatory frameworks are aligned across borders.
This he said requires collaboration between international bodies such as the International Civil Aviation Organization (ICAO), national regulatory authorities, and industry stakeholders.
Najomo said such collaboration ensures that regulations are consistent, comprehensive, and capable of addressing the multifaceted challenges of the air cargo industry. The ICAO’s Annex 17 (Security) and Annex 18 (The Safe Transport of Dangerous Goods by Air) provide the guidelines that are essential for achieving global harmonization.
The DG who was represented by Ayokunle Jimoh, management staff of NCAA said the advent of technological advancements offers both opportunities and challenges for regulators.
The DG said innovations such as electronic documentation, real-time tracking systems, and automated handling processes can enhance efficiency and transparency.
However, he said these innovations also require updates to regulatory frameworks to address new risks and ensure that these technologies are implemented safely and securely.
Najomo hinted that embracing technologies like blockchain for secure documentation and IoT (Internet of Things) devices for real-time monitoring can significantly enhance regulatory compliance and operational efficiency.
He mentioned that another emerging challenge in air cargo regulation is the need to address environmental sustainability. The aviation industry, including air cargo, is under increasing pressure to reduce its carbon footprint.
“Regulatory frameworks must incorporate measures that promote the use of more fuel-efficient aircraft, sustainable aviation fuels (SAF), and environmentally friendly operational practices. By integrating environmental standards into air cargo regulations, we can contribute to the broader goal of achieving a sustainable and greener aviation industry,” the DG said.
Speaking on the economic regulations, Najomo said the economic impact of the air cargo industry cannot be overstated, adding that is a critical driver of global trade, supporting millions of jobs and contributing significantly to GDP in many countries.
“Effective regulation ensures the stability and growth of this sector, facilitating trade and enabling businesses to reach global markets. It is essential that regulatory frameworks support the economic viability of air cargo operations while maintaining high safety and security standards.
“The regulation of the air cargo business is a complex but essential task that requires a multifaceted approach. By addressing security, safety, harmonisation, technological advancements, and environmental sustainability, we can create a robust regulatory environment that supports the growth and sustainability of the air cargo industry,” the DG explained.
He noted that it is through collective efforts that stakeholders can ensure this vital sector continues to thrive while maintaining the highest standards of safety and security.
The Civil Aviation Act 2022 made some provisions for the regulation of air cargo business in Nigeria in line with the Second Schedule, Section 55, (1) and (2) modification to the convention for the unification of certain rules relating to international carriage of Cargo by air, he said.
He requested that participants and stakeholders thoroughly review these provisions in the Civil Aviation Act to be guided accordingly.
He stressed that the regulation of the air cargo industry in Nigeria is essential to maintaining the safety, security, and efficiency of global supply chains. By enforcing comprehensive safety and security regulations and adapting to emerging trends, regulatory bodies such as the Nigeria Civil Aviation Authority play a crucial role in supporting the growth and sustainability of the air cargo sector.
FG’s efforts in growing air cargo
Festus Keyamo, Minister of Aviation and Aerospace Development during the Chinet Aviacargo Conference 2024 stated that recognising the immense opportunities within the cargo sector, the Ministry of Aviation and Aerospace Development has taken proactive steps to ensure that Nigeria does not just participate in the global cargo market but leads it.
Keyamo who was represented by Janet Oputa, the special adviser on service delivery to the minister said the ministry has established a dedicated Cargo Directorate within the Federal Airports Authority of Nigeria, (FAAN).
He said this directorate is tasked with implementing far-reaching policies and programs that will catalyse the growth of the air cargo industry.
These initiatives, the minister said, are designed to streamline operations, enhance infrastructure, and foster partnerships that will make the airports and logistics hubs the preferred gateways for cargo in the region.
“A vibrant cargo sector offers numerous benefits to our economy. It is a critical enabler of trade, facilitating the efficient movement of goods across borders and opening up new markets for Nigerian products.
“With the right infrastructure and regulatory environment, our agricultural exports, for example, can reach global markets faster, fresher, and more competitively.
“Furthermore, a robust cargo industry will stimulate the growth of ancillary services, from warehousing to logistics, creating a ripple effect of economic activities that will significantly contribute to our GDP.
“The realisation of this vision, however, requires more than just policy frameworks, it necessitates the active collaboration of all stakeholders,” the minister said.
Keyamo said he is optimistic that with the support of industry leaders, regulatory bodies, financial institutions, and international partners, the ministry can drive the cargo industry into a multi-billion-dollar sector that will be the pride of the country.
He lauded organisers of the conference, stressing that the event is a crucial platform for forging such partnerships and aligning strategies with global best practices.
Local content in insurance
Segun Omosehin, the Commissioner of the National Insurance Commission, NAICOM, during the CHInET event disclosed that the need for local insurance underwriters for the aviation industry is to insure that the interest of Nigerian Aviation insurance stakeholders are protected and also to grow the local industry.
Omosehin stated that the issue of capacity in terms of Aviation insurance in Nigeria is quite easier and clear.
He said the Nigeria insurance industry has the capacity to underwrite aviation risks, subject to available reinsurance backing across the world.
The Commissioner stated that NAICOM collaborates with the Nigerian Civil Aviation Authority, NCAA, to insure adequate cover for the aviation industry.
He noted that it is essential for stakeholders to understand that beat of law that permits Nigerian companies to be the one to do the insurance cover for airlines operating in the country.
The Commissioner explained that the capacity of underwriters in the market is determined and measured by what they have, in addition to reinsurance capacity that is made available to them.
“This is affirmed in an ongoing basis by the Regulator, so from time to time, we look at policies that are issued, vis-a-vis their solvency state. We actually review that in consonance with relevant treaties they entered into with reinsurance globally.
“The reality of aviation insurance is that it is a global business as risk emanating from one country crisscrosses borders. Many of them often end up in Lloyrd’s Insurance of London and this is not peculiar to Nigeria, but other countries too, even risk emanating from United States will end of in Lloyrd’s because they have great appetite for aviation risk and that is why they are reinsurance.”
