The current shortage of aircraft in Nigeria’s aviation industry is squeezing operators and service providers, thereby impacting their revenues.
Airlines that have sent their aircraft on maintenance are unable to return them owing to skyrocketing costs as a result of the foreign exchange scarcity.
Some carriers have been forced by the Nigeria Civil Aviation Authority (NCAA) to ground their aircraft for inability to send them for maintenance, according to BusinessDay’s checks.
Service providers such as aviation agencies, ground handlers, catering services for airlines, fuel marketers, among others, have been hit by a drop in the number of aircraft still flying.
Data obtained by BusinessDay from NCAA showed that 13 domestic airlines together operate a total of 91 aircraft. This data includes aircraft that have gone on maintenance.
Sources close to the NCAA told BusinessDay that apart from Dana Air which has been grounded; over half of the 91 aircraft in the industry have gone on maintenance.
BusinessDay’s checks show that five years ago when just 10 domestic airlines were operating, there were over 120 aircraft flying the domestic routes.
According to a report on ‘Foreign Trade in Goods Statistics’ by the National Bureau of Statistics (NBS) for Q1’24, Nigeria’s spending on kerosene-type jet fuel importation fell quarter-on-quarter (QoQ) by 87 percent to N31 billion in the first quarter of 2024 (Q1’24) from N239.18 billion in Q4’23.
Stakeholders in the aviation sector say this drop in aviation fuel importation is not disconnected from the current aircraft shortage in the country.
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“Whenever the operations of the airlines are affected by the aircraft shortage, their revenues are also affected.
“Allied service providers – FAAN, NAMA, ground handlers, catering, fuel marketers, and even NCAA, charge five percent on airline tickets and cargo sales”, said John Ojikutu.
Babatunde Adeniji, an aviation management consultant, told BusinessDay that aircraft represents the carrying capacity of airlines; so, the less capacity to carry, the less you can earn (revenue not profit).
“More revenue does not automatically translate to more profit. Remember the mantra: Revenue is vanity, profit is sanity, but cash is king. Airlines obviously should be more focused on profit and have to make decisions to maximise profit and not necessarily capacity or revenue. In most cases, they are barely surviving or trying to survive.
“Airlines operate as part of an ecosystem where their dependence on economic development and fuel is high and the industry structure is such that all five forces (i.e. threat of new entry, internal rivalry, buyer power, supplier power, and the threat of substitutions) work so strongly to make it almost impossible to make a profit. The ”6th force” government exacerbates the poor underlying economics by amplifying its weakness with poor policies and choices,” Babatunde said.
“The entire industry must be orchestrated strategically (all parts, public and private must work together optimally) to deliver the synergy that will create the most value for the customer and adequate returns for all stakeholders.
The airport revenue consists of both aeronautical revenue which includes key components such as passenger charges, landing charges, terminal rentals, and security charges, and non-aeronautical revenue which refers to the incomes derived from sources like concessions, premises rental, & free zones. As there are fewer aircraft operating, this might affect the industry revenue.
According to the International Air Transport Association (IATA), revenue management is the backbone of the airline business.
