Aviation has long been described as a catalyst for economic growth, but this is only partly true. Connectivity is an important aspect of this relationship, for the movement of goods and people. But connectivity without economic activity leads to white elephant projects, which Nigeria is becoming famous for. Aviation and the economy are partners; they work best when they work together.
For the aviation sector to be beneficial to economic growth in Nigeria, it needs to be aligned with the needs of the economy, it needs to be aligned with the demands of the passengers and it needs to be able to deliver this at a realistic and achievable price.
Passengers are one important part of the aviation ecosystem, whose needs are not addressed. Timing of flight arrivals and departures, combined with delays, often see passengers enduring hardship, stranded in different locations at unsavoury hours of the night. Passengers are often forced to adapt their plans to work with the schedules of the airlines, rather than the aviation sector meeting passenger demand.
Most passengers don’t want to travel to Lagos or Abuja to take a flight to another part of Nigeria, Africa, or other parts of the world. But they are often forced to book a local flight and a local flight to catch another flight because schedules are not aligned to passenger needs.
Understanding the passenger journey requirements requires data analysis, but you can’t analyse what you do not have. Hardly any passenger research is conducted, so it will be difficult to match passenger needs with airline supply.
Airlines’ needs are also not met by the aviation system in Nigeria. Airlines need schedule reliability and long aircraft utilisation hours to provide a cost-effective and efficient service. They need efficient and available on-the-ground services to be able to depart on time and service customer demand.
But airports routinely lack the capacity for airline check-in desks, baggage handling, parking and fuel services. These cause delays and delays cost money and damage the reputation of airlines and have a huge impact on productivity.
So, does aviation have a role in economic growth? It certainly does at the right price and the right cost. These are two factors Nigeria has yet to get right. The cost of aviation projects in Nigeria makes it impossible, over any reasonable time frame, to make a return on investment.
Part of the issue is the type of project, e.g. cargo airport or regional airport is not suited to the needs of the region or the activity. Project owners who are typically state governors are more concerned with the optics of projects, rather than the feasibility of projects. So they will target having ‘the biggest’, ‘the longest’, and ‘the largest’ – which often translates to ‘the most expensive’ airport yet to have been built in Nigeria.
For aviation to deliver economic growth, it has to be delivered at the right cost. If the costs of infrastructure are high, project owners try to recoup by loading the costs, which airlines and passengers have to pay.
Airlines struggle to predict and maintain a low cost of operations and have yet to embrace ancillary revenues, which account for 20 percent of total revenue for major airlines or 50 percent for low-cost carriers in other countries. With airlines subjected to high fuel costs, foreign exchange scarcity, currency devaluation, fuel scarcity, duplicate insurance premiums, and all compounded by the high cost of finance/borrowing, they are already at a cost disadvantage before you factor in costs of delays, cancellations, bad weather, bird strikes, and VIP movement, among others.
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Tourism is a driver of the aviation sector in most countries, but it is not in Nigeria. More coordination is needed between the aviation and tourism sectors. Creating an enabling tourism environment will boost the aviation sector. Making Nigeria a more accessible country for tourists will boost the economy and increase the number of passengers travelling locally, which in turn will boost all associated businesses: hotels and hospitality, car hire and taxis, and tour operators, among others.
Nigeria has no air freight industry to speak of. Air freight requires products or produce, and Nigeria is more of an import economy rather than an exporter. The cost-prohibitive nature of air freight means agricultural producers are more likely to transport produce by road, even when it has been established that 60 percent of produce is damaged or wasted by road travel without appropriate cold storage distribution channels.
Currently, the air transport industry, including airlines and its supply chain, adds $600 million or 0.04 percent to the GDP in Nigeria. Spending by foreign tourists supports a further $1.1 billion of GDP, totalling $1.7 billion. The ripple effect is enormous with 241,000 jobs supported by the air transport sector.
We need to get the fundamentals right so that aviation can be an even bigger catalyst for economic growth.
The economy needs to do its part as well. Accessible finance, stable well-constructed policies, availability of fuel where it is needed, and a better enabling environment, where everyone is a partner or a stakeholder in its success, are essential for aviation to be able to deliver a reliable product at an affordable price and provide a boost to the economy.
· Foster is the managing partner at Avaero Capital Partners
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