Stakeholders have taken a holistic look at the aviation industry and came to a conclusion that the sector urgently needs a rescue.
In a Webinar coordinated by Tokunbo Tomori Foundation, with the theme, “The Aviation Sector-Before, During and After COVID-19 ,” and monitored by our correspondent, the experts passed a verdict that the industry in Nigeria is on life support and needed urgent assistance and synergy to make it survive.
For instance, Chairman, Nelike Capital Partners Limited, Mr. Alex Nwuba expressed concern over how airlines are bracing up for resumption coupled with low passenger traffic that they are going to be confronted with.
Nwuba lamented that before COVID-19 pandemic, yearly passenger traffic stands at five per cent of the 200 million population of Nigeria, describing it ‘abysmal’.
He further stated that while costs have risen astronomically, citizens’ earnings have taken a nose dive; a situation he said cannot support airlines’ profitability.
Nwuba listed the high cost of aviation fuel, high cost of aircraft maintenance, high lease cost and depreciation of Naira against the United States dollar as factors that would confront the carriers.
His words, “If you look at it, 40 per cent of airlines’ revenue go aviation fuel while 50 per cent goes into the maintenance of aircraft and other costs. People think turbo aircraft are not safe but they are very safe. It is just customers’ perception which must change. After 7 am and 5 pm rush, you find out that many of the aircraft go near empty with half of their capacity on bigger jet engine planes. The airlines are losing money”.
“Our challenges are high-interest rate. The bigger challenge is the lack of structure. We have to figure out what should be the best fares. If we don’t do that people will choose to travel by road because of the economic situation they have found themselves. Many of them have been disengaged. So, it becomes very unlikely that they will travel by air”.
Also, Managing Director Quorum Aviation Limited, Mr Abiola Lawal stated that over the years, airlines had reported growth but queried whether the growth is tangible or one that can be verified because of the precarious economic situation of many Nigeria whom he said is living below the poverty line.
He stated that statistics show that less than ten million Nigerians travel domestically by air, stressing that the sector has a lot of work to do to attract people to flying.
He reiterated that jet engine planes are expensive to maintain, warning that operators need to cut their cost with the type of aircraft they have in their fleet which he considered to be fuel guzzlers and highly expensive to maintain.
Lawal admitted that a lot of things are stacked against airlines in the country, noting that the source of revenue is in Naira while costs are in dollars.
The airline chief said he doesn’t know the rationale by some airlines to operate bigger airplanes to destinations of about two hours within Nigeria in B737, describing it as ‘ridiculous’ because of the huge costs the operator incur.
He picked holes in the lack of good corporate governance by operators, saying without good economics, the country would continue to see a huge turnover of airlines that would disappear in less than ten years.
Chief Financial Officer of Arik Air, Mr Ayodeji Ilesanmi said a proportional amount of ticket goes into taxes and charges by different aviation agencies like the Federal Airports Authority of Nigeria (FAAN), the Nigerian Civil Aviation Authority (NCAA) and others.
He regretted that there are few aviation agencies and airlines in Africa that are profitable, saying all costs in aviation are in dollars.
He further stated that airlines’ ability to resist shock is non-existent because of lack of reserve.
According to him, ‘Airlines in Nigeria do not have a reserve and how do they keep their operations going without reserve? If airlines are not able to keep their variable costs, they should shut down. All airlines are bleeding”
“We don’t have spare parts. Everything you do is in dollars while your revenue is in dollars. When I take away the taxes, charges, what is left is not enough to do my maintenance. These are cost structures that seat with you. You have aircraft leases in dollars and you have to earn Naira to deal with maintenance. Interest rate is at 25 per cent and how do you survive?
“Aviation is an enabler business of moving people and government need to support the airlines but they see them as private business. These are key challenges that have affected airlines. No matter what you do, you will be in the negative”, he said.