Nigeria's domestic airlines are likely to
post operating losses in the year ended December 31, 2016 as they
struggle to source funds to remain in business.
It was learnt that
exorbitant cost of foreign exchange and aviation fuel took a heavy toll
on their overhead during the year, severely eroding their profits and
leaving them prostrate and in need of government bailout.
Government
sources however hinted that some airline operators have already
approached the Federal Government with facts showing that the industry
is on the brink of a collapse amid low revenue owing to a reduction in
passenger patronage on most routes outside the Lagos, Abuja, and Port
Harcourt airports.
Source:- thenigerianvoice.com
An operator disclosed that the industry may
make massive cuts on staff strength with some of the airline's
increasing air fares within the first quarter of the year as part of
measures to weather the storms and remain in business.
'Last year,
operators watched helplessly as cost of aviation fuel (Jet A1) which
hitherto accounted for about 40 per cent of overheads shot up to over 55
per cent following a 100 per cent rise pump prices of Jet A1 from N120
per litre to between N240 and N270 per litre,' said a spokesperson for
one of the local airlines who didn't want to be named.
'In the
same vein, airline operators battled an ever escalating cost of forex
cost (particularly the dollar) which rose to N490 to $1USD at the end of
2016 as against the N250 to $1USD in the preceding year. I don't think
any airline will declare a profit last year.
In fact, right now
the plans by many is to find ways to lay off staff and to increase air
fares to match the reality on ground,' he added. Chairman, Airline
Operators of Nigeria (AON), Capt. Nogie Meggison, told journalists that
the scarcity of forex and aviation fuel is responsible for the inability
of airlines to pay mandatory premiums to foreign underwriters.
Scarcity
and high cost aviation fuel has led to 30 per cent flight cancellations
and 70 per cent of delays at various airports across the country with
the attendant inconveniences to passengers and losses to airlines.
The
industry is believed to be losing about N200million each day there were
disruptions in flights owing to fuel scarcity. The government late last
year stepped in to create a special window that allows the CBN allocate
forex to airline owners to buy spares.
But until that was done,
the bulk of operators had to source for forex at the parallel market.
The trend had led to inability of most airlines to operate at maximum
aircraft capacity as routine maintenances usually done abroad in forex
were either cancelled or deferred.
The Managing Director of Katari
System Nigeria Ltd., Mohammed Magashi, who spoke on 'Financing Nigerian
Aviation: The Option For Growth' at an aviation stakeholders meeting
noted that the high interest rate charged airlines by commercial banks
in the country has also constituted a big obstacle to the growth and
prosperity of the industry.
Analysts have also listed other
funding barriers on the airlines path of growth include: poor credit
rating, over regulated financial system, which according to him impedes
on simple and genuine foreign currency transaction, the over regulation
and the huge capitalisation and procedures including the minimum of
three aircraft demanded by the Nigerian Civil Aviation Authority (NCAA),
which mar attempts by prospective investors to float new airlines in
the country.
For the Nigerian aviation industry to grow with
airlines recording profits and dividends for investors, the federal
government must wade speedily into the crisis forex and fuel crisis so
that a conducive investment climate is created for investors.
The Nigerian aviation sector is believed to be contributing a meagre 0.04 per cent to the nation's GDP.
Investors
in the industry also said if the figure is to be improved upon to
contribute more to efforts to diversify the economy and grow the non-oil
sector with massive job creation opportunities for citizens,
particularly in the aviation sector, then there should be serious
efforts towards the establishment of a national or flag carrier that
would boast of aircraft fleet in excess of 50. - The Sun.
