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| Murtala Airport Lagos |
Beyond the prevailing harsh operating environment, the faulty
business models airlines’ operators often adopt may be responsible for
the perennial low market penetration and short lifespan of local
carriers in the country, findings by The Guardian has shown.
Further findings by The Guardian also revealed that equally poor
extant policies of regulators are not encouraging niche markets and
other innovations to maximise the potential market at large.
Rather, an environment is created where all operators converge on the
small viable high traffic routes, with gross under-utilisation of
available equipment and neglect of potential traffic.
The consequence is that less than seven per cent of the population
travel by air till date, with perennial low turnover for operators and
steady decline in terms of viability and lifespan of airlines.
Records made available by the Nigerian Civil Aviation Authority
(NCAA) show that no fewer than 40 registered airlines, scheduled and
non-scheduled, have colapsed in the last 15 years.
Among the carriers are Associated Aviation, Allied Air, Hak Air, Kabo
Air, TAT Nigeria, Belview, Sossoliso, Chanchangi, Sky World Express,
Virgin Nigeria, ADC, Concord Airlines, IRS and Okada Air.
The high turnover in mortality rate, perhaps a record in global
aviation, is often blame on various reasons including unfriendly
business environment, multiple charges, lack of government’s support,
non-viable routes and low patronage.
Indeed, Nigeria has about 180 million population and one of the
lowest air traffic demands by population. For instance, the air travel
sector in 2017 transported a total of 11.3 million passengers, which is a
dip from 12.2 million that travelled in 2016, as shown by the NCAA’s
factsheet. By implication, less than seven per cent of the population
travel by air.
Meanwhile, there are 26 airports scattered across the country with
more than two-third of the 36 states, including the Federal Capital
Territory (FCT), having at least an airport.
Station Manager at Yola Airport in Adamawa State, Sheik Abdullahi,
told The Guardian that it is not that people in Yola, Sokoto, Jalingo,
Jos, Markurdi, Minna, Yenogoa, Ibadan, Akure, Maiduguri and so on, don’t
want to travel by air, being the fastest and safest mode of
transportation. “But we all get frustrated having to sleep in airport
for two to three days waiting for an airline that may not even come,”
Abdullahi lamented.
Fact is that it makes no economic sense for airlines to fly to an
airport where there is no guarantee of at least 80 per cent load factor
as the Lagos, Abuja, Port Harcourt and, sometimes Kano, routes offer.
Chief Operating Officer of one of the popular airlines narrates that
it costs at least N800,000 to N1million to fuel a Boeing 737 aircraft to
do a frequency of two landings. “Imagine if all you have as passengers
are 20 persons going and 10 on the return with each paying N24, 000 for
ticket (N720,000). Is that a profit or loss, on fuel alone?”
But route viability, as a determinant, was hardly the case in the 80s
and 90s. Group Captain John Ojikutu (rtd), recalled that the defunct
Nigerian Airways in its hey days strategically covered most parts of the
country, including regional and international routes.
For example, the national carrier, flew the B727 and B737 to Kano
where it already positioned the Fokker F27 turboprop that would fly
passengers destined to Sokoto, Kaduna and Jos twice daily and also to
Makurdi and Yola. Besides, there were direct flights to Yola and
Maiduguri from Lagos, once a day. There were 50-seat capacity F27
flights from Lagos to Ibadan and Benin too.
“Nigeria Airways was flying F28 aircraft mainly to other places like
Enugu, Port Harcourt, Calabar at least twice daily. The airline had 32
aircraft and could in addition fly the west coast. In addition, Nigeria
Airways was flying to New York, London, Frankfurt, Amsterdam, Rome,
Jedda, Nairobi, and so on.”
Ojikutu, the Secretary General of the Aviation Safety Round-table
Initiative (ASTRI), said what has changed and where the current
operators are getting it wrong is in business plan that is tailored at
flying all routes with Boeing and Airbus types of aircraft.
“You cannot fly all the routes at the same time. That is why I
recommend that new airlines should start with a minimum of five aircraft
and target about four or five routes. From Lagos, transport everyone to
Abuja or Kano and from there use the smaller aircraft to distribute
into other states. Flying big aircraft like Airbus without a full load
is a big problem; you are losing money. And that is the major problem
that I have seen here,” Ojikutu said.
Fact is that at least 90 per cent of airplanes in commercial
operations in the country are the B737 series, which is considered fuel
inefficient and runs at a loss without 90 to 95 per cent load factor
per flight.
Former Managing Director of Defunct Virgin Nigeria, Capt. Dapo
Olumide, said the B737 series are now rarely used on shorthaul services
because of their low fuel efficiency. “So, it is now like buy one, get
one free. That is why everyone is buying it here,” Olumide said.
Apparently in agreement with Ojikutu and Olumide, Captain Roland
Iyayi, however, stressed that there is no separating the faulty business
models and wrong types of equipment from the regulatory policies that
permitted them and allowed the industry to stagnate.
Iyayi said a business model is a dictate of what obtains in an
operating environment but “if the extant policies do not support the
kind of business one wants to operate, such is bound to fail
irrespective of how wonderful the model is.”
Iyayi, a former Managing Director of the Nigerian Airspace Management
Agency (NAMA), explained that the policies of the NCAA are such that
welcome all-comers “without due diligence of cross-checking business
case assumptions in line with the realities and needs of market”.
He observed the new airlines in countries like Brazil, Ethiopia and
even Ghana, are hardly allowed into already established local market, to
protect operating airlines from failing. So, new entrants must have
their niche market.
“To do contrary is to end up with what we have here. You have a
situation where all the airlines are concentrated on three routes,
engaging in destructive competition because you are throwing too much
capacity into the otherwise saturated market.
“These three routes give you 80 per cent of the traffic. In realistic
terms, what is the break-even factor that each airline would have? It
all tells you that the NCAA does not see the wisdom to licence airlines
to focus on niche markets like Minna-Abuja or Minna-Sokoto and so on.”
SOURCE:http://guardian.ng
