As More Airlines Join Domestic Market

Chinedu Eze

Pilots who operate flights on domestic destinations have cried out that as more airlines are joining the market, each airline records reduction in number of passengers because fewer people now travel by air.

The pilots who spoke to THISDAY painted gloomy picture of the situation, saying that if this continues, some airlines may be forced to go out of business.

In the last four years, the Nigeria Civil Aviation Authority (NCAA) has issued operating licences to Xejet, ValueJet, Enugu Air, Green Africa and Binani Air among others, but as these airlines are joining the market, economic crunch and other factors have forced some air travellers out of the airports.

Captain Ibironke Rotimi-Olajide of Air Peace who confirmed this situation, told THISDAY that as new airlines are joining the market, the demand is getting lower with increase in supply.

“Right now, I think the demand is lower and new airlines are coming up; although they are coming with small number of aircraft. So, how do you match demand and supply? With all these airlines coming up, airlines hardly fill up their aircraft because of this depleting passenger traffic. And, as you all know, during COVID-19, a lot of things went virtual,” he said.

Captain Rotimi-Olajide who flies the state-of-the-art Embraer E195-E2, noted that COVID-19 brought a lot of changes in air travel because it was during the pandemic when commercial airlines were not flying that Zoom, Google and other similar apps were embraced for official and informal interaction and after the pandemic, corporate organisations and others adopted them for meetings, conferences and others. Virtual interaction became alternative to traveling.

“So, I noticed that employers were like, oh, so business can actually be run virtually; there was no need for everybody to convene in the office and do things. So, people work just once a week, and then the rest of the week, they work from home, or from wherever they are. There was no need any more for people to travel. Right now, so to speak, not so many people travel. They just travel for businesses that require them to be physically there, just like the kind of job you need to be there physically,” she said.

On developing new routes in order to have more people travel by air, she said developing new routes in the Eastern part of the country is not profitable because of their short trips, adding that developing new destinations in other parts of the country may not be sustainable as well because if airlines increase the cost of tickets, passengers may shun traveling by air.

A seasoned pilot, now with NCAA, Captain Horis Jaja, told THISDAY that the depleting passenger traffic should be a thing of concern in the aviation industry.

He said, “That’s a super interesting and concerning situation for the aviation industry. If more airlines are entering the domestic market but the overall number of passengers isn’t growing (or is even shrinking), that could lead to a few pretty tough outcomes, which will include increased competition and price wars, with more airlines vying for a smaller pool of passengers. They’ll likely slash prices to attract customers. While this might be good for consumers in the short term, it can make it really hard for airlines to turn a profit, especially for newer or smaller carriers.”

Captain Jaja suggested that for airlines to survive they could consider consolidation or they fail.

“If airlines can’t make enough money, some might go out of business or be forced to merge with larger competitors to stay afloat. This could eventually lead to fewer choices for passengers down the line, despite the initial increase in airlines,” he said.

According to Jaja, this could also lead to reduction in the quality of service and wages in order to cut cost and survive. He said airlines might reduce amenities, scale back on staff training, or pressure pilots and other employees to accept lower wages or less favourable working conditions.

“This could also lead to pilot shortage (or surplus in the wrong places) because while pilots are currently lamenting a “depletion in the number of people that fly, if airlines start to struggle financially, hiring might slow down. However, if the market corrects itself and some airlines fail, there could eventually be a surplus of pilots looking for jobs, making it harder for individuals to find stable employment. It’s a tricky balance,” he said.

Jaja also added that ultimately, “it sounds like a classic supply and demand issue where supply (airline seats) is outpacing demand (passengers). It’ll be crucial for these airlines to either stimulate demand or differentiate their services to avoid a race to the bottom.”

Industry stakeholder and aviation security expert, Group Captain John Ojikutu (retd), told THISDAY that the observation is true and said that NCAA ought to have it in mind and find ways to ensure that the market is managed profitably by reviewing the licensing of airlines.

“That is absolutely true and that is the responsibility of the regulatory authority to control access into the commercial airline business. First, 20 million passenger traffic was planned for 2020 in 2000; but in 2006 we are far below in airline passengers and a little below in airport passengers. The NCAA should restrict access to minimum of four aircraft for domestic schedule operations, six for domestic and regional and eight for internal operations. Airlines with less than four aircraft should merge, interline with other airline or run unscheduled/chartered flights.

“Secondly, most domestic passengers are government and corporate officials; airfares can be reduced if airports are graded along with the service available into A 100%, B 75%, C 50% D 25% and E 10%. Airlines not capable of paying the charges at some airports can operate to airports of lower charges. Thirdly, bridging fuel supply with pipelines to some airports needs to be giving serious consideration so as to reduce the cost of Jet-A1 (aviation fuel). If this can be done in Lagos especially, the airfares from Lagos to any part of the country can get reduced by about 20/30%. If these rationales are considered, the passengers traffic can increase by about 5 to 7% annually,” he said.

However, industry analyst, Amos Akpan, is of the view that Nigerian airlines have not fully exploited viable routes that existed in the past, which if serviced now could attract more travellers to the airport.

According to him, there were routes that were developed by the defunct national carrier, Nigerian Airways in Nigeria and West Africa. But these routes were later abandoned when the market was deregulated and operators from the private sector stopped operating them.

“These routes were abandoned and the traffic dwindled because no operator provided the service since the 1990s. I am referring to Air Afrique, Nigeria Airways, Ghana Airways, Cameroon Airways, Air Senegal, Air Guinea, Air Gabon. Why? Poor corporate management, Lack of infrastructure, corruption, and government interference. These made them not be able to compete with other international carriers. It made them unable to attract financial facilities from financial institutions. They became bankrupt and insolvent. Currently we have a kind of collaboration where airlines are either 100% privately owned and managed; or they are owned by government, but managed by privately appointed management team,” he said.

These potentially viably routes could be reopened in the West Coast and even on domestic destinations.