Industry analysts have predicted that the aviation industry may experience bankruptcy among many operators due to lack of operating funds, failure to obtain loans and lacklustre investment opportunities.
The analysts noted that while there could be increase in outbound international travel due to many Nigerians who are escaping to better economic environment (migration), load factor on inbound passenger movement and domestic travel may contract due to poor liquidity of indigenous operating airlines.
The Nigerian Immigration Service (NIS) confirmed that while more Nigerians are leaving the country, according their records, more investors are coming to Nigeria due to Ease of Doing Business policy of the federal government, which facilitated the visa on arrival policy.
A senior official of NIS who wouldn’t want to be named, told THISDAY that, “there is massive exodus of Nigerians, in the last three years and this will get worse this year. It is unfortunate that many of those leaving are professionals, including bankers, accountants, medical doctors and lawyers who have enrolled in legal institutions to qualify to practice in the countries they have emigrated to.”
The CEO of Aglow Limited, aviation support services company, Tayo Ojuri, in his projection of the aviation industry in 2019, said there was massive unemployment in the third quarter (Q3) of 2018, which rose up to 23.1per cent from 18 per cent, noting that this has affected air travel, as aviation is a function of disposable income.
Ojuri said the obvious lacklustre holiday spending in the Q4 2018 would also affect liquidity in the early 2019.
He, however, projected that viable domestic airlines would attract particular attention for equity investment and strategic technical partnership with global players.
He said, “Newly commissioned airports will improve passenger facilitation and propensity to increase non-aeronautical revenue if concession space is properly planned and implemented.
“Passenger traffic will marginally increase in first quarter due to electioneering activities with potential dip in second and third quarters. Realistic passenger movement will be evident in last quarter of 2019.”
Ojuri also said African open skies agreement would boost trade, but currency depreciation would increase ticket fares, which would be an area of concern in 2019.
He said that government should concession the airports in 2019, adding that there would be need for the establishment of maintenance, repair and overhaul facility in Nigeria.
Other major factors that would affect air travel in 2019, Ojuri noted, would include oil prices, as Nigeria’s economy is highly vulnerable to oil revenue shocks, disclosing that the country recorded about 80.1 per cent of total exports and current import cover of external reserves in less than 11 months
“Balance of trade will fall – $25 billion which will affect volume of cargo inflow; Nigeria’s output quota now down 7.22 per cent to 1.67 million barrels per day (mbpd); this would increase in cost of Jet A1. Due to decrease in oil revenue, passenger traffic will possibly reduce due to government spending, which would prompt increase in ticket fares,” he said.
Ojuri also noted that the behaviour of forex would significantly affect airline operations in Nigeria.
“Strong dollar will weigh on airline’s operations and availability of funds for training, purchasing spares and maintenance of aircraft. These might affect the outflow of repatriation of funds for ticket sold in Nigeria by foreign airlines,” the CEO of Aglow Limited said.
Also Executive Director, Zenith Travels Limited, Mr. Olu Ohunayo, told THISDAY that fares would rise with attendant manipulation of Global Distribution system (GDS), which makes seats unavailable “with the perennial terminal touts smiling to the bank with the aid of check-in staff.”
Ohunayo said that for Nigerian airlines to operate profitably government must extend operating hours at the airports by providing night landing facilities and should consider it critical the establishment of MRO facility in the country.
He also noted that the industry has lost a lot of jobs, which adversely affected the operational department of airlines.
“Revenue accrued to agencies and regulator are depleted in line with the maxim: ‘the higher the frequencies the higher the revenue generated’. The situation may also encourage new investors to look at opportunities that are bound by either buying dormant AOCs or investing in existing carriers,” he said.