Experts Predict Tougher Times Ahead for Aviation Sector

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Tayo Ojuri

Chinedu Eze

In addition to financial losses that have been incurred by airlines, aviation agencies and support service providers in the aviation industry, experts have expressed their view on what would happen to the industry post COVID-19.

Speaking with THISDAY, the CEO of Aglo Aviation, a consultant company, Tayo Ojuri, said the virus has had adverse effect on the aviation sector, adding that things may get worse because recovery would be slow and sluggish as other sector would also be stuttering financially.

Ojuri, said Nigerian airlines would find it extremely difficult to pay the salary of workers in April.

“How can we keep these airlines operating for two months after resumption of flights? Passenger travel will deepen. People will still be skeptical so there won’t be that traffic and international airlines, which are the feeder to domestic airlines would not be there.

“They will start, not with the same zeal. Their operation will not be fully-fledged,” Ojuri said.

The aviation consultant said poor flight operations would affect ancillary services like catering, adding that the airlines would inevitably cut down staff.

He also noted that low crude oil price would affect government’s spending, noting that with government being the biggest spender, it would also affect the aviation industry because less number of people would travel as there would be poor liquidity.

“Government may likely review its budget again but low price of oil will affect not only government revenue but the money in circulation and cities like Port Harcourt, which is driven by oil and gas activities will be affected adversely.

“So such passenger traffic that used to come from Port Harcourt, which is one of the three triangles, will drop. GDP is low, debt ratio is high and the cost of dollar is also high,” he said.

Ojuri, noted that airlines would spend more money on maintenance, spare part and training because of the recent naira devaluation.

“But government support can revive the airlines but government is also struggling, but government can give the airlines waivers.

“The Federal Airports Authority of Nigeria (FAAN) can give airlines waivers on landing and parking and passenger service charge. But aviation will come up again, but this will be enhanced if Nigerian carriers begin to seek for fruitful partnerships, strategic and quality partnership, which will enable them to secure funds from international investors that will become part of their management. “For example, airline X may continue to have its chairman but those who are bringing the new funds may provide the CEO and the Chief Finance Officer.

“But there will continue to be room for growth because of our population. Nigerian airlines do not have surplus funds like the mega carriers in the United States and in Europe, so while these airlines will draw from their surplus funds to rebuilt their operations, some of the Nigerian airlines may go under but the existing ones will re-strategise,” Ojuri said.

Also, industry consultant of the Etimfri Group, Amos Akpan, said with the current COVID-19 shut down, while airlines are not earning income, their fixed costs are still running.

“Fixed expenses are the costs airlines bear whether they are flying their aircraft or not. Just before the lockdown the traffic was low causing the airlines to operate at loss; that is, income per flight was less than the cost of operation.

“We expect very low traffic when operation resumes because people and corporations will be apprehensive to travel; therefore, flights will operate at less than fifty percent of capacity. There will be redundancy for the machines and the human resources,” he observed.

He noted that airlines would not be able to pay fixed and operational cost bills upon resumption of flights as a result of the effects of COVID-19.

“They will be confronted with more bills than their income can meet. Consequently, all other service providers to the airlines will take the fall out. They will reduce tariff and charges, while some out standings will be out rightly cancelled. Every organisation and everybody in the industry will be affected,” Akpan added.