Chinedu Eze
Aviation experts have identified poor legislation, unpredictability of the cost of airline operation and underutilization of equipment as some of the factors that are retarding growth of the aviation industry in Nigeria.
In their presentations during a webinar on, “Repositioning the Aviation Sector for Revenue Generation and Growth: The Role of Legislation,” the experts brainstormed on issues that could spur the growth of the industry.
In his presentation, the President of Aircraft and Owners Pilots Association of Nigeria, Dr. Alex Other panelists observed that some decisions taken by the National Assembly, which give vent to aviation policies, have been found to be inimical to aviation growth in the country.
They noted that aviation business does not exist in a vacuum but within the context of its operating environment and the governing regulations, remarking that aviation regulation and policy is harmonised across the world to ensure consistent levels of safety and consumer protection.
Cvil aviation authorities, they stated, are usually responsible for determining policy which determines the use of airspace, the economic regulation of airports, licensing and financial fitness of airlines and consumer protection. Legislation should support growth whilst maintaining safety.
However, Nwuba said favourable legislation could help grow the aviation industry or act as a barrier to attracting investment.
He said: “Legislation can help grow the aviation industry or act as a barrier to attracting investment. What are the policy objectives and the intended effects? What policy options have been considered, including any alternatives to regulation?”
He gave examples and said that the right legislations can affect fleet size and maintenance timing requirement, competition and policy and cabotage, entry into the domestic and international markets, access to the market and freedom of overflying, non-traffic stops and traffic rights; licensing and its renewals; permits, ownership structures and foreign ownership restrictions; air service sgreements, tax and tariffs and charges; and consumer protection.
“In other words, if Nigerian carriers will remain competitive in the domestic, regional and international markets; their success will be dependent on the policies that emanated from the legislation. Currently, there have been talks about some Bilateral Air Service Agreement signed by Nigeria with some countries, which are allegedly slanted against the interest of Nigerian carriers and even revenue generation by some agencies. Some foreign airlines are known not to pay the right charges on their operation and when confronted they would cite agreement signed with Nigeria, “he said.
Nwuba also suggested that all legislations should be analysed to identify the growth enablers and the growth barriers, and to provide a full economic assessment, including costs and benefits.
In order to maintain the rapid progress going on in the aviation sector and even surpass it, Nwuba recommended that policy makers should look at the potential markets and opportunities like underserved markets, overpriced market and market segmentation.
“In terms of technology development, we have to consider using the internet to by-pass traditional distribution channels, emerging approach to enterprise management, creating simplified organisational structures and internal processes
Commercial opportunity; seizing opportunities arising from liberalisation or deregulation of a growing number of air transport markets; value creation (value attributes) and also look at network, brand, staff and fleet,” he said.
He also spoke about the operating environment and noted that its political, economic, social and technological dimensions impact air transport in Nigeria.
Nwuba looked at the market access, country risk in the area of leasing and insurance, industry risk and business risk.
Investment in aviation sector also entails the confidence of the investor, government policies, corporate governance and ownership structure in relation to the company; market size, the country’s GDP per capita, traffic growth potential, airline yield and profitability and cost of capital and return on investment.
He said the investor, if foreign, will also look at the ability to repatriate funds, the rule of law and contract enforcement, global factors; that is, competition from other regions and countries, connectivity and location; competition and market liberalisation.
According to Nwuba, flights revenue is projected to rise to $1.45billion in 2023 with annual growth rate of 6.85 per cent between 2023-2027; projected market volume will rise to $1.89 billion by 2027 and users expected to grow to 16.22 million by 2027; user penetration is projected to be 5.9% in 2023, and 6.6% by 2027, while the average revenue per user is expected to amount to $110.20.
Also, 83% of total revenue will be generated through online sales by 2027 and GDP per capita is projected to grow by 7 per cent to 2050.
But on the other side of it, there is subsisting high unit cost of operations, leading to doubling of fare of a one-hour flight from N25,000 to N60, 000 to N140, 000 at peak periods.
According to Nwuba, there is low aircraft utilisation, schedule reliability, OTP (on time performance), cost of capital is in double digits (26 per cent interest) and there is limited private equity interest, or hedge products in forex or fuel.
He said aviation fuel which was N220 per litre in early 2022 raced close to N1000 mark, adding that there is scarcity and high cost of forex and exchange rate volatility, high cost of aircraft leasing, maintenance, insurance and observed that Nigeria tops list of Africa’s airlines trapped funds. It has multiple charges and taxes paid by airlines; policy flip-flops and lack of appropriate notice of imminent changes, poor infrastructure to support airlines, no transit facility. There is also lack of airport capacity at main airports of Lagos and Abuja, limited maintenance and aircraft on ground access.
He frowned at the lack of data, poor access to timely data and there is indication of stagnant growth.
On Legislation and its impact, he said: “Aviation business does not exist in a vacuum but within the context of its operating environment and the governing regulations. Aviation regulation and policy is harmonised across the world to ensure consistent levels of safety and consumer protection. Civil aviation authorities are usually responsible for determining policy, which determines the use of airspace, the economic regulation of airports, licensing and financial fitness of airlines and consumer protection. Legislation should support growth whilst maintaining safety.”
