Report: Nigerian Airlines on International Routes Losing Market Shares

Obinna Chima

Nigerian carriers on the international route are losing market shares, a report has indicated.

International passenger traffic is shrinking, the report stated, adding that there are indications that 60 per cent of all airline tickets are dollar purchased.

The International Air Transport Association (IATA) exchange rate is N308/$.
However, the report revealed that airlines are enjoying higher patronage from Nigerians paying in naira.

The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, stated this in a report titled: Re: “Recovery Fades, Strong Regulator versus Efficient Markets,” which he delivered at the Lagos Business School’s Executive Breakfast session recently.

Kenya Airways reported a major loss for the second year running, rationed its route network and cut 40 per cent of its destinations. Abuja was one of the first casualties. Others were Gabon and Botswana. While Ethiopian Airlines and its subsidiary Asky is gaining market share across Africa, with the Lagos-Lome-Newark route as a blockbuster.

The report indicated that passenger load traffic has been down by 60 per cent, indicating that discount fares and promos are back
Furthermore, it stated that higher cancellations and poor on-time performance were hurting the brands in the aviation sector.

While highlighting some of the challenges facing the industry, it stated: “Regulation makes it impossible for airlines to break-even as well as failure to improve the airports conditions. Cost of operation remains very high and increasing cost of JET A1 fuel and other landing charges. High indebtedness of domestic airlines to banks

“Multiple entries granted to many international airlines creating ineffective competition. Lack of maintenance facilities within the country.”
It revealed that over 50 airlines have been liquidated since Independence (1960), due to failure of regulators in the industry.

Also, it stated that Domestic aviation was consolidating between three carriers – Arik, Medview and Air Peace. It however noted that the airlines are all under financial cost pressures.

The Central Bank of Nigeria (CBN) has made airline remittance a priority sector.
CBN Governor, Mr. Godwin Emefiele recently said the aviation sector is an important sector in the economy, just as he assured that the central bank would continue to fund the foreign exchange need of operators in the sector.

However, the CBN governor faulted the insinuation foreign airlines were moving out of the country due to FX scarcity.

“It is important for me to correct the impression that airlines are closing down or airlines are moving out of the country because of inadequate access to foreign exchange. No one can deny that everyone is finding it hard to get FX these days, given the sharp drop in oil prices and FX inflows. So that may be part of the issue.

“But the real reason airlines are reducing their flights is a lack of passengers not just in Nigeria but all around the world. As a result of the global economic situation that we find ourselves today, there has been a serious reduction in the number of travelers in different parts of the world. The aviation sector in different parts of the world is confronted by this.

“I would imagine that rather than travel in a weekend to go and organise a party or go and conduct wedding in Dubai or travel to go and organise party in London, given the situation we find ourselves, people have now learnt that there is a need for them to be prudent in spending money.

“So, no doubt, we have seen a reduction in the number of travelers. And because there is a reduction in the number of travelers, naturally there is a reduction in the occupancy rate for the airlines.

“So, that is what has happened. Now, are we giving them forex? You will recall that last week when we did some secondary market intervention through forward, we also considered the aviation sector and we gave them what they needed. We are meeting their foreign exchange needs. So, when people say they don’t have foreign exchange, I don’t really understand what they are talking about because we have taken the aviation as an important sector in the country.

“I have heard people speculate that the airlines are relocating to Ghana. Are they suggesting that Ghana has more FX than us? They are facing the same FX shortages like us, if not worse. And by the way, Ghana’s FX reserves are probably less than 25 percent of ours here in Nigeria. So, it cannot be correct that the airlines are relocating there,” Emefiele explained in a recent interview with THISDAY.