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Options for indigenous carriers’ survival - THE NATION
More than two months after domestic flights resumed, operators are still counting losses in billions of Naira, following reduced passenger traffic caused by COVID-19 shocks. Indigenous carriers have also scaled down flight rotations on some routes, as well as other cost-saving measures to keep their operations running. To reverse the trend, experts say a rejig of operational models in favour of equipment suitability and expansion into cargo and courier business can create new revenue streams to survive the hard times. KELVIN OSA-OKUNBOR reports.
These are trying times for players in the global air transport industry, including Nigerian carriers. From airlines, aircraft manufacturers, ground handling firms, airport authorities, air navigation services providers, aircraft lessors, maintenance repair organisations and other players in the aeronautical value chain, it’s been a tale of woes since the outbreak of the Corona virus disease (COVID-19).
From restriction of flights, lockdowns, closure of airspace and other continent-wide strategies put in place to contain the spread of the virus, the global economy has been brought to knees. According to the International Air Transport Association (IATA), carriers, including Nigerian airlines, lost an estimated $113 billion to the crisis.
IATA’s Director-General and Chief Executive Officer, Mr Alexandre Juniac, said it would take a longer time for the sector to recover.
The Nigerian Civil Aviation Authority (NCAA) painted a clearer picture of the impact of the pandemic on Nigerian carriers.
Its Director-General, Captain Musa Nuhu, said indigenous carriers needed to create new businesses to keep afloat. According to the industry regulator, many carriers are yet to recover from the pangs of the deadly virus, which affected their revenue from passenger operations.
The crisis, the NCAA added, also forced many airlines to retire some aircraft, send workers on furlough, and suspend operations on some routes. Many of them are also unable to meet obligations to agencies, catering firms, fuel suppliers, insurance firms as well as financial institutions.
However, since July 8, when domestic flights resumed, carriers, including Aero Contractors, Arik Air, Air Peace, Overland Airways, AZMAN Air, Max Air, Dana Air and Ibom Air, have continued to experience dip in passenger traffic, which is dealing a blow to their operations.
Reduced passenger traffic, investigations by The Nation show, remains a major headache for the airlines, with experts expressing worries that early recovery might remain elusive because of the poor purchasing power of Nigerians.
To drive the sustainability of local airline businesses, experts said they must be more strategic by deploying suitable equipment on major routes to get round the lower passenger traffic.
They noted that despite that COVID-19 continues to threaten the survival of airline business in Nigeria, the few carriers with the right capacity to play actively locally and internationally with the right mix of aircraft would ride the storm.
For instance, the Group Managing Director, Nigerian Aviation Handling Company (NAHCO) Plc, Mrs. Adenike Tokunbo Fagbemi, said airlines with the right mix of fleet could expand beyond passenger operations and break frontiers in the cargo and courier value chain to survive revenue shortfall occasioned by the pandemic.
She said besides seeking stimulus packages from the government, airlines, which would have mitigated the losses incurred during the pandemic, could design operational models that allow them to use their aircraft to ferry cargo on major routes to keep afloat.
Mrs. Fagbemi said if there was right pricing of such services, airlines could leverage such to recover from loss of revenue that would have accrued from passenger operations.
She, however, said the government had a huge role to play in driving the sector towards sustainability by providing financial palliatives for airlines and other players.
“Palliatives are a way to help airlines recover,†she said.
She also said despite the challenges COVID-19 posed for the sector, it had also create opportunities for airlines to deploy appropriate pricing for air fares to drive sustainability.
Noting the need for smart airlines to adopt yield management system in their route planning and fare structure to maximise passenger capacity on their airplanes, she urged airlines to diversify into cargo operations, which could yield significant revenue if they rendered time-sensitive services.
Apart from the delivery of time-sensitive services, Mrs. Fagbemi said lower charges and fares for cargo would increase the revenue net of carriers which were yet to tap into limitless opportunities in cargo business.
Her words: “Though coronavirus has created distortions in the aviation sector, it also could bring in its wake windows of opportunity. This is the time for airlines and ground handling companies to think innovatively.
“Significantly, airline business could be profitable if managers adopt appropriate pricing of fares to achieve yield management. This will assist the airlines to handle the fare structure of passengers in the aircraft and how to run profitably.
“Airlines could delve into cargo business within the country at reduced prices to attract ferrying of goods. But the service must be time sensitive. If cargo arrives in good time, it could trigger patronage by people who had hitherto considered air travel and cargo elitist.â€
A United States Federal Aviation Administration (FAA)-licensed flight dispatcher, Mrs. Victoria Adegbe, said airlines could convert their passenger aircraft for cargo and courier operations to earn additional revenues post-COVID-19.
Citing Air Peace, which has various aircraft in its fleet, she said such a carrier should use its equipment profile to navigate the challenging times by deploying its Boeing aircraft on busy routes when passenger traffic is heavy, but deploy its Embraer Regional Jets on not very busy routes where passenger traffic drops.
Mrs. Adegbe said the COVID-19 pandemic has called to task the planning capacity of many indigenous carriers. It has also created new revenue earning opportunities if owners and managers could explore new areas of business such as cargo.
She said though the government has a duty to assist local carriers with stimulus packages as other countries have done, operators should use the challenges thrown up by COVID-19 to examine new frontiers for survival.
Mrs. Adegbe said: “As governments look to stimulus measures, the airline industry will need consideration for relief on taxes and lower charges. These are extraordinary times. Airlines are cutting capacity and laying off staff or asking them to take unpaid leave. This is the time for government to consider assisting local carriers in any way it considers relevant.â€
She said a carrier such as Air Peace, which operates on domestic, regional and intercontinental routes, could deploy the various aircraft in its fleet to consolidate cargo and courier operations.
“There is apathy globally in the air transport sector because of COVID-19. Only carriers with the right mix of aircraft such as Air Peace, which has acquired more Boeing 777 aircraft for its international operations and its Embraer jets for local and regional operations, seems prepared for the task ahead.
“That is the way to go for Nigeria, to put our carriers on the right path and give us the right representation at this time. All that indigenous carriers need is encouragement and support from government,†Mrs. Adegbe emphasised.
She said, for instance, that an African carrier, Kenyan Airways, during the pandemic, applied the same model by converting some of its aircraft for passenger operations for ferrying cargo, medical supplies and other logistic engagement.
The Chairman, Domestic Airport Cargo Agents Association (DACAA), Mr. Monday Subair, also weighed in on the issue. He said indigenous carriers were yet to fully exploit opportunities in the cargo and courier value chain with the possibility of air lifting over 15 tonnes of cargo monthly.
He said airlines could earn huge revenue from such volumes of cargo if they deployed their aircraft for cargo haulage.
Subair said with the challenges that the COVID-19 pandemic has thrown up, local carriers could tap into this revenue-earning business by expanding their operations at this time passenger traffic is waning.
He said: “Airlines should look beyond passenger operations and expand into cargo, which could be a huge revenue earner. Airlines such as Air Peace, which has large aircraft in their fleet, could deploy some of them to service cargo.†The DACAA boss said indigenous carriers with good network of routes in the West African Coast could break new grounds in cargo operations to boost its revenue in Monrovia, Freetown, Accra, Dakar, Banjul and other destinations.
Such operations, he said, could be extended to Middle East in Sharjah, Dubai, the United Arab Emirates (UAE). The Board of Trustees Chairman, DACAA, Mr. Ikpe Ukana, could not agree less. He said indigenous carriers needed to partner cargo agents to drive sustainability of their business as part of the lessons from COVID-19.
His words: “Airlines should not depend on passenger operations alone. They should veer into cargo as part of COVID-19 lessons. Airlines need to partner domestic cargo agents to leverage opportunities in the cargo sub sector to keep their business afloat.
The Head of Strategy, Zenith Travel, Mr. Olumide Ohunayo, said despite the shocks of the pandemic, some indigenous carriers demonstrated their operational capacity to keep afloat by converting scheduled passenger aircraft for cargo operations.
Such operations, he said, not only earned revenue for the airlines but also assisted in conveying medical supplies during the crisis.
Ohunayo, who is an aviation analyst, said as part of strategy to keep afloat, carriers should begin to improve their systems and processes and look beyond passenger operations and point-to-point destination to drive capacity.