Nigerian aviation in turbulent 2020 COVID-19 pandemic
The year 2020 will not be forgotten in a hurry, owing to the global disruption in all fields of human endeavour, largely because of the outbreak of the novel coronavirus, code-named as COVID-19.
The aviation industry, just like every other sector of the economy in 2020, had its own share of the disruption courtesy of COVID-19.
The outbreak of the coronavirus from Wuhan, China, and its threat to lives and businesses led to the introduction of lockdowns and other stringent measures across cities of the world to curtail its spread.
Nigeria, like other countries, had begun the 2020 business year on a promising note. But when in March 2020, the first confirmed case of the disease was reported, the hope of a bright economy prosperous 2020 becomes deemed.
Nigerian ground handling firms in the aviation industry consequently, counted revenue losses due to the pandemic-induced plunge.
Aviation stakeholders have expressed divergent views on the effects of COVID-19 induced lockdowns and travel restrictions, which had forced ground handling firms to consider job cuts and cost reduction measures in a bid to survive.
A former President, National Associations of Nigerian Travel Agencies (NANTA), Bankole Bernard, said that in the first two months of the global lockdown, the Nigerian travel industry lost more than N180 billion and thousands of jobs.
Bernard said that in Nigeria, about 24,000 jobs were cut, while many employers had ceased payments for a few, who still had their jobs retained until business situations improve.
Also, the International Air Transport Association (IATA) reported that so far, African airlines lost nearly $5 billion in revenue following the spread of COVID-19 on the continent due to low passenger demand.
Stakeholders also called on the government to consider an urgent bailout for the industry to remain afloat.
While others, especially the airlines and the service providers in the industry, would have to innovate to ensure their survivability post-COVID-19.
The Chief Executive Officer of Aglow Aviation Support Services, Mr Tayo Ojuri, on an occasion remarked that COVID-19 had drawn back the aviation sector after “the robust growth” witnessed in recent years.
“Despite the milestones in recent years, the outbreak of COVID-19 had led to a disruption in the sector.
“This has drawn back the recent increase in passenger traffic and aviation contribution to GDP,’’ Ojuri said.
Also analysing the setback the industry experienced in 2020, former commandant of the Lagos Airport and aviation security consultant, retired Group. Capt. John Ojikutu said COVID-19 has seriously rewind the bright progress the aviation industry had recorded in recent times.
Ojikutu, however, said that the pandemic had exposed some weaknesses in the airlines’ commercial practices and the negligence in the oversight in those practices.
According to him, the operators hide under these weaknesses and the responsible authority negligence on oversight of their commercial practices.
“This, they used in asking for government financial palliatives, two months into the lockdown, as if the pandemic is the bane of loses in figures of their one-year earnings.
“There was also the negligence in the periodic maintenance of necessary critical aeronautical landing equipment that led to the diversions of international flights to neighbouring countries. This caused huge losses of revenue earnings.
“There were setbacks in the reconstruction of the infrastructure at some airports, especially those Enugu, Lagos, Abuja, Owerri, and Benin among others where the air and passengers traffic are higher,’’ Ojikutu said.
He observed that the evacuation of foreign nationals exposed the weaknesses in the bilateral air services agreements between countries and the differences in what some countries call national or flag carriers and private airlines carriers.
“While most foreign carriers moved unrestricted in and out of our country, it was not easy for our domestic carriers to do same into other countries.
“We lost out in spite of the capacities in some of our domestic carriers. It is very doubtful if the pre passenger traffic figures will come by soon in the next three years locally and internationally.
“The only available market for our domestic airlines are local and regional cargo freighting; otherwise, most of them will sooner than later be out of operations,’’ the former Lagos Airport chief said.
Similarly, foreign airlines have also been caught in the forex tangle, as over $200 million of accumulated ticket fares sold in the last couple of weeks have lately been stuck in Nigeria due to constraints at the Central Bank of Nigeria (CBN).
Aviation stakeholders, however, believe that unless the Federal Government bailed out the local industry operators and avail them a special forex window, airfares might continue to spike and become unbearable for the travelling public.
The News Agency of Nigeria (NAN) monitoring of fares showed a slightly varying price range across the airlines and routes.
On average, all routes, subject to availability, were sold for between N55,000 and N75,000 Economy Class one-way tickets. Return tickets for the same class averaged N120,000.
The one-way Business Class of N58,000 was sold for an average of N100,000, where available.
For instance, an Azman Air Lagos-Kano Economy flight ticket that used to sell for N30,000 went for N55,000.
The same airline sold Lagos-Abuja 10.00 a.m. flight for N85,000. Dana Air’s Lagos-Abuja Economy Class is selling for N56,000, compared to N29,000 average rates in the past.
A travel agent, Akin Ogunnubi, said indications of fare hike had been palpable in recent months but aggravated when aviation unions picketed Arik Air.
“Arik has the second-highest traffic after Air Peace. Picketing such an airline means serious disruption across the network,’’ Ogunnubi remarked.
The Chief Operating Officer of one of the local carriers said the major worry was the high cost of maintenance.
A C-check, which is required every 18 months, now costs an average of $2 million per commercial aircraft.
“At N500 to $1, a C-check is now N1 billion; just for one aircraft! And that is one component of other obligations.
“So, if you have N33,000 tickets now selling for N70,000, you cannot really blame the airlines, but the economy and its handlers.’’
The Federal Government has announced a plan to prepare a special credit line to support the financial liquidity of airlines amidst the pandemic.
Apart from the policy of the Central Bank of Nigeria (CBN), rolling out measure to mitigate the impact of the COVID-19 pandemic on the economy, stakeholders in aviation are not happy that there is no specific government policy aimed at tackle the devastating impact of the pandemic on the sector.
Unless the existing credit facilities obtained by airline operators, and other stakeholders fall within the scope of CBN intervention facilities, they may not be entitled to take benefit of the CBN policy on the pandemic which provides for an extension of moratorium and reduction in the interest rate payable on CBN intervention facilities.
Since the onset of the COVID-19, the government has helped airlines survive the crisis with approximately $173 billion in various forms of financial support.
The Nigerian government, particularly, pledged to support local airlines with N4 billion, which the operators are yet to receive.
IATA said more support would be needed in the form of fiscal stimulus. Many of the support packages are running out while the industry losses continue to mount.
Airlines losses are now forecast to exceed $118 billion in the last year.
The industry is expected to continue burning out cash at a rate of almost $7 billion per month in the first half of 2021.
Director-General and Chief Executive Officer of IATA, Alexandre de Juniac, advised that financial support must come in ways that do not further inflate debt, which has risen by 51.4 per cent during the crisis to $651 billion.
“To put this into perspective, total industry revenue in 2021 is expected to be $459 billion.
“Financially-viable airlines will be needed to lead the economic recovery from the depths of the COVID-19 crisis. Government support of $173 billion has helped many to survive.
“With the potential to safely re-open borders and revive travel with testing, the Nigerian government will need to add measures that stimulate demand.
“Such targeted initiatives will help generate revenues, avoid adding debt to airlines and immediately generate economic activity across the value chain,’’ de Juniac said.