By AYOOLA OLAOLUWA
Struggling Nigerian airlines reeling from the disruptions caused by the Coronavirus pandemic to their operations are employing strategies to beat the negative impacts, including partnering and possible mergers, Business Hallmark has learnt.
It would be recalled that after about four months of suspension of domestic and international flights because of COVID-19 pandemic in March 2020, the Federal Government reopened shut airports on July 8, 2020, starting with the Murtala Muhammed Airport (MMA) Lagos and the Nnamdi Azikiwe Airport, Abuja.
Kano, Port Harcourt, Owerri and Maiduguri airports later resumed operations on July 11, while domestic flights at other airports resumed on July 15.
However, the return of flight operations in the country has continued to be dogged by low turnout of passengers. According to a six-month (July 2020 to December 2020) traffic data compiled by the Federal Airports Authority of Nigeria (FAAN) obtained by BH, traffic across major routes dropped by 50 per cent, with attendant impacts on load factors and airlines’ frequencies.
For instance, MMA Lagos recorded 551,380 passengers in the six months under review. According to the report, inbound passengers recorded 270, 828 whereas departures stood at 280, 552 passengers.
On the other hand, a total of 3,068 aircraft landed at the airport between July and December 2020 while 3,193 aircraft took off from same airport during the period.
BH checks at the Murtala Mohammed International Airport, Ikeja Lagos, revealed that the arrival and departure halls of the two usually busy terminals in the airport, the General Aviation Terminal (GAT), popularly called MMA1 and Murtala Muhammed Terminal (MM2) operated by Bi-Courtney Aviation Services, are still devoid of the usual bustling and hustling.
Speaking on the development, the Terminal Manager, MMA, Adekunle Aderibigbe, lamented that domestic air travel returned to its low traffic status of the Covid19 era after the December 2020 rush at airports across the country.
“Though, the initial passengers’ turnout at the commencement of flight operations after the lockdown was not too impressive, it gradually picked during the yuletide.
“Passengers turnout in the twilight of 2020 was the most encouraging, compensating for the downturn that trailed the post-lockdown, particularly in December 2020, which witnessed a surge in passenger traffic.
“Airlines were able to manage their passengers as more aircraft were deployed to accommodate passengers. However, since the middle of January, domestic air travel has returned to its low traffic status of the Covid19 era,” he said.
However, the Chairman, Airlines Joint Passenger Committee of the International Air Transport Association (IATA), Bankole Bernard, said the entire aviation sector still had low patronage of about 30 per cent, causing airlines to run at a loss.
Our Correspondent, who monitored activities at the airlines at the Murtala Mohammed Airport in Lagos on Tuesday and Wednesday, saw only few passengers boarding, despite lines of aircraft waiting on queue for boarding and takeoff.
Some airlines representatives who spoke with our correspondent during the visits said the ratio of passengers at present compared with previous years had drastically reduced due to the impact of Coronavirus.
A staff of one of the airlines who spoke to our correspondent, Benson Esoro (not real names), lamented that despite the reopening of airports, things have not returned to normal.
“Apart from the Yuletide period when we recorded full loading capacity, the best we have been able to achieve so far is 50 percent. The aviation industry really needs God’s intervention at this critical period.
“The situation is quite bad, and the prognosis is gloomy. We thought we were going to soon get out of the mess after the first shutdown was lifted in July 2020, but the second wave (Covid19) soon hit.
“Most airlines are currently living on borrowed time. All the airlines are heavily indebted to banks. And loans needed to be serviced. Without a bold and urgent intervention, we will soon start to see the effects of the pandemic on the aviation sector”, Esoro noted
The chief operating officer of one of the airlines said the latest drop in traffic was expected in the New Year and in the middle of a pandemic.
“Do not forget that we are still facing the pandemic, particularly the second wave that is deadlier than the first. So, travelers’ apathy is still there.
“Not too many people want to travel these days, except it is very important. For operators, the roller-coaster is expected and we have to adjust and plan our services accordingly,” Aderibigbe lamented.
Apart from the fear of contracting Covid19, BH findings revealed another factor that could have contributed to the low turnout: significant increase in airfares.
Checks revealed that all the airlines have raised their fares in all classes of tickets for one-hour flights from Lagos to Abuja. For example, an average one-hour economy class seat (Lagos to Abuja) of N33, 000 in August 2020 rose to N65, 000 over the counter of some airlines, while an average return trip climbed to N115, 000 from about N60, 000 some months ago.
Our correspondent gathered that it was much higher at the peak of the Yuletide season, with an average one-hour economy class seat selling for N75, 000 over the counter of some airlines, while average return trip N140, 000.
Meanwhile, with the continued drop in passenger traffic and its resultant revenue loss, airlines are embarking on desperate measures to survive.
One of the measures, a ticketing agent with one of the airlines said, is ‘passengers transfer’. According to the agent, a passenger transfer or swap’ is a process where an airline with more vacant seats transfers its passengers to another airline with more seated passengers.
“For example, if Airline A, with a plane capacity of 100 passengers, has only 30 confirmed passengers on a scheduled flight say an hour to departure, and Airline B, also with a plane capacity of 100 has only 55 confirmed passengers, rather than allowing the two fights flying to the same destination to continue, the plane with fewer passengers is grounded, and this is usually the case, while its passengers transferred to that of Airline B.
“By this arrangement, both airlines are able to share cost and lower their losses”, the agent stated.
An official of FAAN, Dayo Olubukola, said though the development is not a new thing in the aviation industry, airlines are now utilising it more and more.
“As you know, once a flight is scheduled, it must operate, unless there is a compelling reason like a technical problem. Even with that, you are obliged to provide another aircraft within a given period. So, cancelling an already booked and paid for flight comes with legal and cost implications.
“Rather than go through that arduous route, airlines are daily embracing the swap option. It is a common and well-known practice among foreign airlines. But due to several limitations in Nigeria, like breaching of sharing formula and the non-payment of parties their agreed fees, many airlines have been running away from it. The situation is now forcing it on them. I think it is a good thing”, Olubukola stated.
Apart from the ‘passengers swap’ option, local airlines, several sources confided in BH, are weighting the option of entering into a merger arrangement.
A source in one of the leading airlines told our correspondent that his company has been approached by the representatives of more than one carrier wishing to enter into a working arrangement with it.
“Most of the airlines are distressed and need urgent help. Apart from Air Peace owned by Chief Allen Onyema and Dana, with their Indian connection, I doubt if any airline can withstand the negative effects of the Covid19 pandemic without a merger or bailout from government. Even, big players like Aero Contractors and Arik Air are surviving due largely to government takeover”, the source stated.
“The pandemic has exposed airlines to serious financial problems. This is an industry that is still reeling from the impact of paucity and high cost of foreign exchange.
“Apart from maybe workers’ salaries and ticket sales, everything else in the industry is denominated in dollars.” A C-check is now N1 billion; just for one aircraft! Convert that to dollars and you will understand what I am saying.
“Yet, airlines could not access forex from the Central Bank of Nigeria (CBN) for its operations. We get from the black market at the rate of N480 -N485 per dollar.
“Airlines with a couple of planes in operation have reduced their frequencies and routes just to be able to cut losses”, the source disclosed.
Former Commandant of the Lagos Airport and aviation security consultant, Group Capt. John Ojikutu (rred), said it was no surprise that airlines have continued to struggle, owing service providers and regulatory agencies deductions of five per cent Ticket Sales Charge (TSC) and Passenger Services Charge (PSC) in order to stay afloat.