December 9, 2019//-Nigerian scheduled aviation is much discussed and, as has been the case for many years, much of the focus is on the need for a Nigerian flag carrier.
But is that really the answer? Here we look at the Nigerian aviation sector, drawing on a wide range of data
sources, and review the current state of the Nigerian market, and some of the issues.
Nigeria’s African Rankings
With Nigeria being the most populous African country by some margin, and the second ranked African country in terms of economic size, aviation has failed to generate the impact it could. Scheduled capacity to and from Nigerian airports places the country 6th across the Continent, a third of the size of South Africa’s capacity and behind Egypt, Morocco, Ethiopia and Kenya.
So, while the industry is sizeable it is smaller than it could be relative to the size of both the population
and the economy.
Stagnant Supply Side
In the 12 months to November 2019, there were 12.7 million scheduled airline seats to and from Nigerian airports, some 3% fewer than in the preceding 12 month period.
This follows growth of 7% in the previous year and 4% in the year before that. Over the past five years capacity has
averaged 3% reduction per annum. So, while there has been respectable levels of growth, that has now stopped.
Capacity for both the domestic and international scheduled aviation is of a similar size, with there being around 13% more domestic seats (7 million) than international (6.1 million).
Last year domestic capacity did not grow at all while international capacity grew by 16%. In the prior year it was domestic capacity which grew by 16% while international capacity declined by 9%.
Clearly the industry goes through ups and downs on an annual basis but the current status is one of stagnation, or a small decline.
Carrier Landscape
Over the past 12 months there have been 41 airline operators in Nigeria. In the domestic market there are 14 of which 9 are domiciled in Nigeria and they operate 97% of all capacity.
The largest of these are Air Peace and Arik Air which operate just over a quarter of all domestic airline seats each. Aero Contractors is the third largest with 11% of capacity.
There are 36 international airline operators of which nine are also active in the domestic market, some only as fifth freedom carriers. The Nigerian airlines are relatively small players, operating only 5% of Nigeria’s international scheduled capacity, and this is significantly down from the 12% share they had just two years ago.
Instead Emirates, the UAE airline is the largest international player with 12% of capacity, followed by Ethiopian Airlines with 11%. The next largest international carriers are, in order, Lufthansa, British Airways and
Turkish Airlines, none of which are regional players.
It’s striking how little capacity is operated by Nigerian airlines or carriers from within the West Africa region.
One of the major problems for Nigerian aviation for some time has been the level of churn i.e. the number of new airlines which enter the market and the number of failed airlines that leave the market.
In the 12 months to November there have been 14 domestic airlines operating, up from eight in the 12 months to November 2016. However, only 4 of the 2015/16 airlines are the same, indicating 4 market failures and 8 new entrants.
The picture is similar for international aviation. The 35 airlines operating Nigeria’s international routes has grown from 32 to 36 but only 23 are the same as three years ago meaning 9 have failed and 13 are new.
Network Aspirations
The differing strategies of the two main carriers operating in Nigeria today are apparent from their aircraft orderbook. While Air Peace operates a fleet of 11 B737 aircraft and 2 B777’s, as well as 7 E145’s and a Dornier 328 jet, Arik Air operates a handful of B737’s, some CRJ’s and a Dash-8.
By the usual standards of airline strategy any fleet with only two long haul aircraft, as in the case of Air Peace, is
problematic, lacking neither the scale or fleet continuity to operate efficiently.
Both carriers have aircraft on order but while Air Peace have 30 Embraer E2-195 aircraft on the orderbook, Arik Air has a mix of more B737’s and also nine Dreamliners.
There is a clear contrast in the type of routes that will be operated by regional jets vs Dreamliners. One carrier is clearly aiming to expand within the region while the other has a long-haul network aspiration.
Structural Issues
Aside from the matter of having the right airlines to make the most of the market opportunities, there are a number of structural issues which make growth harder.
For starters, many people in Nigeria still choose to buy airline tickets in cash and close to when they want to travel. This in itself makes the role of revenue management difficult. This is not a market which can easily be stimulated by online campaigns and yield management.
IATA has complained recently of the typically high airport charges in Nigeria and, indeed, across Africa where charges account for 11.4% of all airline costs. And then there are the government policies which hinder free and open
competition and free movement of people.
Not least among these is the visa regime. Nigeria ranks 29th of 54 countries in Africa for Visa Openness with very little visa-on-arrival, visa free access for only 16-17% of other African nations.
Everyone else wanting to visit Nigeria from elsewhere in Africa needs to obtain a visa in advance of travel.
With so much potential, it would be great to see Nigeria find a way forward, perhaps one day becoming a regional hub for aviation, with a thriving commercial aviation sector.
However, much remains to be done to get there and those involved in the sector could usefully take a look to elsewhere in the world where countries which used to be thought of as ‘having potential’ are now becoming talked about growth markets.
One such example is Vietnam where multiple local carriers are expanding both domestically and internationally on the back of robust economic growth and liberalised policies. Of course, no two countries are the same or face the same combination of issues, but it takes a proactive alliance of government and business to move from potential to reality.
AviaDev
