The International Air Transport Association (IATA) in its Global Economic Outlook for 2019 forecasts the global airline industry net profit to be $35.5 billion in 2019. This was as it forecast foresees African carriers recording a net loss of $300 million this year.
Director General and CEO of IATA, Mr. Alexandre de Juniac, who disclosed this at the 2018 Global Media Day held in Geneva, Switzerland, however, said “all regions in the world, except Africa, are expected to report profits in 2019.”
The IATA report, while describing aviation as a major enabler of economic activity and social cohesion for any country, stated that global air transport contributes to more than $2.7 trillion in GDP and supports more than 65.5 million jobs.
“Air transport enables tourism, international trade, encourages inward investment, innovation, education in addition to promoting social cohesion and all of these are key objectives of many governments around the world,” IATA said.
IATA stated that air connectivity (the ability to grow the numbers of passenger traffic utilising local airlines) that economic benefits of aviation accrue to nations.
Sadly, the global watchdog noted that many African countries like Nigeria are not benefiting from the aviation sector like the rest of the continents.
“Africa continue to struggle in many of its markets,” said IATA which links this crisis to absence of the right infrastructure and tax incentives for investors to unlock the full potential of the local airline industry.
What should Nigeria therefore do to maximise the economic and social contribution of air transport?
Globally, air connectivity drives economic and social benefits to countries.
“The more connectivity, the more benefits; more number of flights, seats, and destinations,” said IATA’s Head of Policy Analysis, Mr. James Wiltshire.
It therefore implies that for Nigeria to grow it’s aviation sector in 2019, the Federal Government must invest in requisite navigational aid and airport infrastructure as well as regulations to support airlines connect Nigerian cities and international destinations better.
Without doubt, aviation has always been a highly regulated industry. In Nigeria following a series of air crashes between 2005 and 2013, the Nigerian Civil Aviation Authority (NCAA) had come up with stringent safety policies for the local airline industry.
In recent years, some stakeholders have considered some the NCAA policies for new investors and taxes for existing airlines as inimical to the growth of the airline industry, demanding that the regulatory agency also show commitment to the financial regulation and health of the airlines. Where regulations force prices of airfares to soar above the disposable incomes of most citizens, it becomes an herculian task for local airlines to attract the right passenger traffic to grow.
For countries like Nigeria, IATA therefore advises that it evolves “smart policies” if it must gain from the industry.
Air transport business in 2019 in Nigeria should not be subject to a bureaucratic policy making process that results in many burdensome regulations that affect the doing business environment.
“The cost of air travel is a key driver of passenger demand and excessive charges and burdensome taxes add to the cost of travel and inhibit connectivity,” said IATA’s Head of Policy Analysis, Mr. James Wiltshire. “Aviation remains a highly regulated industry; that’s fine up to a point.
But regulations should only be implemented where necessary, and regulations should be proportionate “When a government puts in place policy frameworks that facilitate air transport, they will stimulate air connectivity. And encouraging air connectivity will generate high quality jobs, and economic activities dependant on mobility,” he added.
In 2016, the Federal Government launched a ‘Road Map’ for the aviation sector with the privatisation of major airports in Lagos, Abuja, Port Harcourt and Kano as top priority. It was a policy thrust that was resisted by aviation sector unions who queried the rationale for the concession of thriving and massive revenue generating state assets to private firms.
Since the government had cited the paucity of funds to invest in the continuous maintenance and upgrade of the airports, labour had instead insisted that the other airports (outside those in Lagos, Kano, Port Harcourt and Abuja) which were economically not-viable and generating low revenues should be concessioned or privitised to attract investors that would invest in their infrastructure upgrade to attract airlines and passengers.
In 2019 therefore and with the decision of some airlines like Air Peace to launch operations into some of these unserviced airports, it becomes necessary for the Federal Government to reconsider the suggestions of labour and other concerned stakeholders for the concessioning of some of the non-profit generating airlines.
Airline operators have lamented the poor state of the airport terminals and runways of some of these airports as well as the absence of navigational aids to support flight operations beyond 6pm. If privatised, private firms who would be more desirious of getting returns for their investment would be more willing to invest in the requiste infrastructure to attract airlines and passengers into these airports.
MRO NCAT upgrade
Two other areas that the Nigerian government needs to pay attention to in 2019 is in manpower training and aircraft maintenance where the country continues to lose millions of dollars in capital flight.
The President Muhammadu Buhari’s government Road Map for the sector had included the establishment of a functional Maintenance Repair ad Overhaul (MRO) hanger for aircraft as well as the upgrading of the Nigerian College of Aviation Technology (NCAT) Zaria to a world-class standard.
Although Aero Contractors Airlines has established a hanger, it is basically for the use of the repair of the Boeing 737-500classic type of aircraft.
Local airlines who are not operating with the Boeing 737-500 aircraft are still spending billions of naira annually in the conduct of C-checks and D-checks at various offshore maintenance hangers.
At the Aviation Stakeholders Forum held in November 2018, Minister of State for Aviation, Mr. Hadi Sirika had promised that the establishment of an MRO was still on the table of the government.
In 2019, it would make a lot of cost-saving or economic sense for the Federal Government to take practical steps to establish a vibrant and functional MRO for the country. In the same vein, the government should upgrade NCAT to handle most of the type-rating programmes for pilots done abroad to stem the huge losses in capital flight to the industry.