The empty cabin of an airplane

Data from the Nigeria Bureau of Statistics (NBS) 2nd quarter 2017 report shows overall air passenger traffic declined 28.3% year on year. The drop in air traffic was attributed to the massive jump in inflation which increased by 16.53% year on year. In response to this, air fare prices have also increased by 53%.

Inflation is not the only factor

Besides inflation, airlines in the country have to deal with several factors. Absence of standard maintenance facilities in the country means aircraft have to be flown abroad. This leaves the airlines at the risk of foreign exchange rate volatility as they earn income in Naira, but have to pay in dollars. The drop in crude oil prices and production volumes in the country last year, led to a massive devaluation of the Naira against the dollar and the Central Bank of Nigeria (CBN) placing restrictions on fx demand.

The poor state of the airports in the country hampers their operations. Majority of the airports in the country lack equipment for night operations, limiting the number of flights they can receive daily. Foreign airlines have thus been forced to use neighbouring countries as their hub.

Aviation fuel, which takes up a huge proportion of their earnings, has also increased due to the devaluation of the Naira against the dollar last year. Petroleum products, are imported into the country due to the epileptic nature of the country’s refineries. Operators in the aviation space, have also complained severally of multiple charges by various government agencies in the sector.

Government recently put the Abuja and Lagos airports up for concession, due to a lack of funds to keep them at the required standards. The move has however sparked opposition from unions operating in the aviation industry, who have threatened to go on strike. The union claim they were carried along in the concession process.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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