Joined: 25 May 2007
|Posted: Fri Aug 04, 2017 9:53 am Post subject: How African Airlines Took Advantage of Nigeria's Recession
|How African Airlines Took Advantage of Nigeria's Recession
4th Aug. '17
Whereas many international carriers scaled down their operations to Nigeria due to the recession that adversely affected the value of the naira, African airlines defiantly maintained their services and made significant inroads into the market.
As at May last year, about $575 million revenues earned by foreign airlines was trapped in Nigeria. But the Central Bank of Nigeria (CBN) has significantly liquidated the said sum now. The inability of the airlines to repatriate their funds from 2015 prompted them to take critical decisions about their operations in Nigeria. Similar thing happened in Venezuela, Angola and Egypt. Some of these countries depend on oil export for their GDP and so were hit by the collapse of oil prices in the international market.
The economic recession in Nigeria forced Iberia and United Airlines to abort their operations to Nigeria while the likes of Emirates, British Airways, Delta Air Lines and others to scale down their operations. While Emirates reduced its three flights a day to Nigeria to one, BA, Delta and others changed the aircraft type to that of lower capacity, as the economic crunch inflicted hardship on Nigerians and many stopped travelling overseas.
So with limited passenger traffic, crash in the value of the Naira and uncertainty about Nigeria's economic recovery, many of these mega carriers became ensconced on how to recover their trapped funds and also on how to stop more of their revenues from being trapped. They vainly searched for loopholes to directly sell their tickets in dollars, against the policy that passengers that wish to buy tickets in the local currency must be attended to. Sometimes they went as far as declaring a flight fully booked to those who wished to pay in the local currency. For whatever reasons, there was a time Emirates refunded passengers billed to travel to Brazil with the airline and cancelled their tickets because they bought the tickets with local currency.
Except Kenya Airways which stopped operations to Abuja due to the economic recession in 2016, other African airlines continued to operate to Nigeria and even introduced new planes on the route. They continued to promote their flights and continued to entice the travelling public with new products. In fact, it was at this time that African World Airlines (AWA) broke fully into the Nigerian market, increasing its frequency to Lagos and recently started operations to Abuja, as Asky increased its frequency to the nation's capital. So while international mega carriers reduced their frequencies and capacities to Nigeria; Africa airlines upped the ante and continued to operate despite the economic crunch.
This has attracted more customers to these regional airlines that now it has become obvious that the international carriers are losing their customers to them. They have lost them in Abuja where some have stopped operating to and in Lagos where they have cut down their operations. In addition to their inconsistency, these airlines also charge relatively outrageous fares that are sometimes over 50 percent higher than the fares charges by African carriers.
Travel expert, Ikechi Uko told THISDAY that more Nigerians are attracted to African airlines now because of the way the mega carriers treated the market during the recession, noting that while these international carriers showed hostility to the market, the African airlines responded positively to the recession.
"The behaviour of the international airlines seemed to indicate that they felt the Nigerian economy would not rebound. That attitude helped the African airlines. Ethiopia Airlines, South Africa Airways and Rwand Air introduced new aircraft on the Nigerian route. Ethiopian introduced the Dreamliner, Boeing 787 to the Nigerian market in 2015 and it also introduced the latest Airbus, A350 XWB to Nigeria earlier this year; Rwand Air introduced new Airbus A330-200 immediately after delivery to Nigeria and South Africa Airways also introduced a new aircraft, A330-200.
"While the international carriers pulled out during the period Abuja airport was closed; it was Ethiopia Airlines that landed first in the alternative airport in Kaduna at huge cost on logistics, but that showed the commitment of the airline to its Nigerian operation. And when the Abuja airport was reopened, Ethiopia was the first commercial flight that landed at the airport with A350XWB," Ikechi recalled.
He confirmed that African airlines charge relatively lower fares compared to the international carriers and while these mega carrier were obsessed with recovering their trapped funds and cutting losses, Ethiopia Airlines, which had so much of its revenues also trapped in Nigeria, remained unfazed and continued to do business in the country. It was the same with South Africa Airways.
He also observed that international airlines adjusted the classes of their tickets as part of recovering their funds and concentrated on premium fares and subtly insisting on selling in dollars, at a time the African airlines still accepted local currency from passengers and also offered relatively cheaper fares.
But a source also told THISDAY that the mega carriers like BA, Air France, KLM, Virgin Atlantic, Delta Air Lines, Emirates and others have traditional customers from Nigeria who stick to them. The source observed that most of these airlines operate old equipment but they have built invaluable reputation on safety and service standard that is a permanent attraction to a cross section of Nigerian travellers.
"They operate mainly classics (old aircraft) but the older Nigerians prefer to travel with them because theirs is a very, very experienced system. They manage the minds, not the passengers," the source said.
Speaking on Emirates, an insider told THISDAY that the Middle East airline is yet to figure out what to do with the Nigerian market, "which they invested a lot of resources in but they scaled down their operations and now the market forces has almost eliminated them. They are no more where they were few years ago. The airline does not have patience with countries suffering recession because I gathered it also scaled down its operation in Angola," the source said.
With the departure of United Airlines and later the withdrawal of Arik Air from New York route, African airlines made inroad to the US market from West Africa. While South Africa Airways uses Accra to operate to Washington, Ethiopia operates to the same city through Lome and Nigeria is the target market.
In fact, Uko said that Ethiopia got extra opportunity with the exit of United Airlines, noting that Washington has become the most profitable route from West Africa for these airlines, remarking that "passengers from Nigeria fly to Accra and Lome to travel to the US with these airlines," adding that although these airlines operate to the US from outside Nigeria "but Nigeria cannot be ignored because it has the largest market in West and Central Africa."
The travel expert who regretted that while Nigerian passengers air airlifted to international destinations from outside the shores of the country; however, expressed hope that a Nigerian leadership may in future do the right thing by creating good operational environment for these airlines.
Many Nigerians who travel regularly have excoriated the nation's airports, saying that they are not conducive for flight operations. However, they acknowledged that the security arrangement made recently has reduced the time spent on passenger screening.
Uko spoke in the same vein, saying the operational environment was not conductive "but there is improvement with the reduction of screening points, but the truth is that the airport is tired."
It is now well known that African airlines have improved their safety standards as safety records in air transport in the continent have significantly improved. In fact, passengers who travel with the airlines in the region have become more confident and assured, thus pushing away the old fears and anxiety that becloud travelling with many African airlines. Few years ago, the continent has the worst records in terms of safety but this has been changing as many of the operators embrace the highest safety standards.
The Vice-President, International Air Transport Association (IATA), African Region, Raphael Kuchi told THISDAY during the recent IATA AGM in Cancun, Mexico that many African airlines have embraced the IATA Operational Safety Audit, which is a very high safety certification.
"The good news is that throughout the conference, probably for the first time in many, many years you haven't heard Africa mentioned in relation to air accidents, which shows that a lot of things are happening positively in Africa. To start with, traffic is continuing to grow and IATA 20 year forecast indicates that Africa is going to be the fastest growing region in the next 20-35 years and about 5.1 percent growth year in year out. In addition to that, I am sure you all read the media release of IATA about our safety record in Africa which is unprecedented with zero loses for last year (2016).
"That is also very impressive. We have also got a number of African airlines which now come onboard IATA Operational Safety Audit (IOSA). And I will be taking the message to the government that much as we have seen safety improve since the Abuja Declaration (which made IATA Safety Audit mandatory for African airlines) targets to be met were announced in 2012," Kuchi said.
He urged African states to help the region's airlines to continue to improve and expand capacity and advised that states should stop introducing multiple taxes on airlines; rather, they should support the airlines because without their support the airlines would not prosper as envisaged.
"One of the provisions of the Abuja declaration (that African airlines must obtain IOSA citification to enable them to operate) was that states should make the Abuja Declaration an integral part of AOC (Air Operator Certificate) renewal for airlines. We haven't seen that in many countries, so we will want African governments to ensure that when you are renewing airlines' AOC, you ensure that they have IOSA and that the IOSA is valid. Now if we do that, then we are going to ensure that once you are on the IOSA registry you must keep on it otherwise you will not get your next AOC registration," Kuchi said.
Many industry operators believe that when this is achieved and with the planned open skies for Africa, the regional carriers will effectively compete and wrest the African market from European, Middle East and US carriers.
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