The Nigerian aviation industry is underestimating the nature of the competition it will face from foreign carriers determined to carve a niche in the 4.4% average gdp growth estimated for the country in the next 40 years. Already the country presents the second highest rpk ( revenue passenger Kilometre) in the continent. Traffic between Africa and the EU has consistently accounted for over 60% of all aviation activity on the African continent. Foreign carriers currently dominate the international traffic arena, this now confines the local industry to the national and regional traffic, but that is also about to change unless both African regulators and the airlines recognise the impending threat. At the moment only Arik services any international routes outside Africa and consistently at a horrible loss even the Lagos-London route; one of the most profitable routes on earth.
On the continental level, there are certain affiliations that at best weakens any chance of a multilateral action by African airlines and governments to guard against losing strategic control of their aviation sectors.
Firstly, North African carriers have a stronger bond and a greater sense of loyalty with the Middle East (MENA) than with Sub-Saharan Africa. Emirates is one of the strongest competitors to the African carriers.
Secondly, most of the strong carriers in Africa are government owned who also enjoy the benefits of being IATA members. However, within IATA itself African carriers are small potatoes; accounting for less than 3 percent of it's activities and earnings.
Thirdly, though both camps above (MENA, and government owned carriers) are also members of AFRAA ( African Airlines association), it serves only as a backup plan for them, as AFRAA has only 40 members out of the over 190 registered airlines in Africa.
Fourthly, the ideal platform for a renaissance of African aviation; AFCAC (African civil aviation commission) an arm of the African Union (AU) has not been able to provide the leadership and assert it's legitimacy in recent events.
Finally, ICAO the ever present enduring arm of the UN (United Nations) lacks both the funding and the legitimacy to engender the high level political co-ordination needed to harness the synergy within the 54 African member states.
Unless, the African Ministers of Transport/ Aviation are able to get a grip on reality and move swiftly, I predict a more vindictive blacklist from the EU will soon emerge. Followed by increased co-operation among the foreign carriers (based on their IATA alliance memberships); a sort of re-partitioning of African aviation market, which will leave Africa's strong carriers most of which are IATA members ( SAA, Ethiopian, Kenya, Egytair, Royal air Maroc, Tunisair) in a quandary.
On the Nigerian scene, the local airlines are under the illusion that if they can undermine each other, they'll eliminate the competition, increase market share and control the (local) market. Not knowing that this will only weaken the entire group and make it easier for the real competition (coming soon) to waltz in without encountering any real resistance. The regulator (NCAA) has been deluded in thinking that by providing weak economic regulation, it is giving the airlines some flexibility, respite and maybe a lifeline, but it is actually delivering them hang-man's noose. News of their poor credit history and financial insolvency(tolerated by the NCAA) spreads beyond national borders and jeopardises the reputation of the whole group (Country)international circles. This becomes a real hindrance to taking advantage of the Cape Town convention and securing favourable lease and insurance conditions. It breeds complacency among the operators and leaves them operating without robust business plans or financial discipline. The end result is the obvious low life expectancy and high failure rates of airlines in the Country.
The major threat will present itself in the guise of a private-public-partnership where the funds and technical partner will originate from foreign entities ( with the view that it is required to secure favourable insurance premiums, maintenance contracts and unquestionable training standards), if the management control and MOU are not scrupulously checked against violating bi-laterals, cabotage or both, these new regional entrants will consummate strong commercial agreements with European and/or Middle East carriers (who currently have 70% share of the international traffic) to provide feeder- traffic. The local populace will be lured with new improved loyalty programmes. The regional market that is currently in the hands of the local industry will become dominated by external majors through this new unguarded regional PPP.
If the NCAA and the Nigerian government ( Aviation Ministry) have any inkling of perception they should:
1.Immediately commence the required level of economic regulation and shut any operators that are not able to operate within the financial guidelines.
2. Give the local industry 90 days to come up with sensible strategic consolidation options that will see the Nigerian aviation industry emerg with not more than 3 to 5 organised airlines.
3. Revisit and assess the need for the numerous private jets lurking around the country, their benefits or otherwise to the local industry.
Sometimes, it is easily forgotten that Kenya Airways is still 26% owned by KLM and Comair in South Africa is a Franchise of British airways. Then you will not wonder why the profits are repatriated outside the African continent rather than invested in the much needed infrastructure. A word of caution about our dear Chinese investors; they know how to play hard-ball even when they are smiling.
In the current economic environment, monopoly of the Africa's international traffic is not enough. this time, it'll start "Easy", but it's going to be regional and local, with a slight of hand. Watch this space.
Last edited by DRPAM007; 3rd Apr 2012 at 01:31.