Recession: Emirates, Kenya Airways suspend Abuja operations

Dubai-based Emirates Airlines and Kenya Airways have announced the suspension of their flights to the Nnamdi Azikiwe International Airport, Abuja, Nigeria’s capital, in the face of the economic downturn in the country, foreign exchange scarcity, and the shrinking passenger traffic on international routes.

Emirates, one of the biggest foreign airlines operating in Nigeria, said it would stop flights effective October 22, while the East African carrier, Kenya Airways, has also announced that it would suspend flights to and from Abuja with effect from November 15, 2016 as part of its restructuring and loss-saving measures.

In this regard, Emirates was said to have written to the Minister of State, Aviation, Senator Hadi Sirika, over its intention to stop flights from Abuja, indicating its inability to buy FX.

The letter was said to have been received by the Permanent Secretary, Ministry of Transportation.

The airline was reported to have said, if after weeks off the Abuja suspension, no drastic change happens, Emirates would also suspend Lagos operations indefinitely and with that exit the Nigerian market.

Emirates like many major international carriers operating in Nigeria, has huge sums for ticket sales with the banks, which it has not been able to repatriate.

About two months ago, foreign airlines’ funds trapped in the Central Bank of Nigeria (CBN) was put at $900 million but the federal government granted the airlines access to FX at a concessionary exchange rate to enable them repatriate about 50 per cent of their ticket sales.

Besides the huge funds trapped in Nigeria, the recession has led to a reduction in passenger traffic, forcing the foreign airlines to reassess the logistics of operating from Nigeria with low load factors.

Emirates Airline has also threatened to stop its flights into Africa if the economic downturn on the continent worsens.

The president of the airline, Tim Clark, stated this in Dubai yesterday at an International Air Transport Association (IATA) forum.

Clark said foreign airlines flying to Africa now refuel abroad because jet fuel supplies had become more expensive and scarce in some African countries.

“In certain African countries, the currencies have really gone down, so we’re reflecting on a number of these to look at where it’s just not worth for us to travel,” Clark said.

He added that Emirates’ load factor – a measure of capacity utitlisation – for the rest of 2016 and 2017, would probably be in the mid-70s to low-80s in percentage terms.

Clark, however, said there would be some peaks and troughs in that time.

About a month ago, Emirates started tanking fuel from Accra, Ghana because of the scarcity of jet fuel in Nigeria.

Other foreign carriers were also forced to refuel at different locations outside the country before flying to Nigeria.

When contacted, Emirates spokesperson for their Lagos office confirmed this development, stating: “Emirates can confirm that it’s suspending its four times weekly service between Abuja, Nigeria and Dubai with effect from 22nd October 2016.

“The decision was made after a review of the airline’s operations to ensure the best utilisation of its aircraft fleet for its overall business objectives. The airline continues to serve Nigeria with a daily flight to and from Lagos.”

In a related development, the federal government after the recent shake up at the Federal Airports Authority of Nigeria (FAAN), yesterday announced the appointment of two new directors to help the organisation realise its new set goals.

The new directors are Mrs. Nike Aboderin, who was made Director, Finance and Accounts (DFA), and Mr. Sadiku Abdulkadir Rafindadi, appointed as Director, Commercial and Business Development (DCBD).

The agency said Mrs. Aboderin is a Fellow of the Chartered Institute of Bankers of Nigeria (FCIB). She holds an M.Sc degree in Banking and Finance from the University of Lagos.

“Mrs. Aboderin possesses over 23 years experience in the financial services industry, which has exposed her to both public and private exploits at different institutions including multinationals.

“She is also an Advanced Management Programme (AMP) graduate of the Lagos Business School.

The International Bureau of Aviation Group has completed a close study of the developing opportunities arising from the exponential growth and profit reported within the African aviation industry.

Africa represents 20, 2% of earths land and, with a population set to double by 2036, aircraft manufacturers have highlighted Africa as a key growth market, thanks to deregulation in the aviation industry, economic and demographic growth.

Although aviation is now forming an essential part of the continents development, the IBA Group (IBA) insists careful consideration must be given to its fundamental infrastructure.

Phil Seymour, IBAs president and COO comments: “The investment opportunities and anticipated growth expected from African aviation must not overlook imperative infrastructure improvements which need to take place. Airports, air traffic control and the regulatory authorities of existing and developing airlines will need to improve to international standards in order to compete successfully”.

IBA has pointed out, too, that the prospects for air transport to drive economic and social development in Africa will need to strike a fine balance between available opportunities and their associated challenges. Recent developing ventures have struggled to overcome a range of impediments allied with the complex legal and political issues which plaque much of the continent.

Seymour added: “Virgin Nigeria and Fast jets African plans have both faltered due to the intricate and widespread governmental disputes. Africa has the potential to emerge as a global economic power, but will need to harness the opportunities in order to capitalize on this.”

The IBA study shows that the high-cost operating environment means the continents airlines are prevented from forging the important role aviation connectivity and economic growth could play throughout Africa. Fuel costs are frequently 20% more expensive in Africa than the global average, while taxation charges make connecting travel onerous to the consumer.

According to IBAs database ,there are currently 1014 Western built commercial aircraft currently in operation in Africa among 187 operators .Boeing has forecast that Africa will require 900 new aircraft over the next 20 years .Using these aircraft ,aviation will enable global connectivity ,in turn integrating the 54 national economies of Africa to the rest of the world.

Fundamental to the growth of African aviation is the commitment of governments to actively solve corruption on a national scale, combined with effective harnessing of investment opportunities, allowing airlines to follow the solid reputation of South Africa Airways, Ethiopian Airlines and Kenya Airways.

Seymour added: “Until more Africa countries embrace the ICAO airworthiness standards and invest in the best quality ad visors, the growth forecasts will not be met. While new aircraft are efficient, they also tie up hard to find capital, reducing profit required for growth.

“Africa needs investment in the simple things, such as experienced pilots and technicians, as well as the structural and more expensive investments in airport and air traffic control systems,” he concluded.

Agenda for Cooperation between Airlines and Airports

The International Air Transport Association (IATA) has called for a unified agenda between airlines and airports to address the mutual challenges of growth and sustainability.

“Airports are airlines’ closest partners. Neither of us could exist without the other,” said Tony Tyler, IATA Director General and CEO.

Speaking at the Airports Council International s (ACI) annual congress in Istanbul, Turkey, Tyler noted that major investments in infrastructure would be needed to meet the global demand for air connectivity which, he said, was growing at about 5% annually.

Meeting these requirements efficiently would require close cooperation.

Over the long term, airline profit margins had been insufficient to cover their cost of capital and this also had been the case for some airports, he said, adding: “Neither partner can afford poorly-thought out and overly expensive infrastructure development.

“To avoid this, we must work together in a collaborative process based upon the basic principles laid down by the International Civil Aviation Organization (ICAO) which include consultation with airport users, transparency, on-discrimination ,cost-based charges, and strict safeguards on pre-financing of future infrastructure.”

Tyler also cautioned that “decades of practical experience and longstanding and credible economic theory have shown that most airports have substantial market power.

“Strong independent regulation is required to provide the cost discipline that otherwise would be imposed by the free market.

“The ICAO principles offer sufficient flexibility for regulators to apply various levels of economic oversight where market forces do exist.”

Tyler proposed a unified agenda and partnership between airlines and airports based on a mutual understanding that long-term sustainability was an issue for both airlines and airports; recognition that the solution to common challenges was not to take each other in an “Anaconda-like grip” to squeeze out every last penny from one another; working together to help airports find mutually beneficial efficiencies; seeking opportunities for cooperation to enable process improvements and new value added commercial opportunities such as through providing universal access to Wi-Fi ,and scoping out potential for joint business development.

“An agenda of cooperation does not mean that we will agree in every specific instance. But it does mean that we recognize we will achieve far more together than each could on our own,” said Tyler.

Anthony A Juma is the Editor and Director Commercial & Flights Operations at Wings Over Africa Aviation Limited. This is an Air Charter Company that specializes on Air News The Growth of African Aviation. The website has guided thousands of travelers to achieve their dream holiday. For more information and guidance, visit the site at http://www.wingsoverafrica-aviation.com/index.php/flight-news.html

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