— Jet fuel costs 35 percent more in Africa than they do globally—are among the difficulties African airlines confront, according to AFRAA Secretary General Abderahmane Berthe.
Why do airlines go bankrupt? is a question that is very important to ask, especially if you have witnessed an airline come and go without fulfilling or achieving its goal in the aviation space.
Issues that have led airlines to go bankrupt or even disappear are nothing new to the business. The aviation industry has already faced setbacks that have forced companies to declare bankruptcy or close. Due to problems, airlines have repeatedly been forced to file for bankruptcy or shut down. Many Nigerian carriers are theoretically insolvent.
The amount of debt that the airlines owe to different aviation organizations, such as the Nigerian Civil Aviation Authority (NCAA), the Federal Airports Authority of Nigeria (FAAN), the Nigerian Airspace Management Agency (NAMA), jet fuel marketers, and other vendors, is attested by how precariously the airlines are hanging.
Some of the airlines that used to operate in Nigeria are ADC Airlines, Afrijet Airlines, Air Midwest, Al-Dawood Air, Albarka Air, Associated Aviation, AirStream Aviation, and others.
There have been bankruptcy cases in the aviation business before. Unlike American Airlines, which filed for bankruptcy before joining forces with other airlines to recover, Nigerian airlines do not file for bankruptcy. Rather, the country’s airlines operate on a shoestring, rack up debt, exhibit disingenuous behavior, and then abruptly cease operations without prior notice to their patrons.
The Cost of Operating an Airline Leads to Losses
There have been many sad airlines that had to run at a loss and many of them are no longer in operation. There is an unending list of airlines that did not have as much luck.
Market players would eventually push a sector that has been known to be unprofitable for decades to go through a process of rationalization and consolidation in an effort to discover a more efficient method to conduct business.
However, in Nigeria and other African nations where consolidation is rare, a large number of unprofitable airlines continue to operate despite having incurred significant losses for years.
The forced closure of a severely unprofitable airline would cause hundreds of thousands of people to experience inconvenience and the loss of thousands of jobs.
Governments usually provide financial help to troubled airlines in order to keep them going because it is politically unpopular to shut them down. But in order to fill their extra capacity, struggling airlines sometimes resort to low fares, which negatively impacts even the most dominant companies in the market.
Jet fuel costs 35 percent more in Africa than they do globally—are among the difficulties African airlines confront, according to AFRAA Secretary General Abderahmane Berthe.
Why Nigerian Airlines Are Unable to Compete Successfully Abroad
Concerns over Nigerian airlines’ capacity to compete have grown over time. The explanation for this could be that Nigerian carriers view passenger volume of less than 12 million annually as delicate, tiny, and dispersed.
The unstable state in which the carriers find themselves has put their finances in jeopardy to the point of total collapse. The NCAA, the aviation regulator, was going to audit the carriers. Because of the move, certain airlines might not be able to achieve certain safety and financial requirements, which could result in their grounding.
After it was shockingly revealed that Dana Air had broken safety rules, the airline underwent a rigorous, make-or-break examination. Generally speaking, very few airline operators in Nigeria have any experience with commercial aviation.
They never made a business plan to support their activities; instead, it was stolen from those who came before them and submitted to NCAR (National Center for Atmospheric Research) in order to be awarded the AOC (Air Operator’s Certificate) and AOL (Air Operator’s Licence).
Because of this, rather than going after immediate money, the bulk of business owners in the industry just want to rape the market. The operators generally consist of a single owner, have subpar financial and managerial oversight, and have a habit of selling off, repurchasing, and reinvesting their aviation profits in other ventures.
Africa only makes up 3% of global air travel, according to the International Air Transport Association (IATA), while having 16% of the world’s population. However, the need is progressively growing.
In November 2019, a research by worldwide air travel consulting firm Sabre revealed that it increased by approximately 2 percent compared to the previous two years. According to a research done by the global aviation consulting business Sabre and released in November 2019, it increased by almost 2% over the two years prior. Additionally, the survey showed that if they have easy and unrestricted mobility, travelers are willing to spend up to 27% more on air travel.
The profitability of state airlines in Africa has dropped to unprecedented levels, despite the fact that all national carriers—South African Airways, Kenya Airways, RwandAir, Air Namibia, Air Zimbabwe, and Botswana Airways, among others—are suffering from massive losses.
The African continent is made up of 54 countries and 30.2 million square kilometers. This estimate reveals significant distances between capitals, countries, and trade centers. Africa is home to 1.1 billion people, or more than 16.75% of the world’s population. Interestingly, 16 out of 54 countries are landlocked, a market that has not yet been fully penetrated by commercial aircraft.
In conclusion, air travel is currently the indispensable instrument for promoting human mobility and trade, which is a calling moment. For every direct worker in the sector and in tourism that aviation has enabled, there are an additional 14.8 employment. Air linkages are necessary to enhance the higher facilitation of efficiency and competitiveness.
