The second wave of coronavirus could make a return to profitability by airlines, especially in Nigeria, extremely difficult.
A start-up like Cally Air, an airline to be financed by the Cross Rivers State Government, United Nigeria Airlines, and Green Africa Airlines may not solve the problem of the sector. Cally Air is a proposed Nigerian joint venture to be based at Calabar Airport. The start-up is expected to be bankrolled by the Cross River State Government.
United Nigeria is a start-up carrier to be based at Enugu Akanu Ibiam International Airport. The start-up airline which already has its Air Operator Certificate (AOC) aims to commence domestic services in the first quarter of 2021. The airline plans to operate a fleet of four Embraer E145s initially with services from Enugu to Port Harcourt, Abuja, and Lagos.
The launch date for Nigerian start-up Green Africa Airways (Q9) has been delayed to early 2021. The carrier has been issued an AOC. Green Africa, in a statement, said it had received its Air Transport License (ATL) from the Nigerian government and had signed a strategic partnership with Nigeria’s First City Monument Bank (FCMB), which gives the airline access to short- to medium-term liquidity.
Experts are of the view that the coming of the three airlines may be at the wrong time because of the shrinking travel market, recession, and access to foreign exchange.
Chief Executive Officer, Aglow Aviation Services, Mr. Tayo Ojuri told AirInsight that aviation is driven by disposable income, adding that the sector is not likely to rebound until 2023. The second wave of COVID-19 he stated would disrupt travel as training, meetings and other forms of businesses will be shut in the next three months. “The country is in recession and we are not likely to get out of recession until the second quarter of 2021. The airlines are not going to have passengers come next year after the peak Christmas season. Aviation is driven by disposable income and a lot of people do not have that income. We have 70 percent of business travelers who make the bulk of air travel in the country. What we have left is leisure travel. Leisure travel is not a driver for the airline business. I honestly don’t know why they are coming now except they have a different business model that is sustainable. This is a perilous time for them to think of coming in. What they need to do is to be creative and bring something new on board and not the acquisition of B737 aircraft. Foreign exchange is high. It is a very herculean task for them. I don’t think it is the right time to start. They may learn their lesson the hard way.”
Managing Director of Aero Contractors, Capt. Ado Sanusi lamented that the country is in recession and a very difficult time for airlines and new entrants. “In 2021, it will continue like this but I believe that there would be some new entrants and there would be some mergers and probably we will stabilize with the vaccines that are coming. The stabilization will come a little faster than you think. But the effect of COVID-19 will be here like for five or ten years but we will see probably some mergers and some entrants into the market.”
By the end of June, it was reported that airlines had only about eight and a half months of cash left (as a median) and so cash burn will be a critical factor for airline survivability moving into 2021. The International Air Transport Association (IATA) is forecasting that the industry as a whole is projected to turn cash positive in late 2021.