Aviation Industry: Exploring Opportunities In Cargo Freight

By Ayoola Olaitan

Having suffered losses amounting to $700million following COVID-19 pandemic, Nigeria’s aviation sector, especially airlines would have to explore alternative sources of revenue when the air travel ban is lifted.

With airliners going down as the losers as the past three months has seen no passenger travel as a result of the ban to curb spread of COVID-19, a lot of pressure has been placed on the Central Bank of Nigeria (CBN) to provide some fiscal palliatives but how sustainable would this be? How much can compensate for the airliners’ lack of activity for three months? Does the government or CBN have such funds available to disburse?

Noting that the nation’s major revenue spinner ‘oil’ has also been grossly affected by the pandemic, the realistic approach for Nigerian airlines would be to think out of the box and consider alternative sources of income.

One area that has come up for consideration is air freight business. While the COVID-19 pandemic would see few people travel for fear of the virus and lack of fiscal resources, cargoes would always be available at the seaports and airliners can target some of these cargoes and earn revenue.

The situation the aviation industry has found itself calls for strategic thinking to seek alternative sources of revenue for the industry as survival depends on the revenue for both airlines and the government agencies.

Although there would be challenges in converting passenger planes into cargo planes, the Secretary General of the Aviation Safety Round Table Initiative and Chief Executive Officer, Centurion Securities, Group Captain John Ojikutu (Rtd) has admonished airlines and the industry look out for opportunities in cargo business as key for their survival.

Ojikutu opined that every airline must begin to look at opportunities in cargo transportation because the passengers won’t be there when the ban is lifted.

According to him, about 100million metric tonnes pass through the seaports unlike the airport that records 40,000 metric tonnes.

“Today from FAAN’s record the cargo traffic is about 40,000 metric tonnes compared to the sea ports. Why can’t the airlines tap into that sector? They don’t need to look for one percent because only 0.005% is about 500,000 metric tonnes. This will change cargo business at the airports”

“If airlines look into the road transportation cargoes and tap into it by 0.005%, they would multiply their earnings in air cargo freight by over 10 times. They will make a minimum 50 billion every year which automatically translates into about 25% of what they were making before the pandemic. This venture would reduce the effect of the COVID-19 on their businesses” he said.

Meanwhile, the Minister of Aviation, Hadi Sirika also recently stressed that airports in the country need to be viable and activities need to be created to support such airports.

Sirika observed that an airport is no longer a place to land and take off and with the recent loss in revenue, new business opportunities must be looked into by all players in the industry.

The Aviation Minister recalls an insightful lecture to buttress this, he said: “In 2006, Late Musa Yar’Adua was the Governor of Katsina and he called me to deliver a lecture on the economy of Katsina. He gave me tourism, agriculture and transportation to speak on, I went there with only 3 slides and I said to him that there are 37 dams in the state. Why don’t you produce chili tomatoes and onions and use your airport to export them so that in five hours they will be in London, Paris, etc.”

“I went further to say a handful of tomatoes is 10 pounds in England and a whole basket then was N200. You make foreign exchange as airplanes are going and coming, you begin to service them from Katsina. We must deliberately create activities around the airports and that is why we are considering the concession. We won’t just handover the airport; we would analyze and look at the opportunities around the airport”.

A sustainable approach for airlines at such a time as this could be to key into freight businesses, however, this development would require thorough planning amid the uncertainty facing passenger traffic in the air travel sector.

Speaking from the point of view of a freight forwarder, the National President of Africa Association of Professional Freight Forwarders and Logistics of Nigeria (APFFLON), Mr. Frank Ogunojemite also admonished airlines and ground handling companies to look into improving cargo businesses as alternative to help the industry recover from the losses.

However, airlines should evaluate ways that they can expand into cargo services to maximize revenue generation.

He stressed that airports and airlines must recognize that cargoes will represent a much more important revenue opportunity, going forward.

“As a priority, aviation agencies, airlines and ground handling companies should work to ensure that cargo is handled and processed with the highest level of quality, transparency, speed and efficiency that the markets demand to encourage its usage. Also, treat cargo as the strategic asset so as to fully realize the revenue benefits that cargo has to offer,” he said.

He, however, noted that there was a dire need to engage airlines, freight forwarders and other major stakeholders like manufacturers, medical practitioners who need to take delivery of their cargoes expeditiously to utilize airplanes.

About 91,380 aviation workers are at risk of losing their jobs following the rising cases of the epidemic coronavirus that hit the country and crippled the aviation sector with the ban on flight operations.

According to the International Air Transport Association (IATA), the effect of the pandemic has led to colossal revenue losses in Nigeria with about 91,380 jobs in the nation’s aviation industry on the line.

Airlines are fighting for survival in every corner of the world as air travel restrictions and evaporating demand mean that aside from the few cargoes, there is almost no passenger business except for evacuation of citizens done by several governments.

IATA noted that failure of governments to address the aviation sector crisis may lead to more perilous economic times, adding that airlines have demonstrated their value in economic and social development and governments needed to prioritize them with significant rescue packages.

According to IATA specific analysis of the effects of COVID-19 on airline operations, Nigeria would record 3.5 million fewer passengers, resulting in a $ 0.76billion revenue loss, risking 91,380 jobs and $0.65billion in contribution to the country’s economy.

IATA has called for an urgent action from the government to provide financial relief to airlines as the latest scenario for potential revenue loss by carriers, especially in Africa, reached $4billion.

Nevertheless, the airlines may have their fate in their hands if they become innovative.

While aviation continues to maintain its critical role as it is not just a means of transportation, but actually an economic business, which has equally supported the fight against COVID-19, the fate of the sector may lie in the choices airlines make or don’t make.

It will be difficult to foresee passenger airlines returning to profitable operations anytime soon.  Airlines losses would be a great threat to the industry as 80 percent of revenue generated by government agencies are solely dependent on passenger airlines.

With passengers not willing to fly for safety and destination closure it would be a great challenge for the industry to thrive during this period.

Air freight might be the savior of Nigeria’s ailing air travel sector.