Global airlines fancy profits in 2023, but outlook gloomy for Nigerian carriers

BY MADUABUCHI EFEGADI

As IATA revises 2022‭ ‬loss to‭ $‬9.7bn from‭ $‬42.1bn

Global airlines are expected to post a much lower aggregate loss this 2022, a year already in H2. The International Air Transport Association (IATA) revised the loss down to $9.7 billion, a sharp improvement from an earlier $42.1 billion, with global carriers expected to begin to see profit by 2023.

According to IATA, forecast yields, a proxy for airfares, will rise by 5.6 percent this year globally.

However, some aviation industry experts who spoke with Business A.M. are doubtful if the expected global positive scenario will rub off on Nigerian carriers, who are highly indebted and struggling with cost pressures from workers’ salaries, rising fuel prices –Jet A1–, rising aircraft maintenance costs, amid the worst inflation in many years, and a depreciated naira. The domestic industry has thus had to raise fares and also suffered a series of flight hiccups.

On several occasions, domestic carriers have threatened to withdraw services due to rising Jet A1 fuel costs. The high fares, increasing worries over the state of the economy, as well as insecurity weigh heavily on airline recovery in Nigeria, according to one expert who spoke from Port Harcourt, Rivers State.

Last month, Airline Operators of Nigeria (AON), the carriers’ union in the country, warned of major flight disruptions in the aviation sector due to massive scarcity of Jet A1. It was the second time in over two months that AON was warning of the potential flight disruptions.

Worldwide, the average price of jet fuel is about $4.15 per gallon, or about 149 percent more than a year ago, according to IATA. But in Nigeria, it keeps getting higher. It went for as high as $129.2 as of 06 August, according to data from Jet A1 Fuel.com.

A new report on the global aviation industry from McKinsey indicated that travellers are taking to the skies again, though on pent-up demand, and showed that global airlines may just about to see a lowering of losses this year, compared to the huge loss figure of over $42 billion recorded in 2021.

One air travel analyst said although customers were eager to travel, and willing to pay more as a result, airline companies were expressing concerns that the present air travel demand may just diminish as airlines costs continue to rise globally, but more especially in Nigeria, which grapples further with graver economic concerns.

The analyst listed high inflation in the country and interest rate rises, both of which have been biting. According to him, there are increasing queries over whether the present appetite for travel in Nigeria was sustainable.

As of today, earnings by air carriers both globally and in Nigeria remain abysmally short of pre-pandemic levels. Highly indebted carriers in the country are grappling with fresh challenges from rising fuel costs and high wage bills, which they have already passed on to consumers in the form of higher fares. On the global stage, the picture is quite different.

Marie Owens Thomsen, IATA chief economist, told Reuters recently that, “we have a certain degree of insensitivity to prices this year,” citing high household savings rates during the Covid-19 pandemic and pent-up travel demand.

“That could fade into next year,” the IATA senior personnel said.

Air travel users and consumers in many countries, with Nigeria hardest-hit, are now facing higher prices for everyday items such as groceries and gasoline that are rising faster than wages.

But globally, to date, this has not hit the appetite for travel, with many having saved up during the pandemic when many borders were closed and holidays were postponed, according to a survey by McKinsey.