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Under-utilization of Aircraft Capacity in Nigeria: How it affect Airlines Revenue

Shadrach Swante Kambai

THERE is generally gross under-utilization of aircraft capacity which has great negative implication on the profitability of airlines in Nigeria. It’s an open secret that the number of seat occupied in a commercial flight is directly related to the profitability of that flight.

With the addition of four (4) new airlines, competition for passengers is inevitable therefore the need for airlines to ensure effective utilization of their capacity cannot be over emphasis because the unusual increase in demand for seats in December will meet adequate supply but what will now happen in January when demand will drop sharply while operating cost remain the same.

This article therefore seek to analyze: The paradoxical relationship between aircraft movement and volume of passengers in Nigeria, To compare the operating cost of airlines and the prevailing flight traffic.

The infographic above reveals that the industry recorded more aircraft movement in January but with less volume of passengers. For the purpose of this article I am making the following assumptions Average operating cost of $5352 per block hour (Source: 2018 Form 41, Schedules P-5.1, P-5.2 and T-100)

  • Every flight is equal to 1 block hour
  • Every flight has 100 seating capacity
  • 20% of total flights are private executive jets.

Now in December 16, 448 flights moved 988,619 passengers while in January 18,787 flights moved 852,444 volume of passengers, this means there was excess 2339 flights which is equal to 15% increase of aircraft movements in January but with 136175 less passengers than December.

In view of the above assumptions, we will have 1872 excess domestic flights in January at a total value of (1872 * $5352 = $10,018,944 USD) operating cost, and this implies $10,018,944 USD of gains made in December was lost in January operating 1872 flights that added no profit to the airlines.

Also looking at the average seat occupied per aircraft based on the above figures, there is an average of 60 passengers per flight in December and 45 passengers per flight in January, this reveal that there is about 40% under-utilization of aircraft capacity in December and 55% in January which means the aviation industry lost 15% seating capacity in January but operated 2339 more flights than in December.

Finally I suggest adoption of proactive Operational Intelligence Measures by airlines such as: Increasing your number of flights by 15% in December to take advantage of the unutilized seat capacity while maintain average price of tickets and reducing your number of flights by 15% in January to avoid incurring lost due operating cost without reciprocal increase in passengers, instead of crashing down ticket price to a ridiculous amount.

Secondly, effective collaboration and interlining by airlines to sells services to a customer that are provided by another airline will help airlines reduce cost by merging passengers in one flight instead operating two flights with 45 seats occupied each, one flight can accommodate 90 passengers at once like the partnership signed recently between Dana Airlines Limited and Ibom air.

Finally, Aircraft type’s variation and Leasing will also help significantly because an airline operating smaller planes can lease bigger planes in to use only in the peak period like in this case from late November to December.

Now as an Aviation Business Developer, I will advise CEOs and COOs of airlines in Nigeria, Instead of crashing the price of tickets in January, I will rather increase my frequency by 15% in December at an average market price because it will reduce operational cost in January by reducing frequency seeing that increasing flights in January those not translate to increase in profit.

Though this data is for 2015 alone, the pattern will still remain the same or even get worse with the coming of 4 additional airlines in the industry.

 

 Mr. Shadrach Swante Kambai

Aviation Business Developer, Flight Dispatcher, Data Analyst

Email: [email protected]; (+234) 07030801912

 

About NigerianFlightDeck

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Nigerianflightdeck is an online news and magazine platform reporting business stories with a bias for aviation and travel. It is borne out of the intention to inform, educate as well as alter perceptions with balanced reportage.

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