Tuesday, October05, 2021 / 10:35 AM / by FBNQuest Research / Header ImageCredit: Life Science

Datafrom the NBS compiled from contributions by the Federal Airports Authority ofNigeria (FAAN) show that total passenger traffic through Nigeria's airports inQ2 '21 improved by c.73% y/y and 9% q/q to c. 3.2 million. Supportive data fromthe national accounts show that air travel grew by 4.98% in Q2 '21. Despite theimpressive y/y increase, Nigeria's aviation sector is still recovering, withoverall passenger traffic still below pre-pandemic levels, as shown in thechart below. While domestic air travel appears to have rebounded significantly,with a passenger load factor of around 80% of pre-pandemic levels, foreign airtraffic remains low, at roughly 40% of pre-pandemic levels.

Thetrend in Nigeria mirrors that of other countries, where strong domestic traveldemand has helped to boost air traffic volume. As with most other nations,recovery in Nigeria's international air traffic has been slow due to mobilitylimitations (re)imposed by various governments across the world, particularlywith the emergence of new strains of the COVID-19 virus.

Followingthe collapse of global air travel in 2020, most airlines were only able to remainafloat thanks to critical life support from their governments, totaling c.USD243bn (or c.0.3% of global GDP for FY '20), according to an industry studypublished by the International Air Transport Association (IATA).

Incomparison, the total financial aid announced by the federal government ismerely 0.02% of the country's GDP or NGN27bn. The Nigerian Civil AviationAuthority (NCAA) estimates that the pandemic has cost the country's airlineindustry c. USD1bn.

Furthermore,Nigerian airlines have had to cope with the fx liquidity constraints, which hasnegatively impacted their operations, because service parts and maintenancechecks are priced in foreign currency. We can only infer that Nigerian airlinesare still losing money based on the lower load factors and issues mentionedabove.

Accordingto IATA, international air travel is expected to improve in FY '22. However,the recovery will be uneven. Also, countries with large domestic markets,faster vaccination rollout, and less restrictive government policies willrecover faster than the others.

ForNigeria, the pace of vaccinations (less than 5% of the population has beenvaccinated) will determine the recovery path for foreign travel, and thesector's full recovery.

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