Nigeria’s aviation industry is expected to experience stronger passenger traffic in the coming months, but airlines face mounting operational challenges from persistently high jet fuel prices, peak rainy season disruptions and climate-related risks, according to the latest Financial Derivatives Company (FDC) economic outlook.
The report noted that global air travel is gradually recovering following easing geopolitical tensions in the Middle East.
Global passenger traffic contracted by 1.7 per cent year-on-year in June, an improvement from the 2.2 per cent decline recorded in May, as aviation activity in the Middle East began recovering after the Iran ceasefire and the easing of flight restrictions.
African airlines remained the world’s strongest-performing carriers, posting 3.8 per cent annual passenger growth during the period.
Despite the improving demand outlook, the report warned that soaring jet fuel costs continue to threaten airline profitability.
According to FDC, fuel remains one of the largest and most volatile components of airline operating costs, placing particular pressure on low-cost carriers.
Budget airlines, it said, are increasingly being forced to raise ticket prices, impose fuel surcharges, rationalise routes and reduce services to less profitable destinations in order to remain financially viable.
The report observed that as fares rise, the traditional pricing advantage enjoyed by budget airlines over full-service carriers is narrowing, potentially discouraging price-sensitive travellers.
To cope with the higher operating environment, airlines worldwide are investing in more fuel-efficient aircraft such as the Airbus A220 and Embraer E2, improving flight planning, reducing aircraft weight and expanding ancillary revenue streams through baggage, seat selection and onboard service charges.
Aircraft leasing is also becoming increasingly attractive because it enables airlines to modernise their fleets without committing large amounts of capital, while transferring residual-value risks to lessors and providing greater operational flexibility.
For Nigeria, the report identified several positive industry developments.
ValueJet, Ibom Air and Green Africa were identified as the country’s strongest performers on on-time operations, while Enugu Airport has been concessioned under a 30-year public-private partnership to Aero Alliance Limited.
Air Peace has also continued its regional expansion by opening new routes to Conakry, Bamako, Douala and Libreville.
However, climate change is emerging as a major business risk.
FDC warned that flooding is reducing both domestic and international travel by damaging hotels and tourism infrastructure, disrupting road access, forcing cancellation of events and lowering visitor spending.
The resulting decline in occupancy rates, hospitality revenues, employment and foreign exchange earnings could further weaken tourism-related aviation demand.
To reduce the sector’s vulnerability, the report recommended improved airport drainage systems, investment in advanced weather forecasting, stronger emergency response capabilities, climate-resilient transport infrastructure and closer collaboration among government agencies, airlines and tourism operators.
Looking ahead, FDC expects back-to-school travel to support passenger volumes during the third quarter.
However, it warned that the peak rainy season is likely to result in more delays, cancellations and operational disruptions, while persistently high jet fuel prices could keep airfares elevated and dampen leisure travel demand.
