- Hurdles for Local Carriers as Foreign Airlines Dominate Lagos
Local carriers operating on the international route are faced with fresh hurdles as fellow African airlines now have dominance in the Lagos market.
The entry of the likes of RwandAir, Asky and Ethiopian airlines into the Lagos market, the heart of air travel in Nigeria, opens Arik Air, Air Peace and Med-View to competition right at their hub.
While fear has since gripped the local airlines over lack of competitive advantage, Nigerian passengers may witness great times enjoying more attractive offers, better onboard services and competitive fares from the foreign airlines.
Some experts have, however, faulted the development, describing it as indicative of government’s failure to protect its own flag carriers, airlines and the market.
The Guardian learnt at the weekend that the patronage of some local flights to Accra and South African routes has slightly dipped with the attendant drop in revenue in the last one week. The hint was given at a time International Air Transport Association (IATA) recorded a 7.1 per cent traffic growth among African carriers, compared to the traffic a year ago.
It was learnt that the national carrier of Rwanda, RwandAir, last month gained the approval of the Ministry of Aviation in Nigeria to ply Lagos-Accra route on a direct flight. The approval widens competition with Arik Air, Med-View, Air Peace and Ghana-based Africa World Airlines (AWA) on the route.
The fastest growing carrier in East Africa said the new addition was part of its consolidation on the African market.
RwandAir Country Manager, Nigeria, Ibiyemi Odusi, said the direct flight between the two West African cities was a result of the “fifth freedom right” the carrier secured from the Nigerian government.
The “fifth freedom of the air” is the right or privilege, in respect of scheduled international air services, granted by one state to another state to put down and to take on, in the territory of the first state, traffic coming from or going to a third state. The rights were packaged in the United States several decades ago.
RwandAir has been running the Lagos-Accra flights since March 23, 2017, creating more travel options for passengers on the route with the state-of-the-art Airbus 330 and Boeing 737.
Similarly, Asky Airlines has commenced its non-stop flight on the Lagos-Lome-Johannesburg route, giving already troubled Arik Air and South African Airways a challenge.
The Lome-based airlines in Togo have Ethiopian Airlines as its parent company and partner. Ethiopian Airlines, with at least 16, 787 dream liners, uses the Lome airport as transit hub for its Lagos-U.S. flights.
A keen observer of the industry, Group Captain John Ojikutu (rtd), was alarmed by the development, saying that the government should investigate officials that signed such agreements.
Ojikutu said: “RwandaAir flies direct Lagos to Accra! Who signed this patrimony of ours out again in the name of commercial agreements? How can the domestic airlines develop their capacities when the markets on the national exclusive routes are being mortgaged to foreign airlines?”
The Nigerian Civil Aviation Authority (NCAA) explained that it was a legitimate commercial agreement that would give government more revenue.
The spokesman of the apex regulatory body, Sam Adurogboye, said there was nothing untoward about the approval, claiming it was within the ambit of aviation regulations.
Adurogboye said the commercial agreement was signed with some conditions, which include certain royalty that the airlines must pay.
On its effect on the local airlines, he said that they were not running the routes as they should and needed to put their houses in order instead of complaining.
The ability of local airlines to withstand competitions with African leading carriers on the local route, however, worries more industry watchers.
The Chairman of Airlines Operators of Nigeria (AON), Capt. Nogie Meggison, said such agreements were possible where officials did not put Nigeria first.
He said: “Nobody does fifth freedom anymore. It is like giving your own away to develop others. Those countries are developing their economies at our own expense, just because our own people fail to put Nigeria first to grow our local airlines.
“Cape Town Convention was signed in South Africa, but South Africa is not a signatory to the agreement. You don’t operate an open sky when you are the one that has the advantage. The people struggling to sign open skies have just one airport, compare to yours that is 22. Seventy per cent of West Africans reside in Nigeria. So, why are you throwing yourself and your economy to others to prey on?”
Other experts have little sympathy for the local airlines. A source, who craved anonymity, said they got what they deserved in the matter, given their usual habit of blocking other airlines from plying the route they are not ready to take.
“Nigeria currently has many Bilateral Air Service Agreements (BASA) that are open to airlines to explore. Besides, Yamoussoukro open-sky agreement is there for African airlines to freely explore and Nigeria signed into it. Why are our airlines not exploring it?
“They don’t want anyone to call them weak, yet they are not ready to do anything. They are the same group of people that will be making noise that government is giving their market away. But the world has changed and far gone is the era of holding tightly to a market, that it is all yours. The passengers want options, authorities want streams of income and the market is ready for multiple players that are serious and ready,” the top official said.
The President of the ART, Gbenga Olowo, earlier raised concern that the domestic airlines had consistently rejected the option of merger and partnership to come out stronger and be in a position to compete with the foreign carriers dominating the African airspace.
Oil Prices Recover Slightly Amidst Demand Concerns in U.S. and China
Oil Prices Continue Slide as Market Skepticism Grows Over OPEC+ Cuts
Global oil markets witnessed a continued decline on Wednesday as investors assessed the impact of extended OPEC+ cuts against a backdrop of diminishing demand prospects in China.
Brent crude oil, the international benchmark for Nigerian crude oil, declined by 63 cents to $76.57 a barrel while U.S. WTI crude oil lost 58 cents to $71.74 a barrel.
Last week, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to maintain voluntary output cuts of approximately 2.2 million barrels per day through the first quarter of 2024.
Despite this effort to tighten supply, market sentiment remains unresponsive.
“The decision to further reduce output from January failed to stimulate the market, and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” noted PVM analyst Tamas Varga.
Adding to the unease, Saudi Arabia’s decision to cut its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months raises concerns about the struggling demand for oil.
Amid the market turmoil, concerns over China’s economic health cast a shadow, potentially limiting fuel demand in the world’s second-largest oil consumer.
Moody’s recent decision to lower China’s A1 rating outlook from stable to negative further contributes to the apprehension.
Analysts will closely watch China’s preliminary trade data, including crude oil import figures, set to be released on Thursday.
The outcome will provide insights into the trajectory of China’s refinery runs, with expectations leaning towards a decline in November.
Russian President Vladimir Putin’s diplomatic visit to the United Arab Emirates and Saudi Arabia has added an extra layer of complexity to the oil market dynamics.
Discussions centered around the cooperation between Russia, the UAE, and OPEC+ in major oil and gas projects, highlighting the intricate geopolitical factors influencing oil prices.
U.S. Crude Production Hits Another Record, Posing Challenges for OPEC
U.S. crude oil production reached a new record in September, surging by 224,000 barrels per day to 13.24 million barrels per day.
The U.S. Energy Information Administration reported a consecutive monthly increase, adding 342,000 barrels per day over the previous three months, marking an annualized growth rate of 11%.
The surge in domestic production has led to a buildup of crude inventories and a softening of prices, challenging OPEC⁺ efforts to stabilize the market.
Despite a decrease in the number of active drilling rigs over the past year, U.S. production continues to rise.
This growth is attributed to enhanced drilling efficiency, with producers focusing on promising sites and drilling longer horizontal well sections to maximize contact with oil-bearing rock.
While OPEC⁺ production cuts have stabilized prices at relatively high levels, U.S. producers are benefiting from this stability.
The current strategy seems to embrace non-OPEC non-shale (NONS) producers, similar to how North Sea producers did in the 1980s.
Saudi Arabia, along with its OPEC⁺ partners, is resuming its role as a swing producer, balancing the market by adjusting its output.
Despite OPEC’s inability to formally collaborate with U.S. shale producers due to antitrust laws, efforts are made to include other NONS producers like Brazil in the coordination system.
This outreach aligns with the historical pattern of embracing rival producers to maintain control over a significant share of global production.
In contrast, U.S. gas production hit a seasonal record high in September, reaching 3,126 billion cubic feet.
However, unlike crude, there are signs that gas production growth is slowing due to very low prices and the absence of a swing producer.
Gas production increased by only 1.8% in September 2023 compared to the same month the previous year.
While the gas market is in the process of rebalancing, excess inventories may persist, keeping prices low.
The impact of a strengthening El Niño in the central and eastern Pacific Ocean could further influence temperatures and reduce nationwide heating demand, impacting gas prices in the coming months.
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