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Hurdles for Local Carriers as Foreign Airlines Dominate Lagos

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Foreign Airlines
  • 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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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OPEC Agrees to Increase Oil Supply by 500,000 Barrels Per Day Ahead of Surge in Demand

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Nigeria's economic Productivity

OPEC and allies finally agreed to ease their 7.7 million barrels per day production cut by 500,000 barrels per day starting from January 2021.

This will now bring the oil cartel’s total production cuts to 7.2 million barrels per day starting from next year.

Oil prices rose after the news as the market believed the approval of Pfizer COVID-19 in the United Kingdom will kick start a series of approvals and helped restore confidence, increase business activities and demand for the commodity across the globe.

After the outcome of the meeting was made public on Thursday, Brent Crude Oil against which Nigerian oil is priced gained 1.35 percent on Friday after gaining 1.4 percent on Thursday to $49.37 per barrel at 11.35 am Nigerian time on Friday.

The US West Texas Intermediate gained 1.29 percent to $46.23 barrel on Friday.

500,000 bpd from January is not the nightmare scenario that the market feared, but it is not what was really expected weeks ago,” said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu. “Markets are now reacting positively and prices are recording a small increase as 500,000 of extra supply is not deadly for balances,” she added.

Investors King increased business sentiment in the energy sector to boost investment, increase activity in the sector and most important improve crude oil demand enough to accommodate the 500,000 barrels per day extra that would be hitting the global market starting from January.

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Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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Oil

The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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