Airline Profitability in Nigeria

Airline Profitability in NIGERA In a 2008 interview with VIA Magazine, Richard Branson, founder of Virgin Airways, said, “I've always said the easiest way to become a millionaire is to start out a billionaire then go into the airline business.” The airline business has been somewhat of a mixed bag; that is until 2010 when airlines were at their most profitable. According to the Wall Street Journal, since 1978 airlines have experienced lagging profits, but in 2010 they posted half year profits which exceeded previous years’ gains. The journey to profitability has seen the collapse of carriers, whether through bankruptcy or merger, and the paring of flight schedules to curb excess capacity. By getting supply close to the level of demand, airlines can charge enough to make a profit on most flights. An industry long regarded as “unprofitable,” appeared to be regaining its vitality. According to the International Aviation Transport Association (IATA), airline revenues went from $560bn in 2008 to $593bn in 2010, but that was not before it dropped to $545bn in 2009. Making $15.8 billion in 2010, the industry garnered a measly 2.9% net profit margin. 2011 is not looking any better as IATA expects net profit margins to fall to 1.2% and projects profits to fall to $4.9 billion on revenues of $632 billion(a net margin of just 0.8%) in 2012. Fuel costs continue to be a major component of any airline business model, forming a significant portion of an airline’s operating costs. In 2010, according to IATA, fuel expenses accounted for roughly 29% of the operational expenses of airlines globally. Nigerian airline operators haven’t fared any better with fuel accounting for 40% of total costs. The world's aviation industry regulator, the International Civil Aviation Organization (ICAO), opined “there are too many taxes, levies and charges in Nigeria's aviation industry, is a reality that must be redressed to save the sector from the current high rate