The fall in oil price, a weakened currency, stringent monetary policies, and consequently a lack of foreign exchange and currencies are factors responsible for what could be termed a “mass withdrawal” of airlines from Nigeria’s aviation market a few months ago.
The current economic climate, notwithstanding, Nigeria’s largest airline operator, Arik Air, is making expansion plans with the intent to exploit the gaps created by other departed carriers in the market. Chris Ndulue, the CEO of Arik Air made this known in an interview with Reuters.
According to him, the airline will first make a private placement to get new shareholders on board and then make an initial public offer a year or 18 months down the line. “We are looking at something in the neighbourhood of $1 billion for both private placement and IPO,” Ndulue said.
As part of the expansion, Arik would increase flight frequency to New York, from three times a week to daily. The airline would also add Rome and Paris to its international flight routes to help generate foreign currency.
The plunging naira has resulted in the dearth of foreign exchange, which in turn has affected the cost of operations for so many carriers, resulting in increased air fares.
“The biggest problem now is the foreign exchange issues. A lot of things are imported, a lot of services are imported we depend so much on foreign exchange which means that our costs have increased, in some cases more than doubled,” Ndule explained.
Although the decision to expand seems a smart business move on Arik Air’s part, people doubt its success given the airline’s notoriety for being unreliable and having a poor customer service in general.