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Nigeria has failed to leverage its opportunities to develop non-aeronautical sources of revenues at airports across the country, thereby under-utilising the huge revenues that come from this source.
Aeronautical revenue is generated largely from the airline, which include passenger service charge, landing and parking and use of airport facilities, including rentals, power and other services. So, the revenue is dependent on provision of services by the airport management to airlines.
On the other hand, non-aeronautical revenues are revenues that accrue from non-airline services such as car park charges, retail outlets, advertising, meters and greeters, hotels and shops, among others.
The need to develop non-aeronautical sources of revenue is driven by the dwindling passenger traffic, which is the only source of airlines’ revenues. This will on the long run reduce the amount of revenues remitted to the Federal Airports Authority of Nigeria (FAAN) as it is becoming increasingly difficult for airlines to pay their charges.
Report obtained by BusinessDay has revealed that only 11,221,617 passengers passed through the nation’s 32 airports in 2017, representing 26.3 percent drop when compared with the preceding year.
Nigeria’s airports are heavily reliant on the aeronautical side of the business as a driver of revenue growth.
BusinessDay’s checks show that out of the 22 airports managed by the FAAN, only about five generate revenues that could fund their maintenance. This is because these airports depend on the number of flights that operate from them to raise revenue. Many of these airports record as few as one or two flights daily, so they generate very poor revenue.
“Nigeria has failed to leverage on opportunities non-aeronautical sources can offer. Nigeria has huge meet and greet population; whereby people come to the airports to meet or see-off their friends and relatives.
“Airports should be attraction to people. Rather than go to the malls on weekends, people should come to the airports for sightseeing, have an educational tour, and have a feel of the place.
“There should be multiple car parks available. We should have the viewing parks, restaurants, shops and retail outlets that show the sense of place.
“Nigeria is a very culturally diverse country, so let our airports show the beauty of Nigeria and an opportunity to grow tourism,” Tayo Ojuri, CEO, Aglo Limited, an aviation support service, told BusinessDay.
Ojuri explained that once there were shops and a well operated food and beverage outlets, these would grow non-aeronautical revenues. The growth in revenue will help the airports to reduce aeronautical revenues, which will increase the passenger flight movement and aircraft coming into the airport.
In 2015, the Federal Government through the FAAN earned about N2 billion from aeronautical sources and N3.5 billion from non-aeronautical sources monthly from the Murtala Muhammed International Airport, Lagos, which is its most viable airport. This amounted to about N30 billion annually. The total revenue it earned from other airports was put at N15 billion, which totalled N45 billion per annum – in 2015.
In 2016, which was the height of the economic recession that hit Nigeria during the crash of oil price in the international market, FAAN earnings dropped by over 20 percent, as industry observers explained that the agency had not been able to boost its revenue because it had left the non-aeronautical sources largely underdeveloped and underutilised.
BusinessDay’s checks show that FAAN earns more revenue from non-aeronautical sources only in Lagos, but in some airports, such sources do not exist at all and that the reasons non-aeronautical revenue is high in Lagos is due to concessions to business and service providers.
A source in FAAN told BusinessDay that Lagos airport alone can generate over N80billion annually if non-aeronautical revenues are fully exploited and all loopholes for cheating are blocked.
Isabel Zarza, managing director, Dufry Africa, a global travel retailer, told BusinessDay that the way Nigeria can grow its non-aeronautical revenues is to have duty free walk through shops; this means that in order to arrive to the airport gate, passengers need to go through the shops.
Zarza noted that Nigeria currently has two entrances to the airport. This means the airport authorities are dividing passengers and cannot attract them to the same offering and duplicating the offerings will not be convenient.
“It is also important to have a good relationship between the duty free operators and the airport authorities in order to be flexible and to meet the customers’ needs,” she added.
