Non-aeronautical Revenue Key to Viable Airports in Nigeria
Many successful airports in the world depend more on non-aeronautical revenue sources arising from modern facilities and the provision of services that draw both travellers and non-travellers to the airports. Chinedu Eze writes that improving nonaeronauti
Industry observers describe Nigeria as a lucky country because it has many airports and considering the pivotal role airports play in economic development of any nation, it is said that Nigeria is already well positioned to benefit from the aviation industry.
But currently, many Nigerian airports are a burden to the Federal Airports Authority of Nigeria (FAAN), which rely on the huge revenues generated by few busy ones to maintain and sustain the unviable ones.
THISDAY learnt that out of the 22 airports managed by FAAN, only about six generate revenues that could fund their maintenance. This is so because these airports depend on the number of flights that operate from them to make aeronautical revenue. Many of these airports record as few as one or two flights daily so they generate very poor revenue.
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.
Non-aeronautical revenues come from money largely spent by passengers and other airport users at the airports. These also include the earnings from service providers who meet the need of passengers and others at the airport.
So non-aeronautical revenues are such revenues that accrue from non-airline services such as parking and landing charges, fuel surcharge, baggage taxes and others that relate to passengers but include revenues generated from businesses around the airport, advertising and establishment of rendezvous where people meet, eat and drink and enjoy other services.
Industry experts say that in many successful airports in different parts of the world, nonaeronautical revenues constitute over 70 percent of their overall revenue base, which it is still less than 30 per cent in many Nigeria airports.
FAAN’s Revenue Sources
About three years ago, 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 N30 billion annually. The total revenue it earned from other airports was put at N15 billion which totalled N45 billion per annum. That was in 2015.
In 2016, which was the height of economic recession that hit Nigeria during the crash of oil price in the international market, FAAN earned about the same amount of revenue, as industry observers noted that the agency has not been able to boost its revenue because it has left the non-aeronautical sources largely underdeveloped and underutilised.
THISDAY learnd that it is only at the Lagos airport that FAAN earns more revenue from non-aeronautical sources, 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 from the agency told THISDAY that Lagos airport alone could generate N100 billion annually for FAAN if strict measures are put in place to block all loopholes and if non-aeronautical revenues are fully exploited. These measures include the automation of every process that generates revenues for the agency in all the airports under its management.
“First, FAAN has to capture the data of revenue potential which will determine the amount of revenues to expect. It will have to ensure that there is transparency, which means that every amount of money generated is captured; then it will have to streamline all its activities so that at a glance everyone will have the picture of what is generated. Then it has to fully exploit non-aeronautical revenues sources, which can add at least 35 per cent increase to the current revenue”, an inside source told THISDAY.
Other Airports
Industry observers are of the view that other airports in the country, besides the Murtala Muhammed International Airport, Lagos could be made to generate revenues from entertainment, meeters and greeters by establishing shopping malls, restaurants, cinemas, even night clubs and transit lodgings. The airport authority would collect rentals and charges from them. This is because some of these are airports are strategically located and as facility for air travel it attracts more people.
The Director General of Airport Council International (ACI) World, Angela Gittens told THISDAY that it is better that airport managers develop non-aeronautical revenue sources more so that their source of revenue would not be dependent on flight movement to the airport, so that the airport could survive at all times, not depending on flight movement.
“I will say it is best to increase non-aeronautical revenue so you have more diversification in case something goes wrong. Because you can’t always depend on aeronautical revenue because the airlines can change their mind and you don’t have complete control over how much you could charge. In any case, it is only cost; so the best you can do is cost, whereas with non-aeronautical revenue you can make a profit.
Modern Airport Facilities
The CEO of Aglow Limited, an aviation support services company, Tayo Ojuri once explained to THISDAY that building facilities to meet the people’s need is a way to attract people to the airport and create avenues for non-aeronautical revenue.
“There are a lot of ways to develop nonaeronautical revenue, if you look at what that market needs. When you realise what your market needs… I will give you a typical example, look at MMA2 (domestic terminal of the Murtala Muhammed Airport, Lagos), MM2 has realised the demography, they have restaurants, they have supermarkets, they have revitalised car park, they have opportunity to make even a night club or other things on top of that car park, like an event center.
“The other part of it, you see a lot of advertisements; the airport has a lot of captive audience. Advertising is huge there; they have been able to optimise that; even their towing of vehicles. You have Kia Motors coming to showcase and change their cars every day; you have Nigerian Breweries Limited come there every Friday to setup, so the terminal is being creative,” Ojuri said.
He noted that if the operator has an airport loyalty programme with a touch of technology, including wifi as most of the people that travel have smart phones, they would be attracted to the airport.
“If you do a comparative analysis between MMA2 and GAT (General Aviation Terminal) at the Lagos airport, you will realise that MMA2 has actually made use of all the facilities and there is still room for more business. Those are the things you see and they are actually bringing value to the system and that is why you find out that MMA2 over time is being considered the best airport terminal in terms of facilitation because they have added value to the system. So that is how you can build ancillary revenues,” Ojuri added.
Attracting non-flying Public to the Airport
Managing Director, Dufry Africa, a global travel retailer, Isabel Zarza disclosed during the recent ACI Africa meeting held in Lagos, what attracts non-flying public to the airports.
She said most airports in Africa are yet to develop such attractions unlike in other developed regions, noting that many governments in Africa still see airports as place solely made for travelling.
“In Africa this is very difficult because most African countries do not allow non-flyers to enter into the airport. In Europe and in other countries you are able to enter. There are also countries in Africa where you can enter into the airport as non-flyers but most of them, you cannot. You cannot make an offer attractive for people who are not going to fly. In Europe, you have that mostly on the arrivals because when you fly and depart, you want to go but when you arrive, you have meeters and greeters and people who go to meet their relatives. So, that is where you can have convenience shops where you see newspapers and flowers,” Zarza said.
She remarked that as a result of this non- aeronautical revenue in all African countries is reduced compared to what it is in Eur ope. “In Europe, we are arriving 30 to 40 per cent of non- aeronautical revenues as against aeronautical revenues. In Africa, we are below 20 percent. The reason for this is that r etail is not yet well developed. We need to invest in this part of retail. It is important to develop r etail is African countries. There are new terminals that ar e being built in Nigeria. We need to work with Federal Airports Authority of Nigeria, (FAAN) to build the perfect shops in the new terminals. On how the airports could be modernised to attract non-aeronautical revenue, she said that airports ar e looking at incr easing the non- aeronautical revenues because that is the way they can incr ease the plane tickets and increase the number of passengers. “The way they can do it is to have duty free walk through shops. This means that in order to arrive to the gate, you need to go through the shops. It will also be important for us to have only one entrance. For example, in Nigeria curr ently, you have two entrances to the airport. This means you are dividing passengers and cannot attract them to the same of fering. You need to duplicate the offering and that is not convenient. So, if you have one only entrance with one walk through shop, it will be much better because revenue will increase for everyone. Investing in Airports FAAN is calling for investment in airport to boost its non-aeronautical revenue. It wants private sector investment in infrastr uctural facilities like the construction and management of hangar facilities and well as fixed base operations (FBOs), construction and management of hospitality facilities, including but not limited to hotels; construction and management of automated car parks, development of terminal buildings, construction of runways, taxiways and aprons; construction and management of helipads and construction and management of independent power plants (IPPs) and aviation fuel deposit facility. Also for perishable agri-produce, FAAN is inviting for the construction and management of cargo air services for perishable agricultural produce. The managing director of the agency, Saleh Dunoma explained to THISDAY that for third party businesses, FAAN provides land spaces or developed aviation and non-aer onautical facilities, under appr opriate business and financial arrangements, in line with the agency’s commercial and investment policy guidelines for leases and rentals. “In the interest of transparency, FAAN advertises all commercial concessions and infrastructural facilities and calls for bids for such concession/ facilities from local and international investors,” Dunoma said.