Analysis of Critical Factors Affecting Growth and Expansion of Airline Business in Nigeria: Case Study of Aero Contractors.
Abstract
This study was on analysis of critical factors affecting growth and expansion of airline business in Nigeria. A case study of aero contractor in Lagos state. Three objectives were raised which included: To ascertain the factors that affect growth Aero contractor, to ascertain the factors that affect expansion of Aero contractor and to find out the effect of management on the growth of Aero contractor. The total population for the study is 75 selected staffs of aero contractors in Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. The data collected were presented in tables and analyzed using simple percentages and frequencies. The study recommended that Federal Government should ensure that air transportation is well managed in order to achieve results and develop the sector to international standards. Good management should ensure that there is adherence to business principles and sustainable development of the aviation industry Government should continue to invest in the development of infrastructure at the airports by overhauling and expanding the facilities used at the nation’s airports. Maintenance culture should be imbibed to sustain the facilities provided.
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Chapter one
Introduction
1.1Background of the study
Air Transportation is the transportation of passengers and cargo by aircraft and helicopters. It is a transport system that involves the movement or carriage by air of persons or goods using airplanes and helicopters (WIE, 2011).It has become the primary means of common carrier traveling. Greatest efficiency and value are obtained when long distances are involved and high value payloads are moved, although, the time and cost efficiencies obtained decreases as distances traveled is reduced, air transport is often worthwhile even for relatively short distances. It also provides a communication link, which is sometimes vital, between the different groups of people involved (WIE, 2011).
Nigeria is classified as an emerging market and is rapidly approaching middle income status with its abundant supply of resources; well endowed communication, financial sector and stock exchange (Wikipedia, 2011).Such a country and its economy needs efficient air transportation. Furthermore, the large size of the country coupled with geographically diverse regions, difficult terrain, water bodies etc necessitates the use of efficient air transportation. Efficient air transportation is a means of transport that conveys people and goods from one place to another safely, on time without delay or flight cancellation or any other problem. It also contributes to economic growth and development. However in Nigeria, it suffers from poor reputation for operational efficiency and safety (Wikipedia, 2011).
Air transportation is a major industry in its own right and it also provides important inputs into wider economic, political, and social processes. The demand for its services, as with most transport, is a derived one that is driven by the needs and desires to attain some other final objective. Lack of air transport, as with any other input into the economic system, can prevent efficient growth (Nwaogbe et al, 2013).
Air transport has a unique advantage over all other modes of transport; speed, time and distance are major considerations. Air transport is of high value in relation to weight. It is also preferred where accessibility by other modes is a problem (especially in riverine or mountainous regions). Air transportation is a system with many inter-related parts. Each airport is connected to the system through the airways and other airports with which it exchanges flights. Its share of the GDP is however, still legible in Nigeria (Aderamo, 2006). In Nigeria, the demand for air transport services has been on the increase within the past three decades. There has been growth in passenger, aircraft and freight traffic as a result of physical and economic development of cities in different parts of the country. Fast connections between the diverse economic spaces of Nigeria are better achieved through air transportation. According to (Ogunbodede, 2006), the diversity in the resource endowment between the North and the South is an important factor in the growth of air transport in Nigeria.
Air transport has a unique advantage over all other modes of transport; speed, time and distance are major considerations. Air transport is of high value in relation to weight. It is also preferred where accessibility by other modes is a problem (especially in riverine or mountainous regions). Air transportation is a system with many inter-related parts. Each airport is connected to the system through the airways and other airports with which it exchanges flights. Its share of the GDP is however, still legible in Nigeria (Aderamo, 2006). In Nigeria, the demand for air transport services has been on the increase within the past three decades. There has been growth in passenger, aircraft and freight traffic as a result of physical and economic development of cities in different parts of the country. Fast connections between the diverse economic spaces of Nigeria are better achieved through air transportation. According to (Ogunbodede, 2006), the diversity in the resource endowment between the North and the South is an important factor in the growth of air transport in Nigeria.
The competitiveness of airlines in the air market is determined by technical and economic criteria and the most important of them are: volume of transportation, level of service, reasonable airfare, low operating costs, brand image, rapid response to changes in market conditions, effective functioning of management, timeliness and effectiveness of marketing activities, etc. According to Dumbadze (2009). There are qualitative and quantitative indicators that are used to assess the performance of air transport
Quantitative indicators: volume of carriage of passengers, volume of transportation in tons-kilometers. The unit of measurement for calculating the airline transportations volume is the passenger. The volume is calculated by summing the number of passengers dispatched for a particular period. Qualitative indicators show socio-technical-economic efficiency of air transport. Technical indicators include transportation capacity, capacity of registration halls, aircraft and aircraft engines fleet and power, capacity of automation and mechanization means and provision of airlines.
Economic indicators – returns, transportation expenses and cost, profit, cost-efficiency, labor productivity
Operating indicators – aircraft hourly productivity, annual flying hours, flight speed. The structure of factors affecting the volume of passenger traffic was developed based on the analysis of the marketing environment of the airline (Dumbadze (2009)
Airline passenger flow generator: Factors of direct or indirect impact and subjective and objective factors
The category of subjective factors includes a group of circumstances that are pre-selected and determined by the airline, such as airline management, marketing, supplier, intermediary, etc. Moreover, subjective circumstances are the tools at the airline’s disposal to help it attract passengers and create a product. The category of objective factors includes a group of circumstances that the airline cannot influence, such as economic, demographic, climatic, sociocultural, etc. Both subjective and objective factors (indicators) directly or indirectly cause an increase or decrease in the number of passengers
Specifically in the airline industry, these limiting factors include: lack of good infrastructure, unfavourable policies (Schragenheim & Dettmer, 2000), low market demand, lack of qualified personnel and competent managers, poor corporate governance, weak regulatory environment, multiple taxes, poor maintenance practice and overstaffing, amongst others (Xu & Dioumessy, 2019). Moreover, despite the fact that constraints cannot be totally eliminated from a system, a repeated practical application of the theory leads to continuous improvement and increased profitability. Based on this background the researcher wants to analysis of critical factors affecting growth and expansion of airline business in Nigeria.
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Statement of the problem
Morally and physically obsolete equipment, inefficient management, lack of investment sources, low passenger turnover, lack of work experience in a competitive environment. The transition of the country to the rails of a market economy required a reorganization of the economic structure of air transport. Although obsolete equipment has been replaced by leased, relatively modern aircraft, airline management has made progress, airports have been built and upgraded to meet the increased demand of the passenger flow, but these measures have been insufficient to maintain a high share (in terms of passenger service by airlines) in the civil aviation sector. Based on this background the study wants to investigate factors affecting growth and expansion of airline business in Nigeria, using aero contractor as a case study
Objective of the study
The objective of the study is to investigate factors affecting growth and expansion of airline business in Nigeria, using aero contractor as a case study. The specific objectives are;
- To ascertain the factors that affect growth Aero contractors
- To ascertain the factors that affect expansion of Aero contractors
- To find out the effect of management on the growth of Aero contractors
Research Question
The following research questions are formulated to guide the study;
- What are factors that affect growth Aero contractors?
- What are factors that affect expansion of Aero contractors?
- What is the effect of management on the growth of Aero contractors?
Research Hypotheses
The following research hypotheses are formulated to guide the study;
H1: There are no significant factors that affect growth Aero contractors
H2 There are no significant factors that affect expansion of Aero contractors
H3: There is no significant effect of management on the growth of Aero contractors
Significance of the study
The study will give a clear insight on the factors affecting growth and expansion of airline business in Nigeria. The study will be very beneficial to students, lecturers, airline operators and policy makers. The result of the study will educate airline operators on the factors affecting growth of airline and how to overcome it. The study will also serve as a reference to other researcher that will embark on the related topic
Scope of the study
The scope of the study covers analysis of critical factors affecting growth and expansion of airline business in Nigeria. The study will be limited to Aero contractor airline in Nigeria.
Definition of terms
Growth: The act or process, or a manner of growing; development; gradual increase. Size or stage of development:
Expansion: The action of becoming larger or more extensive.
Airline: An airline is a company that provides air transport services for traveling passengers and freight. Airlines use aircraft to supply these services and may form partnerships or alliances with other airlines for code share agreements, in which they both offer and operate the same flight.
