General News
Aviation Industry Profitability Improves- IATA
The International Air Transport Association (IATA) revised its 2016 financial outlook for global air transport industry profits upwards to $39.4 billion (from $36.3 forecast in December 2015).
That is expected to be generated on revenues of $709 billion for an aggregate net profit margin of 5.6%. 2016 is expected to be the fifth consecutive year of improving aggregate industry profits.
In 2015 airlines generated a global aggregate profit of $35.3 billion (re-stated from $33.0 billion estimated in December 2015).
All regions are making a contribution to the $4.1 billion boost over 2015 profits with improved results; but there are stark regional differences in performance.
Over half of the industry profits will be generated in North America ($22.9 billion) while African carriers are forecast to continue generating an overall loss (-$0.5 billion).
“Lower oil prices are certainly helping—though tempered by hedging and exchange rates. In fact, we are probably nearing the peak of the positive stimulus from lower prices. Performance, however, is being bolstered by the hard work of airlines. Load factors are at record levels. New value streams are increasing ancillary revenues. And joint ventures and other forms of cooperation are improving efficiency and increasing consumer choice while fostering robust competition. The result: consumers are getting a great deal and investors are finally beginning to see the rewards they deserve,” said Tony Tyler, IATA’s Director General and CEO.
Resilience
On average, airlines will make $10.42 for each passenger carried. “In Dublin, that’s enough to buy four double-espressos at Starbucks.
Looked at from a different angle Starbucks will earn about $11 for every $100 in sales while airlines will make $5.60. We don’t begrudge Starbucks their profitability. But there is clearly still upside for airline profits,” said Tyler.
For the second year in a row and only the second time in the airline industry’s history, the return on invested capital (9.8%) will exceed the cost of capital (estimated to be 6.8%).
This is the minimum expectation level for investors. The airline industry is beginning to generate profits that would be expected of any normal business.
“The job of shoring up resilience by repairing balance sheets is under way. We have had a few years of good profits and some airlines have started to pay down debt. It will, however, take a longer run of profits before balance sheets are returned to full health,” said Tyler.
Repaying accumulated debt will take several years of profitability to achieve. Airlines in North America and in some parts of Europe have seen the gearing of their balance sheets fall towards investment grade levels. But for much of the rest of the industry, it is a continuing challenge.
“Airlines are producing solid results even with some strong economic headwinds. It’s an impressive performance and the mood of the industry is generally optimistic,” said Tyler.
Main Forecast Drivers
Oil Prices: The outlook is based on oil averaging $45/barrel (Brent) over the course of the year which is significantly lower than the $53.9 average price in 2015.
The full impact of lower fuel prices is still being realized as hedges mature. Overall, fuel is expected to represent 19.7% of the industry’s expenses, down from a recent high of 33.1% in 2012-2013.
The Global Economy: Weak economic conditions prevail. GDP is expected to expand by 2.3% in 2016.
That is down from 2.4% in 2015 and the weakest growth since 2008 when the global financial crisis hit. Consumer spending is relatively strong, but the corporate sector is conserving cash and, despite some easing of government austerity budgets and low interest rates, there is little evidence of an acceleration in infrastructure spending.
Passenger Demand: Passenger demand is robust with 6.2% growth expected in 2016. That is, however, a slowdown from the 7.4% growth recorded in 2015. Capacity is expected to grow slightly ahead of demand at 6.8%. Load factors are expected to remain high (80.0%), but with a slight slip from 2015 (80.4%). Yields are expected to fall by 7.0%. Unit costs, driven by lower fuel prices, are expected to fall by 7.7%. Overall the passenger business is projected to generate $511 billion in revenues, down from $518 billion in 2015.
Cargo: The cargo side of the business remains in the doldrums with 2.1% growth in demand. Airlines are growing their fleets with long-haul wide-body aircraft to meet strong passenger demand growth. This adds cargo capacity to a flat air cargo market. Cargo yields are expected to fall by 8.0% this year. Overall cargo is expected to generate $49.6 billion in revenues, down from $52.8 billion in 2015.
Regional Diversity
North American carriers continue to deliver the industry’s strongest financial performance with an expected net profit of $22.9 billion which is an improvement on the $21.5 billion reported for 2015.
Passenger capacity is expected to expand by 4.3% in 2016, marginally outpacing an anticipated 4.0% increase in demand, but load factors are forecast to remain well above break-even levels.
Cash flow has been sufficient for airlines in this region to improve balance sheets significantly by repaying debt, and return cash to shareholders through dividends and share buy-backs.
European airlines are expected to post a $7.5 billion profit in 2016 (up from $7.4 billion in 2015). Passenger capacity is forecast to grow by 5.8%, ahead of expected demand growth of 4.9%. Terror incidents have had a dampening effect on demand in some key tourist centers.
It is difficult to describe the state of European carriers as uniform. The major groupings have seen solid improvement based on stronger long-haul markets, while many small- and medium-sized carriers continue to struggle.
Competition is intense (particularly on intra-Europe routes) and the burdens of high taxes, onerous regulation and inefficient infrastructure (particularly air traffic management) have yet to be meaningfully addressed. Additionally, for many carriers there is a wide gap between the expectations of labor and management.
Airlines in Asia-Pacific are expected to post a $7.8 billion profit in 2016, up from $7.2 billion in 2015. Capacity is forecast to expand by 9.1% in 2016, ahead of demand which is likely to grow by 8.5%. Asia-Pacific carriers have a 40% share of global air cargo markets.
As a result they continue to feel the brunt of stagnation in this sector, which is holding back the improvement in financial performance.
Challenges include intense competition as the budget sector expands, restructuring in the Chinese economy and continuing infrastructure and cost difficulties in the Indian market.
Middle East carriers are expected to post a $1.6 billion profit, up slightly on the $1.4 billion reported for 2015.
Capacity is forecast to grow at 12.2%, outpacing an expected 11.2% expansion of demand. Efficient hubs continue to gain market share on connecting markets for the region’s major carriers, although local markets have been weakened by the impact of falling commodity revenues.
Economic changes in the region’s oil economies are manifesting themselves in a spate of increases of charges and taxes which could dampen the region’s cost competitiveness.
Airlines in Latin America are expected to see a $100 million profit in 2016 after a $1.5 billion loss in 2015.
Demand is expected to grow by 4.2% while carriers are forecast to add 3.7% to capacity. Two of the region’s major economies—Brazil and Venezuela—continue in a deep economic and political crisis.
The region has been hit disproportionately by the fall in commodity prices and revenues, which led to foreign exchange crises to add to the economic difficulties.
Such has been the falling of exchange rates in Brazil and other major commodity economies in the region that airlines have seen hardly any decline of fuel costs in local currencies, while outbound residents have suffered a dramatic decline in purchasing power overseas.
African airlines are expected to post a $500 million loss in 2016, a slight improvement on the $700 million that the region’s carriers lost in 2015.
Capacity growth (5.3%) is anticipated to outpace demand growth of 4.5%. Carriers in the region continue to confront a plethora of challenges including intense competition on long-haul routes, political barriers to growing intra-Africa traffic, high costs and infrastructure deficiencies.
In addition many major economies in the continent have been hit hard by the collapse of commodity prices, and the impact that has had on revenues and the inflow of hard currencies. Unresolved foreign exchange crises are adding to the economic difficulties facing airlines in this region.
Value Creation
The airline industry continues to add value to its customers, to the wider economy, and to governments:
Consumer benefits from the industry’s improved performance are significant. In 2016 the average return airfare (before surcharges and taxes) is expected to be $366 which is a 62% reduction on 1995 levels (after adjusting for inflation). Passenger numbers are expected to reach 3.8 billion. And the network of unique city pairs will reach 18,243.
The number of direct airline jobs is expected to rise by 2.8% in 2016 to 2.61 million. The total airline payroll in 2015 is expected to reach $153 billion (up 6.4% from $144 billion in 2015). Compared with 2015, average unit labor costs are expected to rise by 0.1% as productivity per employee improves 3.4%. Airline employees are also extremely productive for the economies in which they work, generating gross value added (GVA—the company level equivalent to GDP) of $100,186 per employee in 2016 (up 5.3% on 2015).
The industry tax bill is expected to grow to $118 billion in 2016, a 5.5% increase on 2015.
Airlines’ environmental performance continues to improve. The industry is on target to meet its goal of improving fuel efficiency by an average of 1.5% annually until 2020. Current analysis shows that on average the sector has improved fuel efficiency by 2.4% per year since 2009, a figure that is expected to normalise in the coming years.
Investments in new aircraft are a major driver of fuel efficiency improvements. In 2016, airlines are expected to take delivery of almost 1,900 new aircraft. About half are projected to replace less fuel-efficient older aircraft.
The industry remains committed to achieving carbon-neutral growth from 2020. This is in addition to a 1.5% average annual improvement in fuel-efficiency to 2020 and complements the long-term goal of cutting net emissions in half by 2050 (compared with 2005 levels).
NLNG and the Nigerian Content Development and Monitoring Board (NCDMB) have commenced the construction of a research and innovation centre at Rivers State University, aimed at strengthening indigenous capacity in computer and electrical engineering.
The NLNG Research and Innovation Centre for Computer and Electrical Engineering (RICCEE), which was inaugurated yesterday, is the company’s largest Human Capital Development Institutional Strengthening project to date.
The centre is expected to provide specialised training, advanced research facilities and technological solutions for challenges in Nigeria’s energy and industrial sectors.
It will also house a professorial chair and operate as a research and development centre where industry-focused solutions, particularly for NLNG, can be developed and potentially commercialised.
Speaking at the groundbreaking ceremony, NLNG’s Managing Director and Chief Executive Officer, Adeleye Falade, described the project as a strategic investment in the country’s future and evidence of the company’s commitment to sustainable human capital development.
Falade, who was represented by NLNG’s General Manager, External Relations and Sustainable Development, Sophia Horsfall, said the facility would improve the university’s ability to produce highly skilled professionals while ensuring that research responds to industry needs.
He said the centre would also help bridge the gap between academic knowledge and practical industry requirements by creating opportunities for researchers and professionals to work together on innovations with commercial and developmental value.
Felix Omatsola Ogbe, the Executive Secretary of NCDMB, represented by the Director, Capacity Building, Abayomi Bamidele, said the project marked an important step in advancing the Board’s Human Capital Development objectives.
According to him, the centre is part of the Board’s Institutional Strengthening Programme, which seeks to build lasting partnerships with higher institutions through infrastructure that supports teaching, research, innovation and practical skills development.
Ogbe challenged the centre to emerge as a hub for discovery, creativity and technological advancement, where students can develop innovative ideas, researchers tackle real-world problems and industry can find reliable research and development partners.
The Vice-Chancellor of Rivers State University, Prof. Isaac Zeb-Obipi, said the project aligned with the institution’s 2026–2030 strategic plan, particularly its focus on research collaboration, innovation and entrepreneurship.
“We envisage the Centre as a world-class hub where researchers and students can develop practical solutions to engineering and technological challenges, where university-industry collaboration can flourish, and where innovative ideas can be transformed into useful products, technologies and services,” he said.
The centre will occupy about 9,336 square metres within the university and include specialised laboratories for electronics and signal processing, robotics and embedded systems, software engineering, and digital forensics and cybersecurity.
The facility will also feature solar energy provisions, energy-efficient lighting and other environmentally responsible systems designed to reduce operating costs and support reliable research activities.
RICCEE is one of NCDMB’s Institutional Strengthening Projects designed to improve learning institutions through modern infrastructure, research facilities, technical equipment and training aligned with industry needs.
General News
NITDA Seals Strategic Deals with Goose FL and Fireflies AI to Power $1 Trillion Digital Economy Vision
In a significant step toward expanding Nigeria’s tech footprint on the global stage, the National Information Technology Development Agency (NITDA) has signed strategic Memoranda of Understanding (MoUs) with Canadian tech companies Goose FL and Fireflies AI.
The signings took place during the Nigeria–Canada Investment Forum and the Nigeria Investment Economic Conference in Toronto, Canada, witnessed by NITDA’s Director-General, Kashifu Inuwa Abdullahi.
The strategic partnership centers on three core pillars designed to accelerate the nation’s digital roadmap:
- Expanding Financial Inclusion: Developing innovative technology solutions to broaden access to digital financial services and create sustainable economic opportunities for underserved communities.
- Deploying Local AI Infrastructure: Establishing indigenous Artificial Intelligence infrastructure and services to strengthen Nigeria’s internal capacity to build, manage, and benefit from AI technologies locally.
- Building a Stronger Digital Economy: Driving long-term economic growth through strategic global partnerships, technology transfer, innovation, and digital capacity development.
This international collaboration directly aligns with President Bola Ahmed Tinubu’s vision to grow Nigeria into a $1 trillion economy by 2030, anchored by innovation, digital technology, and human capital development.
By forging key global ties, NITDA continues to position Nigeria as a rising leader in the digital economy, ensuring that emerging tools like AI deliver real, tangible value for local citizens and businesses.
Anambra State Government says it is exploring partnerships with the Federal Government and other stakeholders to extend digital connectivity to underserved rural communities across the state.
The Managing Director and Chief Executive Officer of the Anambra State ICT Agency, Mr Chukwuemeka Fred Agbata, disclosed this during a virtual media engagement with journalists on Thursday.
Agbata said rural connectivity remained a major challenge because telecommunications operators were often reluctant to invest heavily in communities where network deployment might not be commercially viable.
He said the state was willing to explore opportunities to leverage Federal Government infrastructure and the Universal Service Provision Fund (USPF) to extend connectivity to underserved communities.
“We understand what digital inclusion means because we are dealing directly with these communities,” Agbata said.
According to him, the objective is to ensure that rural residents are not excluded from the benefits of digital government and the wider digital economy simply because of where they live.
Agbata said the effort formed part of the state’s broader digital transformation agenda, which is targeting deeper digitalisation of government services and a more digitally enabled business environment by 2030.
He said the second phase of the agency’s digital transformation agenda would focus on e-governance, digital infrastructure, smart government and the use of emerging technologies to drive development.
“My core vision is that we would have digitised every single government entity in Anambra State,” he said.
The ICT boss said the digital transformation agenda would extend beyond government ministries, departments and agencies (MDAs) to businesses and residents across the state.
He said the agency was already developing websites for government MDAs and transforming them from mere information platforms into channels for delivering government services.
“We are building websites for all the MDAs. We are also automating them to be able to carry out services and give government support and government services through their websites,” he said.
Agbata said the initiative would reduce the need for citizens to physically visit government offices to access basic services.
He said the Smart Anambra platform had already demonstrated growing demand for remote access to government services.
According to him, the platform recorded about 14,000 visits between July 9 and July 29, averaging approximately 700 visits daily, despite limited publicity.
He said the data indicated that residents were interested in accessing government services online, including applications, permits and identification-related processes.
“What the data is already showing us is that we really need to build a system that allows people to actually get government services remotely,” Agbata said.
He explained that the objective was to allow residents to initiate processes online, complete forms remotely and only visit government offices where physical presence was eventually required.
This, he said, would reduce the time and cost citizens spend travelling to Awka or other government offices to access services.
Agbata said services in areas including hospitals, schools and other government processes were being connected to Smart Anambra.
Anambra Targets 2030 for Digital Government
Agbata said the state’s 2030 target was to deepen the digitalisation of government services and create an environment where businesses could increasingly operate within the formal digital economy.
He said the agency was working with the Ministry of Commerce to promote the formalisation of businesses, particularly SMEs and businesses operating in major markets.
“One of the biggest challenges that we have is that SMEs are not formalised enough,” he said, adding that the agency was exploring partnerships to address the challenge.
The ICT agency boss said the transformation would be gradual because major government initiatives required the necessary approvals and resources.
On the possibility of making Anambra completely paperless, Agbata disclosed that the State Executive Council was already operating a paperless system.
He, however, said the entire civil service might continue to operate a combination of digital and paper-based processes for some time because of the complexity of government operations.
“What might happen is a dual situation,” he said, adding that selected MDAs could be used as pilots for deeper digital transformation.
Agbata also disclosed that the Anambra State ICT Agency had commenced the deployment of a locally trained artificial intelligence (AI) system to automate its operations and explore applications in governance, revenue management and public-sector productivity.
He explained that the agency did not develop a frontier large language model from scratch because of the huge computing and financial resources required.
Instead, he said, it adopted an open-source model, modified it and was training it for specific local use cases.
“We have started doing our own local AI system. It is an open-source system, so we didn’t build our own frontier model. We basically looked at open source and modified it, and we are training it,” Agbata said.
He said the system had already been deployed to automate the agency’s operations end-to-end.
“We have used it to automate our agency end-to-end. Everything that we do now is currently automated,” he said.
Agbata said the agency was exploring how the model could be applied across other areas of government to improve productivity, address revenue leakages and strengthen governance.
He said the AI initiative formed a major part of what he described as the agency’s “2.0” phase following his reappointment by Gov. Chukwuma Soludo.
According to him, the second phase would build on achievements in infrastructure, capacity development, e-governance and smart government while placing greater emphasis on AI and emerging technologies.
Agbata also said the state’s free public Wi-Fi initiative remained operational, stressing that the programme was introduced before the electioneering period.
“The free Wi-Fi didn’t start as a political thing, a campaign thing. It started way before the campaigns,” he said.
He explained that the strategy was adjusted during the campaigns to enable residents to follow the governor’s activities and participate in live engagements while on the move.
According to him, existing Wi-Fi locations, including facilities at the state Secretariat, remain operational, although occasional downtime occurs, particularly during periods of adverse weather.
“There are downtimes now and then because with the rains and all of that, these things have their uptime and their downtimes, but it is still very much available,” he said.
He disclosed that there were currently no plans to establish additional Wi-Fi locations, noting that existing sites were still providing services.
Agbata said the state would continue to develop digital skills and education programmes, including Smart Schools and other capacity-development initiatives.
He also called for stronger collaboration among government, technology companies, telecommunications operators, local technology manufacturers and other stakeholders to accelerate the state’s digital transformation.
He cited the procurement of about 2,000 computers supplied by indigenous technology company, Zinox, as an example of the state’s engagement with local technology providers.
Agbata said the agency would remain open to partnerships capable of supporting Anambra’s technology agenda.
He said the ultimate objective was to build an Anambra where residents and businesses could increasingly interact with government digitally, while technology becomes a central driver of economic development across the state.
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