Dear Shareholders, it affords me great pleasure to be here this morning to render our stewardship of the Company for this last one year. I would like to thank you for your support for the modest achievements we made in 2015.
According to IATA, airlines expect to welcome some 3.6 billion passengers in 2016. These figures are revealed in the IATA Airline Industry Forecast 2012-2016. NAHCO would handle some of these. We plan to handle a higher percentage of this than we did last year. This industry consensus outlook for system-wide passenger growth sees passenger numbers expanding by an average of 5.3 percent per annum between 2012 and 2016. The 28.5 percent increase in passenger numbers over the forecast period will see almost 500 million new passengers traveling on domestic routes and 331 million new passengers on international services.
International freight volumes will grow at 3 percent per annum to total 34.5 million tonnes in 2016. That is 4.8 million more tonnes of air cargo than the 29.6 million tonnes carried in 2011.
The emerging economies of Asia-Pacific, Latin America and the Middle East will see thestrongest passenger growth. This will be led by routes within or connected to China, which are expected to account for 193 million of the 831 million new passengers over the forecast period (159 million on domestic routes and 34 million traveling internationally). Passenger growth within the Asia-Pacific region (domestic and international) is expected to add around 380 million passengers over the forecast period.
It is comforting for us to note that Africa will report the strongest passenger growth with 6.8 per cent CAGR. International cargo demand will rise 4 percent; although the five fastest growing international freight markets over the 2011-2016 period will be Sri Lanka (8.7 percent CAGR), Vietnam (7.4 percent), Brazil (6.3 percent), India (6.0 percent) and Egypt (5.9 percent). Five of the 10 fastest growing countries are in the Middle East North Africa (MENA) region, reflecting MENA's growing importance in international air freight. As we can see, Nigeria is missing from this list. What this means in essence is that we shouldn't be too optimistic about this operating year.
The prevailing economic realities are indeed a mixed bag. Our ground handling operations especially with regards to international airlines generates revenues for us in foreign currency. Our cargo customers import cargoes into the country. These cargoes are paid for with foreign currency. The exchange rate of the naira to the dollar had not been very competitive. Infact, in the first quarter of this year and almost all of the second quarter, the forex had practically dried up. This had made the cargo import volume to touch a low level which it had not touched in a long while.
Challenges of operating at the Airport
More than at any other time in our history, we face multiple obstacles in our operating environment. Multiple charges is only one of such.
We are charged for facilities which ordinary should be available free for our use under our concession agreement with FAAN. FAAN now bills us even for infrastructure that we assisted in putting in place. You may be aware of the well - publicized letter of one of the unions in the sector, NUATE, to the Minister of State for Aviation in which they complained bitterly that FAAN's mode of business is stifling businesses at the airports. We fully align with that position. The amount charged us by FAAN for allowing our equipment to access our place of business continues to rise geometrically while we have to cough out great resources to pay for even our staff to enter the Airport to perform their lawful duties.
Continually Falling Margins
There is no business that faces the kinds of challenges that we face that would be high on profits at the end of the day. With the falling margins, the Airlines are also asking that handling charges be reduced. What made the present situation so tough is that we have a standard that we cannot compromise on. As a matter of fact, NAHCO is the benchmark. How possible is it for us to reduce our excellent service quality because of reducing margins? Others could do it and probably get away with it. But the industry knows that NAHCO does not do that.
In 2015, ICAO awarded us Ra3 Validation for our operations in Port Harcourt Airport. The Company was actually the first in the country to pass and receive the Ra3 Validation in compliance with the European Union regulatory requirements. NAHCO had previously received the first Ra3 validation for the Lagos operations in 2013 and later Abuja. The Regulated Agent Third Country Validation Process (Ra3 Validation) for Port Harcourt brings to three the number of airports where nahco aviance had secured the all-important validation which is much sought out for in the Aviation industry.
As you may be aware, one of our client airlines, Iberia had pulled out of the Country. It no longer flies the Lagos - Madrid route.
This is a loss of revenue to us. We had been handling this airline since June 2004, for four times a week. Now they are gone! As if to further emphasise that bad times are not limited to just one operator in the industry, another airline this time, United Airline also had withdrawn from the Lagos route. Again, this means a loss of revenue, not for us, but for the competition. This goes to show that this stormy weather coming upon Aviation will not isolate anyone.
Permit us for the moment to mention therefore that the immediate outlook does not look so good. It is safe to project that some airlines struggling on this route would follow the lead and example of Iberia and United airlines. Although it is good to hope for the best; it is better to face realities well projected. This will only prepare us for less disappointment. We should not be optimistic about grossing extra billion of revenues in an economy that is increasingly shrinking and in which its managers had repeatedly warned is headed towards a deep recession.
But it is not just a tale of disengaging businesses. We also have a story to tell of new businesses won. We have continued to win new businesses on the domestic front. We already have in the kitty, deals that would ensure that nahco aviance operates in three additional airports of Akure, Maiduguri and Yola. We have Azman Air, to handle it's entire Nigeria Operations.
On the international routes, we have the Mid-African Airlines (New Gambia Flag Carrier) - LOS, with Operations set to start July 2016. We have won the bid to handle Meridiana Fly (Italian Airline) whose starting date is also set for July 2016. Of course, Rwandair to Abuja, just got on board. This is a new route won and signed and sealed in Kigali on June 1, 2016. Also in June this year, we signed a business deal with Mainstream Aviation, MainStream Aviation is a major Cargo Air-Freight (Logistics) Airline operating both international and local flights. We expect to seal more deals in the next few months.
This definitely is good news we are happy to share with our shareholders. We will continue to seek for ways to expand our business and increase our revenues.
A Pledge and a Promise
Dear Shareholders, we are proud of what we achieved this outgone year. Repeatedly, we had won awards as the Most Resilient Company in the Aviation sector. This is a testimony to our hard-work and our ability to surmount all obstacles in the conduct of our business. We pledge that we will not relent on our oars as we face the obstacles present in the current operating year. Our pledge and our promise is that we will strive for excellence. We will give our best. Government policies are some of the things that we cannot control. We are however prepared that however and whichever way these policies come, they will not catch us napping. We are in this business for the long term; and for the successful term.
Thank you for your kind attention.
Thank you for your kind attention.