Aviation sector: Growing burden of doing airline business in Nigeria

Clearly all is not too well for Nigeria’s domestic airlines owing to several factors. Out of the six functional domestic airlines presently operating, only one or two are able to stand the heat within the sector. Many unable to withstand the challenges that come with the pressure have gone underground. In this report, SHOLA ADEKOLA identifies the factors responsible for the problem with key players urging government to come to the rescue of domestic airlines.

 

Many reasons have been traced to the myriad of challenges confronting domestic carriers despite their struggle to keep afloat in rendering services to Nigeria’s flying public. Among such reasons include multiple taxations which the airlines are subjected to pay to various government agencies. It is also no longer hidden that efforts being made by the airlines to meet the expectations of the traveling public are still far from being fulfilled due to many other factors ranging from government’s unpopular policies such as expensive and unavailable jet A1 (aviation fuel), undue advantages being enjoyed by foreign airlines, multiple entry points and unlimited frequencies doled out to foreign airlines at the expense of the domestic airlines, lack of political goodwill by government.

Besides these factors, there is the lopsided Bilateral Air Service Agreements (BASAs) which Nigeria signed with over 80 foreign countries. These have been found to be disadvantageous to the course of domestic airline business. The high interest rate being charged by the banks is another major obstacle working against the optimal performance of the airlines and the highly unstable foreign exchange rate.

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Many of the domestic airline owners have identified the hostile business environment within which they operate as one of the major challenges confronting them. Speaking on this, the Chief Executive Officer of Medview Airlines, Muneer Bankole who lamented the negative impact of the high cost of fuel in Nigeria in particular, declared that “We cannot continue this way. This country is blessed. If you go to the market, you are the master of the market and the marketers sometimes say they don’t get FOREX. They import this fuel. Three parties are involved: the man who gets the license to bring in the fuel by whichever means he brings it in; another receives the fuel to keep for the man, he has his own value. Don’t forget the other chains including the one on the sea and on the roads. When the fuel lands, they keep it somewhere before it finally goes to the people who need it. Because of security situation, they don’t go to Maiduguri. Fuel there goes for between N250 and N270.

“We held a meeting. Two major issues were discussed. One was on Value Added Tax (VAT) and the other one was on fuel. We are about six or seven schedule operators in Nigeria. The meeting was for CEOs of airlines. When we sell for N21, 000, others are selling for N18, 000 or less. The fare will not help us. You are at the bottom. You must have a full capacity to break even. The other side of it is that somebody can sell for N15, 000 or N16, 000.”

For the chairman, Airline Operators of Nigeria (AON), Captain Nogie Megisson who described the non-involvement of government in aero politics as the bane of operators, “like Bellview which was frustrated out of the India market; Arik Air that was given a distant parking bay in Dubai at the far end of the terminal; Medview which was frustrated out of the London route by sheer regulatory technicalities and so called safety deficiencies, unfair slot allocation, exorbitant airport charges, levies and fees, and all forms of excuses to name a few which are mainly to discredit the airlines as a means of edging them out of the route in order to get rid of the competition the carrier posed to their own local operators on the route and to protect their own.”

To many key players across the sector, Nigeria with its size and its citizens been adjudged as the most traveled set on the continent and even one of the topmost traveling countries across the world deserves a more vibrant domestic airline sector.

According to the Managing Director of Centurion Security Services and a one-time Military Commandant of the Murtala Muhammed Airport, Group Captain John Ojikutu (retired), there is the need for careful assessment of the business plans of the airlines to ensure that their aircraft can sufficiently comply with the safety and economic regulations of Nigeria’s aviation rules.

Ojikutu urged the government to equip its airports to sustain the airlines’ day and night operations and also install equipment which will enhance landing and takeoff of aircraft even during inclement weather. Megisson added that the Federal Government should not leave Air Peace but should stand tall with Nigerian Airlines and bring the full weight of its political machinery and influence behind Air Peace and effectively protect the airline from all forms of aero politics and regulatory biases that may arise during the course of the airline’s operations into various international destinations.

One of the major steps government can take to enhance the growth of the domestic airlines according to players is in the area of enforcing the “Fly Nigeria Act.” Even though it has again been debated that the act as good as it will help in enhancing the growth of the domestic carriers in line with the government’s crusade for local content policy, one obvious fact is that if this act is binding on government officials who may be traveling on official tours financed with government funds, which they agreed  may gradually encourage their family members and other Nigerians to shift patronage to the Nigerian airlines which will subsequently empower the local airlines.

The stakeholders are however challenging the government to first reposition domestic airlines by resolving the myriad of challenges they have reeled out which have been traced to many unpopular policies taken in the past with a call on the government to drastically reduce the numerous taxes the airlines are presently paying, the need to resume the production of aviation fuel in Nigeria which is presently gulping over 40 percent of the cost of production of the airlines, the reduction of the high interest  rate on the bank loans to the airlines to single digit, stoppage of multiple entry points and unlimited frequencies to foreign carriers and the need for government to be willing to not only designate its airlines to foreign routes but engage in playing aero politics to protect the domestic airlines before the government of such foreign nations.

For Mr Olumide Ohunayo, a Director at Zenith Travels in Lagos, the ‘Fly Nigeria Act’ if implemented will improve the performances of the airlines.

“I am in support of the Fly Nigeria Act which was initiated fifteen years ago and sadly, we are still pushing and begging for support for the policy. The act if implemented will support Nigerian carriers and it will be an improvement on their market share and I hope one day government will respond to it. Ohunayo like many key players are canvassing for single digit interest rate loan for the airlines on the premise that this would cushion the effect of the high cost of operations and the hardship further brought on the airlines by the highly unstable FOREX as 90 per cent of airline transactions are done in foreign currencies.

“A single digit interest is a good way to support the airlines, but you can only give this to airlines which have schedule flights and not chartered flights or non scheduled operators. Subsidies are given to scheduled operators; they are the ones that help the economy and as you are doing that government needs to work on infrastructure; the roads are not good. For travel to generate the needed indices required, airports must be opened for a longer time to allow airlines spread their flights. Airlines are still registering to get their Airline Operators Certificate (AOC),  it means there is market in Nigeria. If airlines are investing in smaller countries like Togo or Ghana, why not in a country like Nigeria that has the largest market?” He said.

Speaking at an event recently, Nigeria’s Minister of Aviation, Senator Hari Sirika had hinted that the Federal Government would aggressively pursue a Fly Nigeria Act as part of plans to make Nigerian airlines including the proposed new national carrier, Nigeria Air viable and competitive. This is just as stakeholders in the nation’s aviation industry at the latest breakfast meeting organised by the Aviation Round Table Initiative in Lagos have expressed the need for the Federal Government to sign the Fly Nigeria Act legislation so as to help protect the Nigeria travel market for both local airlines and travel agents.

Besides it is generally believed that if the government is able to tackle these lingering problems, domestic carriers like Air Peace will have very little to do to successfully fly the flag of the country in high esteem around the globe thus reducing the exploitation of Nigerian travelers by foreign carriers.

Megisson added that the empowerment of the domestic carriers by government «will mean more travel choices for Nigerian travelers at affordable rates; more contribution to the Nigerian economy and GDP; increased growth for the Nigerian aviation sector; the transfer of technology and technical expertise; and a reduction in capital flight from the country by foreign airlines. Government therefore needs to rally round Air Peace as a proud Nigerian operator and give the airline and others all the support to succeed.”