Since the Federal Government, through the Minister of Aviation, Senator Hadi Sirika, announced the approval of N4 billion as bailout funds for the domestic airlines to cushion the effects of COVID-19 pandemic, the country’s aviation sector has been thrown into a hot debate on the desirability or otherwise of the intervention. SHOLA ADEKOLA samples opinions of key players on the bailout debacle.
Introduction
PRIOR to the outbreak of COVID-19 pandemic, domestic airline business had already been engulfed in myriad of challenges that hindered the optimal performance of the local airlines. Such challenges include the high exchange rate, unpopular policies of government like the multiple entry points and loose frequencies granted the foreign airlines at the detriment of the indigenous carriers, too many taxes, customs duty on incoming aircraft spare parts, expensive aviation fuel on the side of government while on the side of the airlines there were and still are failure to understand and play the game of the business by its rules, lack of cooperation, diversion of funds generated from the airlines to other businesses by some of the owners, use of wrong equipment on wrong routes and many more. All these put together have been attributed to the collapse of over 20 domestic carriers in the last 10 years.
There came the bang early this year with the outbreak of COVID-19 pandemic which nearly collapsed global economies with the hardest hit being the aviation industry, particularly the airlines.
Many airlines across the world had sacked thousands of workers with many aircraft orders cancelled and flights drastically reduced. This pathetic situation did not exempt the Nigerian airlines many of which sacked many workers and placed those retained on half salary or even 20 percent of the original salary.
To prevent a total collapse of the all important sector, government of nations announced and released huge bailout to their airlines and the aviation sector to keep them in business for seamless air transport.
Nigeria, like other countries, after so much pressure and the obvious fact that the domestic airlines were operating in a critical predicament, finally announced N4 billion as bailout to the airlines.
N4 billion bailout is nothing
As soon as the N4 billion was announced the airlines, first to kick was the Senate Committee on Aviation led by its chairman, Senator Adeyemi Smart, who described the amount as infinitesimal compared to the huge investment required in running an airline particularly at this critical period.
The position of the House of Representatives Committee on Aviation is equally not different from the upper chambers’ as they both proposed a N50 billion bailout for the airlines to enable them regain their lost economic strength.
While those arguing against the bailout have premised their position on the fact that many of the domestic airlines are not good at repaying loans, citing the examples of the two bailout funds granted some airlines in the past which were never paid back. Besides, this group believes that releasing a whopping N50 billion to only the airlines will create injustice as other relevant agencies of government and others like ground handling companies in the same sector also suffered the impact of the pandemic.
However, the majority is on the side of the airlines to access the N50 billion bailout funds on the ground that they have tried so much to keep the domestic airline scene floating even in the midst of challenges capable of driving away private investments. According to this group, failure to bail out the domestic carriers will not only nail their coffins and pave way for the subsequent end of domestic airline business, but give rise to the final takeover of the local and foreign scenes by foreign carriers.
Key players make case for bailout
Unlike those who argued against bailout for the airlines, those in support have however given conditions to serve as a guideline for government to avoid the past mistakes others are standing on to deny the airlines the bailout funds.
For Mr Ayuba Kyari, an aircraft engineer and Managing Director of Finuum Aviation Services, rather than use past experience to deny the airlines this critical financial assistance. “First, the experience of government arising from the past bail out should help government to do a better arrangement for this coming bailout. If government is not planning to be complicit, the bailout should focus on core needs of individual airlines that will nudge them to reach their optimum.
Secondly, the bailout should not be seen as a dash to the operators but a strategic support for the industry which is having less than 50 per cent of the domestic capacity. Air fares are already hitting the roof now at the eve of Christmas. The bailout should, therefore, be given to them to shore up their operations for the benefit of the economy and the nation.”
Group Captain John Ojikutu (retired), who is the Managing Director of Centurion Aviation Security Services, in his reaction, said the government should not be blamed for the illegality committed in the past by some airlines even as he suggested that only airlines that are not indebted to the government should be given the bailout palliatives.
“First, I am not against bailout for airlines but I am against bailout for private airlines, especially those that are indebted to the public agencies that are critical services providers for their operations. However, if there would be bailout due to the COVID-19 pandemic, it should be to support the staff salaries for the airlines that are not indebted to the government agencies. I suggested at the beginning of the lockdown that government should gradually support airlines staff salaries with 25 per cent in the first and second months; 35 per cent in the 3rd and 4th months; 50 per cent in the 5th/6th months; 75 per cent in the 7th/8th months only. When people compare Nigeria with other countries that give bailouts to their airlines they fail to sufficiently identify the difference; while ours are generally private, the others are either national and or public. The advice to the private airlines operators in Nigeria is to go public instead of depending on government or public funds always to support their private enterprises.”
A former worker at the defunct Nigeria Airways, Mr Adesanmi Adekoya, appealed to the government to, as a matter of urgency, release the bailout funds to the airlines which he said are still owned by Nigerians who are providing services to Nigerians in a place government has failed to do a similar thing.
According to him, “Of what benefit will it be for those opposing the bailout efforts if the airlines collapse while thousands of Nigerians working there with their families lose their monthly income?”
The issue of bailout, he said, was not peculiar to Nigeria since the outbreak of the pandemic; therefore, “Anyone bringing a past issue to treat the present situation is not helping the country’s aviation sector which cannot survive without the domestic airlines.”
Conclusion
As the argument for and against the bailout continues, many key players have called on the government to come to the aid of the airlines as they pointed that many of the airlines are presently finding it extremely difficult to survive.
The key players have cited the latest sack of 300 Nigerians working in Arik Air as one of the dire consequences the failure to bail out the airlines may invoke on the sector as the obvious reasons cited by the airline to sack the workers was the impact of the pandemic.
In their position, the key players said rather than use this failure on the part of government to deny the present crop of airlines; the key players are appealing that the bailout should be released to give life back to the domestic airline business.
In a time of recession like this, which the beleaguered Nigeria’s aviation sector has been in for years now, key players have argued that there is need for more cash flow to avert collapse. To them, the economy would be in dire straits should airlines be allowed to go down without bailout. After all, the airlines employ thousands of Nigerians directly and indirectly, create revenue for service providers and services to the traveling public.
If some operators abused past privileges, it is not the fault of the entire industry or newcomers, rather, of the financial institution and regulators that tolerated sleaze. The regulators should go after debtors and never use that as an excuse for not playing its role to save the local sector. According to the many key players, like the National Assembly has said, the local airlines need good support of the government now more than ever before.
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