‘Why over 50 indigenous airlines collapsed’

Airline Operators of Nigeria (AON) has attributed the collapse of over 50 indigenous airlines in the past to unfair competition encouraged by the government through the granting of multiple designations and frequencies to foreign airlines.

In its presentation on the economic implications of the grant of multiple entry points to foreign airlines in Nigeria at the recent aviation round table first quarter business breakfast meeting in Lagos, AON as a group called on the Federal Government to find a lasting solution to the problem that has impacted negatively on the survival of the domestic airlines.

The operators took a swipe at the Ministry of Aviation officials in charge of negotiating the Bilateral Air Services Agreements (BASA) on behalf of Nigeria saying, “During such negotiations, typically guided by the principle of reciprocity, our ministry representatives do not take due cognizance of the overriding national interests, jobs of our teeming young Nigerians and consider the longer term economic impact and well-being of the domestic aviation industry in the course of such negotiations because they are not aviation technocrats.

“The international airlines operating into the country are usually bound by the terms and conditions defined in the Bilateral or Multilateral Air Service Agreements (BASA or MASA) signed between states. These provisions, as detailed in the extant BASA or MASA, define the air transport relationship between states.

“The typical BASA or MASA stipulates the type of aircraft to be operated by the foreign airlines, the capacity (gauge), frequency of the flights and the point of entry (airport) to be operated into the country. Following the unfortunate demise of Nigeria Airways, the erstwhile national carrier under whose purview the country’s BASA and MASA were domiciled, the Ministry of Foreign Affairs and Ministry of Aviation assumed responsibility for the negotiation and consummation of these key agreements. Hence, a lot of the BASAs are lopsided and frequencies are assigned without looking at the longer term effects on Nigeria,” the operators said.

According to the operators, due to the alleged inappropriate negotiations by the ministry officials, “the practice has resulted in a high level of arbitrariness as exemplified by the ministry officials in designating most international airlines to operate into any domestic airport of their choice simply by requesting such.

“During the Nigeria Airways days negotiations were robust because the Nigeria Airways staff were specially trained for bilateral negotiations and thus were aviation technocrats. On the basis of the principle of reciprocity, commercial agreements were entered into to compensate for the lack of capacity (equipment) on the part of Nigeria Airways for which royalties were paid for each passenger carried on additional frequencies operated. This informed the introduction of the BASA account into which these royalties were paid.”

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Maintaining its rejection of the multiple entry points to foreign airlines, AON further declared, “The practice of granting multiple entry points to foreign airlines is not acceptable. The norm worldwide is that you come in through one or at most two entry points and domestic airlines distribute. For instance, Heathrow & Gatwick in London, New York & Atlanta in the USA or Charles De Gaulle in France, and then domestic airlines connect their passengers to their onward destinations within the country.

“By giving multiple entry points to foreign airlines as recently done to Ethiopian Airlines with five entry points into Lagos, Abuja, Kaduna, Kano and Enugu. This further erodes the already fragmented domestic market to the detriment of domestic airline operators.”

Calling on the government to protect them, the airline operators said there was no industry that would grow without government protection, saying that was the basis of creating trade barriers by different responsible governments even in developed economies such as the USA, UK and China.

“Indigenous airlines are therefore competing against foreign airlines in the domestic market with one hand tied behind their backs, considering the fact that foreign airlines do not pay income tax, they have access to cheap funds at 2.25 per cent as against the 26 per cent interest rate for indigenous airlines and they engage in anti competitive behaviour by blocking our airlines from operating into their countries under flippant excuses or guises.

“The practice of city hopping (cabotage operations) does not add any value to the Nigerian economy due to the attendant capital flight, loss of jobs by our youths (as these foreign airlines use 100 per cent foreign crew and engineers) and it negatively affects our contribution to the GDP. It is a serious disadvantage and an infringement on the rights and privileges of domestic operators in the Nigerian air transport market that is further being depleted by such unfair operation.”