SPECIAL FOCUS: How FG can enhance growth of domestic airline business

Tribune Online
SPECIAL FOCUS: How FG can enhance growth of domestic airline business

Definitely, all is not going too rosy for the Nigeria’s domestic airlines owing to several factors which are already in the public domain. Without any bias, out of the six functional domestic airlines presently operating, only one or two are able to stand the heat in the kitchen though still not on a platter of gold, while many who could not stand the pressure had gone underground. In this analysis, SHOLA ADEKOLA x-rays the factors responsible for the problem with key players urging government to come to the rescue of the domestic airlines:

Airlines’ Painful Story:

Many reasons have been traced to the myriad of challenges confronting the domestic carriers despite their struggle to keep afloat to continue to render services to the Nigerian flying public. Among such reasons include: the 37 multiple taxes they are subjected to pay to the various government agencies which the airlines said was pushing their financial envelope to the extent that they are groaning under pressure with some going bankrupt.

It is also no longer hidden that the 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 gesture of government viz-a-vis its failure to engage in the protectionism of the domestic airlines through joining countries of this world to play international aero politics that will pave the way for the easy operations of the designated Nigerian carriers to foreign countries.

Besides these factors, the lopsided Bilateral Air Service Agreements (BASAs) Nigeria signed with over 80 foreign countries which 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 high,y unstable foreign exchange rate.

Our Predicaments – Airline Operators:

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, Alhaji Muneer Bankole who lamented the negative impact of the high cost of  fuel in Nigeria in particular, declared: “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 the FOREX. They import this fuel. Three people are involved; the man who gets the license to bring in the fuel by whichever means he brings it in. This is one owner. Another owner who has a dump, who 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, he declared; “like Bellview that 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 who 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.”

FG must rescue the airlines:

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 travelers across the world deserves a more vibrant domestic airline system.

Since there  was a time when the country could boast of more than ten airlines doing well on the local  and foreign scenes, and with the latest exploits of Air Peace airline, the ability to bring the lost hope back to the flying public is very much in place if only the government will be willing to shift from its present lukewarm position.
Majority of stakeholders have argued that the present status of the domestic airlines can still be redeemed in the sense that the circumstances which brought them to the lamentable level greatly lies in the failure of government through its representative agencies to be proactive in the face of changes in global air transport.

The argument is that while some of the airline owners who ventured into the business had no reason for doing so in view of their little or no knowledge of what it takes to venture into it, however with the enviable record of few like the Air Peace which forayed into the business four years have, some of the domestic carriers can do better if they have the support of the government.

For the 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 the Nigeria’s aviation rules. Ojikutu urged the government to equip its airports to sustain the airlines’ day and night operations and also install equipments that will enhance landing and take off of aircraft  even during inclement weather.

Another area the key players want government to review its policies is in the areas of the open skies and commercial agreements it has with foreign airlines which had hitherto led to their encroachment into the domestic routes and the concessions for multiple destination on the Nigerian domestic routes. According to the key players, these loose opportunities are “incursions into the domestic airlines’ markets which can seriously affect their growth.”

According to the AON Chairman, Nogie Megisson, the Federal Government should not leave Air Peace but to 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.

Bring back the ‘Fly Nigeria Act’:

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 ‘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 is bounding 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 the 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. “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 the Nigerian carriers and it will be an improvement on their market share and I hope one day government will respond to it.”

Airlines need single digit interest rate:

Ohunayo like many key players canvassed single digit interest rate loan to the airlines on the premise that this will 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.

According to Ohunayo: “a single digit interest is a good way to support the airlines, but you can only give this to airlines who 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”.

Conclusion:

Speaking at an event recently, Nigeria’s Minister of Aviation, Senator Hari Sirika had hinted that the Federal Government will 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 organized 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, that the domestic carriers like Air Peace airline 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 the Nigerian travelers by the foreign carriers.

For the Chairman of the Nigerian airlines, Megisson, 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.”

The airlines are also not exempted from the challenges with stakeholders tasking them to wake up from their passivity. The airlines are advised to drop their ego of by forming alliances with other domestic a carriers and even foreign carriers to make them stronger and vibrant. Besides they have been urged to embrace voluntary consolidation and be willing to open their financial books for economic audit when the need arises. In doing this and with the readiness of the government to resolve the obstacles standing in their way, the domestic airlines will no doubt enjoy a robust growth.

SPECIAL FOCUS: How FG can enhance growth of domestic airline business
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