Experts recommend ‘New Deal’ as key to resuscitating ailing aviation sector

Experts in the aviation sector say the implementation of the ‘New Deal’ as initiated by Franklin   Roosevelt, the 32nd president of the United States will help combat the great depression in the Nigeria’s aviation sector.

The  New  Deal  involves  a  set  of  unconventional policies, which  created  a  new  set  of institutions  like  the  Federal  Deposit  Insurance Corporation  (FDIC)  to  protect  depositors  funds and  the  Securities  Exchange  Commission  (SEC) to  regulate  the  stock  market.  Analysts say the New Deal can be applied to the Nigeria’s aviation sector to help revive the industry.

“Recommendations of the new deals include opening Nigeria’s domestic air space to foreign airlines willing to invest in the sector, increasing partnerships between local and foreign airlines akin to the Virgin Atlantic and Virgin Nigeria relationship through code sharing and interline partnerships.”

“Increasing accessibility between international and local airports through trams built by the private sector, appropriate fiscal incentives to stimulate investments in the sector, improving corporate governance standards amongst operators,” Jimi Ogbobine, head research Augusto&Co, an indigenous Rating organization told BusinessDay.   

According to Ogbobine, the  Nigerian  domestic  aviation  industry  is  tethering  on  the  brink  today probably  facing  its own  great  depression and  it  will  require  a  ‘New Deal’  to  save  it  from  collapse  and  spur  it  on  to growth.

This suggestions are coming at when the  Nigerian  domestic  aviation  industry has  been  in  dire  straits  for  quite  a  while  and  recent  statistics  by  the  Nigerian  Civil  Aviation  Authority  (NCAA)  seem  to  buttress  the  fragility  of the  industry.

According  to  the  NCAA,  only  6% (nine)  of  the  150  registered  local  airlines  that  existed  at  the  beginning  of  this  millennium  still remain.  Most  of  these  operators  collapsed  because  they  were  unable  to  meet  the  stringent regulatory  requirements  while  the  surviving  nine seem  to  be  the  outliers.

He noted that even  with  the  ouster  of  a great  legion  of  operators,  the  industry  is  still weakened  by  inadequate  capitalisation,  and  poor corporate  governance  that  could  further  undermine  its  long  term  prospects  and  also  affect  passenger  safety.

Experts say that sadly,  the  government ’ s  recent  response  to  some of  these  challenges  will  prove  to  be  inadequate  in the  long  run.

The  Federal  Government recently  acquired the  biggest  domestic  airline  Arik  Air,  even amidst  the  challenges  following  the  earlier  acquisition  of  Aero  Contractors.

These  acquisitions have  been  executed  through  the  Asset  Management  Corporation  of  Nigeria  (AMCON),  a  state owned  enterprise  (SOE)  which  was  created  to acquire  bad  loans  from  banks.  Thus,  AMCON s acquisition  of  both  Aero  and  Arik  is  as  a  result  of the  failings  of  these  airlines  to  meet  obligations to  their  providers  of  finance ’are  the  banks.

“An unconventional approach it has become a cliché these days for troubled sectors in Nigeria to indolently seek financial bailouts from the government as the solution to their woes.

“Sadly, the repeated failures of the various bailout programs by successive administrations especially in this Fourth Re-public have not engendered new thinking amongst policy makers. Some of these government bailout funds have only served as golden parachutes for the investors who then exit the industry without concrete repayment plans. 

“This New Deal for the domestic aviation sector is a typical of the conventional policy frame-work in Nigeria. This New Deal will be unique in the sense that it will not require direct cash hand-outs but will entail the government adopting unconventional, bold and progressive policies for the domestic aviation sector,” Ogbobine explained.

Ifeoma Okeke