BusinessDay
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Amid COVID-19, multiple taxations, FX, others compound airlines’ woes

As airline operators struggle to stay afloat amid the impact of COVID-19, their troubles are being compounded by lack of access to foreign exchange, multiple taxations, high-interest rates, multiple entries for foreign carriers, unreciprocated BASAs and poor airport infrastructure, among others, BusinessDay has found.

Domestic airline operators who have been seeking the government’s urgent support to cushion the effect of COVID-19 have disclosed that thousands may lose their jobs if the government fails to review some of its policies that have continued to have adverse effects on their operations.

While governments in other countries have rendered some level of support to airlines through palliatives in a bid to keep them alive and sustain jobs, Nigeria’s case is still uncertain. This may be due to the fiscal challenges faced by the country in the wake of low prices of crude oil, which provide over 70 percent of government revenue and foreign exchange inflows.

However, worthy of commendation is the new signed Bilateral Air Service Agreement (BASA) between Nigeria on one hand, and the USA, India, Morocco and Rwanda on the other hand.

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Stakeholders in the aviation sector have said that BASA agreements with these countries are yet another testimony of the commitment of the government to the growth of the domestic aviation industry.

Allen Onyema, chairman of Air Peace, stated that this couldn’t have happened at a better time than now that the domestic industry requires all the support to stay afloat.

“It is most commendable and I promise Mr President that the gains thereof shall be fully harnessed. With this, the President has effectively pushed the ball in the court of domestic airline operators and I want to use this opportunity to call on my colleagues to rally to savour the full benefits of these agreements,” Onyema said.

Before now, there had been lop-sidedness against Nigerian airlines in international aviation circle. For instance, the denial of landing permit to Air Peace by the UK and Canada governments were demonstrations of ‘obnoxious’ aero politics.

However, experts have said with the new BASA, Nigeria airlines are given an opportunity to reciprocate air services with these countries.

This policy is, however, one among many others that need to be reviewed. Experts say the government must do more with regard to policy review to support airlines and keep them afloat.

Olumide Ohunayo, an aviation analyst, told BusinessDay that it is time Nigeria began to take its BASA seriously and look for reciprocity because countries are looking to take advantage of BASA through their own carriers.

“Once they stop you, they provide their own carriers that will do it. We need to use this period to learn our lessons, strengthen our BASA agreements, and on no basis should we allow our flag carriers to go unprotected and unassisted. You don’t have to own the carrier to give it support,” Ohunayo said.

Experts have called on the Airline Operators of Nigeria, (AON), which recently elected new executives, to put forward these myriads of issues facing the airline industry to the government to avoid airlines going under.

High foreign exchange rate

Obi Mbanuzuo, the accountable manager of Dana Air, told BusinessDay that exchange rate is a big factor when it comes to increase in losses incurred by airlines.

“The naira was about N360 to a dollar before the lockdown, but now it is about N450 to a dollar. Our tickets are sold in naira but the spare parts, the leased airplanes, the insurance and many more are paid in foreign currency.

“We don’t have access to foreign exchange at the official rate. When we get foreign exchange, there is limitation on how much can be paid on a daily basis.

“There was a time the Central Bank of Nigeria (CBN) mandated us to pay a maximum of $10,000 a day. For instance, if I have one spare part that costs $40,000, it would take four days to spend for just one spare part. That means I can’t pay for anything else during the four-day period. The people abroad do not understand these things,” he explained.

Multiple taxations

Domestic airlines, on the average, pay about 35 to 40 percent of ticket cost as taxes and charges that come under the guise of statutory levies, in addition to others.

These include 5 percent Ticket Sales Charge, 5 percent Cargo Sales Charge, 5 percent Value Added Tax (VAT), Passenger Service Charge, Charter Sales Charge, Aircraft Inspection Fees, Simulator Inspection Fees, Landing Charges and Parking Charges.

Others are Terminal Navigation Charge, Enroute Charge, Fuel Surcharge, Airport Space Rent, Electricity Charges, and Apron Pass, Ramp Access Charges, ODC and a newly imposed Registration Fee, all of which are paid to government agencies.

Poor airport infrastructures

Despite the charges paid by airlines, the airport authorities have failed to fix infrastructures across the airports to aid seamless operations for airlines.

Many of the airports in the country do not have runway lights and navigational landing aids, meaning that such airports are only open between 7 a.m. and 6 p.m. daily.

AON urged to step up its game

Seyi Adewale, chief executive officer of Mainstream Cargo Limited, stated that the newly inaugurated AON executive is the reawakening of the association because this leadership is current, relevant and incorporates major stakeholders in this sub-sector.

Adewale said Abdulmunaf Yunusa, the new President of the association who is founder of Azman Airline and the President of Azman Group and Allen Onyema, the Chairman/CEO of Air Peace, who is now the Vice-President of the association have over 30 passenger aircrafts and constituting over 50% of the entire domestic (scheduled flight) aircraft fleet.

He said Air Peace, Azman and other airlines are directly and most significantly impacted by Covid 19 pandemic, taxation, maintenance, exchange rate, aviation fuel cost etc.

He further explained that the new executives have enough ‘weight and stature’ to influence policy and pressure the government to consider their charge.

He added that also of benefit is the cultural diversity seen in these new executives.

“For me, I believe the agenda that could be considered as top priority may include: immediate release and access to palliatives, grants, waivers and incentives as indicated by the federal government.

“The commercial domestic airlines need funding support for their operations post COVID lockdown. This will ensure they don’t go under. There is a need to sustain pressure on the federal government to disallow foreign airlines from multiple entries into the country.

“The federal government should encourage and incentivize these foreign airlines to partner local airlines through Code-Sharing and/ or be their feeder and encourage joint training that lower their high overall training costs,” he explained.

John Ojikutu, member of the aviation industry think tank group, Aviation Round Table (ART) and chief executive of Centurion Securities, told BusinessDay what he thinks AON should do first is to collectively demand that the foreign airlines should be restricted to two international airports out of the five airports so classified.

Ojikutu said no foreign airline should be cleared to Lagos and Abuja but Lagos or Abuja and any other from alternate geographical zone, adding that the aim is to ensure that the domestic routes and market benefits are not infringed upon by the foreign airlines.

Why unreciprocated BASAs must be reviewed

Experts in the aviation sector have again called on the federal government to review its unreciprocated BASAs or else local carriers may be pushed out of the skies soon.

Some stakeholders had earlier argued that Nigerian carriers did not have the capacity to reciprocate flights into other countries, but this argument has been debunked by operators and stakeholders, especially after Nigeria’s largest carrier, Air Peace, acquired and registered its Boeing 777 aircraft in the country.

Three of the four wide-body aircraft it acquired for its long-haul operations to Dubai, Sharjah, Johannesburg, London, Houston, Guangzhou and Mumbai had so far been delivered.

The airline had, in 2019, commenced the Dubai route but was awaiting landing permits from other international countries before the compulsory lockdown, making it impossible for airlines to continue scheduled international operations.

Since the lockdown, Air Peace has been operating a series of ‘special flights’ to and from different countries, including China, Turkey, India, Israel and South Africa. Experts say the airline has demonstrated its vibrancy and capacity to fly to any destination across the globe.

Air Peace evacuated 327 Nigerians from London in the wake of Covid-19. However, after this flight, the UK government refused it landing permit to operate other evacuation flights, while its carriers operate freely in and out of Nigeria.

Support for local carriers key to economic development

Stakeholders in the sector have also stated that support for local carriers is important to the economy as they provide thousands of jobs for Nigerians, thereby contributing to the economy.

For instance, during the lockdown, Air Peace was the only domestic airline still creating job opportunities for Nigerians in the aviation sector.

Through the evacuation flights, it engaged Nigerian pilots, engineers, crew members, ground handlers, government agencies, air traffic controllers and security officials, among others.

Before the pandemic, Air Peace had employed over 3,000 direct employees and created over 6,000 indirect jobs for Nigerians. It has continued to call back its staff as airlines build passengers confidence to fly again.

Onyema said he was motivated to establish an airline because he wanted to create jobs and help in national development.

“I went into aviation to create jobs. I love touching lives,” Onyema noted.

The airline has provided jobs to Nigerians from different parts of the country as pilots, engineers, members of cabin crew, ground staff, administrative personnel and many others.

It maintains a robust financial status and has, over time, built integrity in international aviation circles because it always pays its bills whether to suppliers, insurers, aircraft maintenance companies and others.

Conclusion

Policies are meant for the regulation of the industry, not strangulation of operators. It is important that the federal government urgently reviews some of its policies, otherwise, there may be ripple effect which could lead to thousands of job losses and airlines going under, experts say.

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