The average lifespan of a domestic airlines is a mere 10 years and for many, poor government policies hastened their demise.
Domestic airlines are squeezed by high cost of aviation fuel, uneven allocation of destinations that seemed to favour foreign airlines, high operational costs and the inability to pass a Fly Nigeria Act, are fallouts of poor government policies.
The Nigerian Civil Aviation Authority (NCAA) records show that no fewer than 40 registered airlines, scheduled and non-scheduled, have collapsed in the last 15 years.
Some of these carriers include Associated Aviation, Allied Air, Hak Air, Kabo Air, TAT Nigeria, Belview, Sossoliso, Chanchangi, Sky World Express, Virgin Nigeria, ADC, Concord Airlines, IRS and Okada Air.
While some airlines struggle to stay afloat and others such as Air Peace is investing heavily on equipment to aid their operations, the government has to play its own part by providing the enabling environment for them to thrive.
Air Peace, no doubt is the highest employing carrier in Nigeria, creating over 5,000 direct and indirect jobs, akin to playing the role of a national carrier. Analysts say the government can do much to support an airline that has created more job opportunities than all foreign airlines put together.
John Ojikutu, a member of aviation industry think tank, Aviation Round Table (ART) and chief executive officer, Centurion Securities, listed some ways government could support domestic airlines.
First, Ojikutu said there should be a careful assessment of their business plans to ensure the airports designated for their operations are well equipped to support and sustain their day and night operations and even during inclement weather.
Secondly, he explained that government policies on open skies and commercial agreements with foreign airlines must limit their operations in domestic routes. He said concessions given to foreign airlines for multiple destinations must be reduced to two in different airports outside Lagos and Abuja.
“The foreign airlines incursion into domestic routes is seriously affecting the growth of local airlines ,” he said.
Fly Nigeria Act
Last year, Hadi Sirika, minister of aviation said that as part of efforts to make airlines viable in Nigeria, the ministry is seeking to have the National Assembly pass a fly Nigeria act. This law will require that anybody travelling on a ticket bought with public funds must travel on a Nigerian carrier unless the route is not served by a Nigerian carrier.
The concern of ‘Fly Nigeria Act’ has been on ground for decades but as good as it would have been, each time it came up, lawmakers who are in a position to make it work by passing the legislation, have frustrated it.
Many analysts have wondered why lawmakers are unwilling to back the move. The Aviation Safety Round Table Initiative (ASRTI), an aviation industry think tank said that Nigerian airlines and the industry as whole do not benefit from the many foreign airlines that airlift passengers out of the country and repatriate over 75 per cent of their revenues.
The group said that if the Fly Nigeria Act was introduced, foreign carriers would partner with local airlines to code-share allowing indigenous carriers to earn some revenue from the partnership.
“There is an urgent need to sign the Fly-Nigeria-Act legislation to help protect the Nigeria travel market for both local airlines and travel agents,” the experts said.
BusinessDay’s checks show that 39 foreign carriers operating in Nigeria realised over $3.1 billion dollars from ticket sales, up from $1.7 billion in 2018 and $1.7 billion in 2017. This improved revenue based on the bilateral and multilateral air services Nigeria has signed with other countries shows the extent of funds repatriated to foreign countries.
Single-digit interest rate to airlines
While other African Airlines are accessing fund to purchase and lease aircraft at an interest rate of three to six percent, airlines in Nigeria access loan facilities with interests rates of between 21 and 26percent.
“It is better to get new airplanes and get rid of older ones but to make this happen, we need financing. In Nigeria, no bank wants to finance an airline for more than ten years. So, you find out that it is difficult to keep up with payments on a 21 percent interest rate for ten years,” Obi Mbanuzuo, chief operating officer, Dana Air told BusinessDay.
Mbanuzuo added “When we send one aircraft for C-check, it cost us almost $1 million and takes between one to two months to get back. On the other hand, a new airplane will only need maybe 20 days ground time. It will be a bit cheaper to maintain because it hasn’t gotten to a point where of doing corrosion prevention works on the aircraft. However, interest rate to acquire more aircraft in Nigeria are scaring operators away,” he added.
Nogie Meggison, chairman, Airline Operators of Nigeria (AON) told BusinessDay that despite the fact that airline business is foreign exchange dominated, Nigerian banks still charge airlines as high as 23percent interest rate on loans.
“How do you expect airlines to survive with a 23percent interest rate? This is why airlines in Nigeria do not survive,” Meggison added.
Experts and stakeholders in the aviation sector have also called on the Central Bank of Nigeria to look into funding issue for airlines especially at a time when the air fleet size has drastically reduced.
Addressing multiple taxations
Domestic airlines, on the average, pay about 35 per cent to 40 per cent of a ticket cost as taxes and charges that come under the guise of statutory levies in addition to other charges. These include 5 per cent Ticket Sales Charge, 5 per cent Cargo Sales Charge, 5 per cent 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.
Meggisson, has called for a total harmonisation of all agencies’ charges into a single payment system, as contained in the recent proposal of a committee set up by government and supported by the airlines.
He said streamlining all fees and charges by the various government agencies into a single window will remove any confusion and double billing.
Infrastructure upgrade
Despite all these charges, many of the airports in the country do not have runway lights and navigational landing aids which meant such airports are only open between 7 a.m. and 6 p.m. daily.
“To this end, airlines can’t fully utilise their airplanes for 24-hour operations. No airplane or factory machine can be profitable only from 7 a.m. to 6 p.m. daylight operations,” Meggison noted.
He therefore calls for the provision of airfield lighting and navigational landing aids at all airports in Nigeria to reduce delays and cancellations and allow for 24-hours operation and better utilisation of airplanes.
Beefing up on aeropolitics
Allen Onyema, Air Peace chairman has urged the government to get more involved in playing aero politics to sustain indigenous carriers on designated international routes.
Onyema said: “If we must succeed on this Dubai route, the government must support us. We cannot do it alone. We can only do our best but the rest lies with the government. The government must stop unfair competition in this sector.
“The United States government did it when the Gulf carriers swooped on them, so the policy of multiple designations and frequencies for foreign carriers is detrimental to our economy. Our airlines will not grow under this policy.
“The government must help us grow the sector and not stifle it, but I know the President is a nationalist who is ready to support our carriers. “Aviation is a very tough business. I plead with Nigerians and the government to support Air Peace. We promise to give Nigerians modern equipment and unparalleled services.”
He said without government’s support local airlines will lose out on aeropolitics. He said this is why many Nigerian carriers have been unable to sustain their operations on the route.
“I have the plan to sustain operations, but if I am not supported by the government, there is little or nothing I can do. If, for instance, the government allows more frequencies of other airlines from United Arabs Emirates (UAE) into Nigeria, how will Air Peace compete? Air Peace can only be successful with support from the government,” he said.
Air Peace which operates the West coast regions has sustained Sharjah operations (UAE route) almost three months after it commenced, shaking-up competition in the route with cheaper tickets.
Air Peace played the role of national carrier helping evacuate several stranded Nigerians in South Africa following xenophobic attacks in that country at the cost over N300 million.
