Clear economic policies seen improving airlines’ success

The success of airlines in any country has been strongly tied to clear economic policies propounded by policy makers, amid the economic downturn. Despite the current recession in the country, experts in the aviation sector believe that the right policies can drive the sector and attract direct and foreign investments.

Allen Onyema, managing director, Air Peace said that investments in the sector will be successful if only the government remove stringent policies and provide the enabling environment for them to thrive.

Onyema said that before now, major setbacks in the aviation sector were as a result of unfriendly operating environment and he hopes that government can learn from its past mistakes to make these opportunities become reality.

Nogie Meggison the Chairman, Airline Operators of Nigeria, (AON) said that there is an urgent need for a deliberate economic policy that will critically look into the support and the positive growth of the aviation sector and survival of domestic airlines in the country.

“Following the air crashes of 2005/2006, the Federal Government came up with a deliberate policy to ensure air safety in Nigeria. As fallout of that singular action, today Nigeria has had an excellent safety record of 93% between 2006 and 2017. The country also secured the Category 1 Status and most of the scheduled airlines are currently The IATA Operational Safety Audit (IOSA) certified as a strong testimony of the country’s commitment to air safety.

“Safety and Economic policy go hand-in-hand. Where there is no financial profit for airlines, safety would be compromised. A clear economic policy for the survival of domestic airlines is very critical, especially at this time when 25 airlines have gone under in 30years. Safety and Financial Economic Policy must go hand-in-hand; as airline investors are in the business of aviation for the profit and can’t make profit without safety or have a safe airline without profit,” Meggison said.

Airline operators have pointed out some major issues to be the removal of Value Added Tax (VAT), the review of 5% Ticket Sales Charge (TSC) to a flat rate (in line with the global best practices) and the harmonization of over 35 Multiple Charges which add huge burdens on airlines.

Others include poor Navigational and Landing Aids that limits operations to daylight operation for most airports (Nigerian Airlines fly an average of only 5 hours as against the average of 10 hours worldwide per airplane); high cost and epileptic supply of JetA1, obsolete infrastructure that hampers the ease of doing business; and Lack of consultations with airlines before introduction of new charges and policies among others.

“These are some of the main reasons for the short life span of Nigerian airlines averaging about eight years,” Meggison stressed.

The International Air Transport Association (IATA) recently conducted a quick impact analysis of a potential removal of the domestic VAT of 5%. Using an average domestic airfare, it would reduce the ticket price by 4.39% which would mean a boost in domestic air traffic of 3.51% or around 133,000 passengers a year together with the multiplier effect of additional turnover of revenue from other indirect businesses.

Meggison noted that this growth in demand for domestic air travel and making Nigeria the Hub for Africa can easily make aviation the 4th contributor to the economy and a major contributor to the Gross Domestic Product, (GDP) as well as create 200,000 new jobs for our ailing youths through its direct and indirect link (airlines, airports, ground handlers and catering companies).

He added that from the foregoing therefore, it means the mortality rate of airlines in Nigeria within the last 11 years stands at 57%. This is quite alarming because it means virtually half of the airlines that existed within the period in review have all gone out of business and 2 of the major airlines exciting today are in receivership.

“We cannot overemphasize for Government to create a right enabling environment for the African Aircraft Leasing Company (AALC), OEM led MRO centre, African Aircraft Spare Parts Company (AASC) and Aggregated Services Solutions provider to be able to list and trade on the NASD OTC, Nigerian Stock Exchange, Aviation Asset Backed Securities (ABS), Enhanced Equipment Trust Certificates and other innovative tradable monetary and debt instruments.

“Government should provide exemption from certain charges such as customs duties and grant us pioneer status, to create a one stop shop for the processing and issuance of all necessary permits and licenses.

“We need a special visa regime and dedicated immigration procedure for crew and workmen in the aviation industry. Airport concession fees and other charges will need to be waived or differed for these brand-new aircrafts and especially for the MRO bound aircrafts,” Tokunbo Fagbemi, the Executive Director, SpringFountain Infrastructure Limited said.

Fagbemi added that the Federal Government should work to align Nigeria with international standards on control and compliance with aircraft noise and fuel emission and should invest in aviation education, skill building and skill development capacity.

 

Ifeoma Okeke