Experts suggests models to revive Arik, Aero as AMCON denies setting up national carrier

Experts in the aviation sector are suggesting to the management of the Asset Management Corporation of Nigeria (AMCON) proper management models to adopt to keep the two largest domestic carries, Arik Air and Aero Contractors alive, amid the challenges facing airline business in Nigeria.
This is just as sources close to AMCON told BusinessDay yesterday, that the Asset Management Corporation does not intend to convert the airlines into a national carrier and the corporation is willing to sell its debts to any investor who is willing to buy.
Arik Air and Aero Contractors, together amount to over 70percent of the domestic airline market in Nigeria and their management is said to be key to the sustenance of the indigenous market.
“To revive Aero Contractors and Arik, AMCON will need to structure them as  low cost carriers. They should try to reduce their cost and make them operate effectively and efficiently, so that more people can patronise these airlines, Dong Pam, chairman, Governing Board of the Nigerian Aviation Safety Initiative (NASI) told BusinessDay.
Pam recalled that in the budget of 2016, the government slated N1.25billion for a 737 simulator to be established in the Nigerian College of Aviation Technology, Zaria, in a bid to reduce the cost of training which is usually carried out abroad.
He explained that this way, the government can support the industry constructively as this will reduce the cost of training pilots for both Arik Air and Aero Contractors, as both airlines make use of Boeing 737 aircraft.
“The government can also establish and support a Maintenance Repair Overhaul, (MRO), in order to further reduce the operational cost for all the airlines, as these costs  affect the profit margins of airlines and also translate in their ticket sales,” Pam added.
BusinessDay’s checks show that commercial airlines, charter operators and privately owned jets, spend about N250 billion annually on aircraft maintenance and simulator training of pilots annually.
“AMCON should improve corporate governance at Arik to turn its fortunes around. They must leave the airline’s management in the hands of professionals. The management should also guarantee security of the jobs of innocent employees,” Bernard Bankole, President, National Association of Nigeria Travel Agencies (NANTA) said.
After the Asset Management Corporation of Nigeria (AMCON) took over Arik Air as a result of its N300billion debt profile, it said it would require over N10billion to fix the airline before it would resume full and uninterrupted flight operations to its regular routes across the country and beyond.
The corporation also said the situation is so bad that only nine aircraft out of the 30 in the fleet of the airlines are operational, 21 of them have either been grounded, gone for C-check in Europe, among other forms of challenges.
John Ojikutu, a security expert and the former Commandant of the Murtala Muhammed International Airport (MMIA), Lagos, told BusinessDay that airlines’ main challenges are the lack of good corporate government or good management team that understand how civil aviation business works.
“Now the airlines need good corporate management with experienced operations teams but with regular monitoring of earnings and spending by the responsible aviation authority in compliance with the appropriate economic regulations.
“It is not economical now for any airline to fly passengers to Abuja or any other route of one hour flight at a cost of less than N50,000 considering the current exchange rate and other statutory charges; especially if we are still importing fuel and depend on offshore maintenance and spares.
“I do not agree with the new Arik management that it is sourcing for N10 billion to bring the airline back to full operation; that would keep the airline in perpetual wastages of earnings. Let the new management stick to domestic and possibly regional operations making average of 25 to 30 flights a day for six months and make an evaluation of its earnings and debt payments to know if it has made any significant progress.
“With this, I do not think it would need more than three billion in addition to ticket sales and cargo charges earnings for a start, to cover operational costs of two months. Anything more than five N5billion for two months operations, based on 25 to 30 flights per day, will revert the airline to ground zero,” Ojikutu said.
Before now, Arik claims it was operating 100 to 120 flights per day and was consuming 500,000ltrs of fuel per day; that translated to about N100m on fuel alone per day, at N200 per litre.
NogieMeggison, Chairman of Airline Operators of Nigeria (AON), had said that the charges levelled on airlines should be reviewed to reduce huge debt burdens on the airlines, which has today contributed in the financial crisis of Arik Air and Aero Contractors.
“Ordinarily, airlines meet so many costly foreign exchange components daily, which account for 70precent to – 80percent of their direct operational cost, such as jet fuel, spare parts, insurance and simulator training among several others.
BusinessDay’s checks show that domestic airlines, on the average, pay about 35percent to 40percent of a ticket cost as taxes and charges that come under the guise of statutory levies, in addition to other charges.
These include five percent ticket sales charge, five percent cargo sales charge, five percent Value Added Tax (VAT), passenger service charge, charter sales charge, aircraft inspection fees, simulator inspection fees, landing charges, parking charges, terminal navigational charge, enroute charge, fuel surcharge, airport space rent, electricity charges, and apron pass, ramp access charges, and a newly imposed registration fee, all of which are paid to government agencies.
Meggison said there is an urgent need for a total harmonisation of all agencies’ charges into a one-stop shop payment system, which was recently proposed by a committee set up by government and supported by the airlines, but was eventually frustrated by the agencies.