Several domestic airlines may be closing shop after the COVID-19 crisis if drastic measures are not taken to keep them afloat and help feed demand in passenger traffic in the future.
Experts in the aviation subsector who spoke to BusinessDay suggested that government-led stimulus packages and incentives be given to airlines to limit the negative impact of the pandemic on the subsector.
The aviation sector is the worst hit by the coronavirus pandemic and many airlines risk collapse amid the crisis, Hadi Sirika, minister of aviation, said on Wednesday during the daily briefing of the Presidential Task Force on COVID-19 in Abuja.
Airline operators say the sector loses N17 billion monthly due to the pandemic and that over 120 aircraft are parked at various airports across the country, with airlines required to pay accumulated cost on leased aircraft, staff salaries, allowances for crew, parking and maintenance fees, and recurrent training.
Arik Air, one of the leading airlines in the country, recently asked 90 percent of its staff to embark on unpaid leave beginning from May 1, 2020.
“We are very aware of our responsibilities and the weight attached to this. We are worst hit among all the sectors. Some N17 billion is being lost by the airlines monthly, thanks to COVID-19. The sector is highly regulated and very coordinated and has set standards that must be followed at all times, regardless, because we speak to safety,” Sirika said.
“This is the situation of civil aviation. It is really a pathetic one and I can guarantee you that several airlines won’t come out of this, unfortunately,” he said.
Seyi Adewale, chief executive officer, Mainstream Cargo Limited, suggested deliberate sourcing, loans, grants, tax waivers, special forex windows and rates, airport infrastructure deliberate upgrades or construction, and reduction of airport taxes or surcharges.
He stated that locally, government can consider expanding definition of aircraft spare parts to include other important aircraft items such as brake ASSY, safety appliances, rafts, and aircraft tyres in order to enjoy zero percent duty waivers.
“In consultation with relevant bodies, companies and associations, increase the seven-day grace to clear cargoes to 14 days and reduce the Airport Authority concession fee from 5 percent to 2.5 percent with at least three months concession payment-free period. This frees cash for aviation service providers that are tenants to these airport authorities,” Adewale said.
Ikechi Uko, a travel expert and consultant, told BusinessDay that government can waive all taxes and charges on airlines as contribution savings to running cost during and after the crisis.
Uko said this way, no fake airline would collect cash subvention like they did the last time.
“We are very aware of our responsibilities and the weight attached to this. We are worst hit among all the sectors. Some N17 billion is being lost by the airlines monthly, thanks to COVID-19. The sector is highly regulated and very coordinated and has set standards that must be followed at all times, regardless, because we speak to safety,” Sirika said.
Several countries including Russia, USA, Canada, Britain, among others have come up with one measure of support or another to help airlines recover from losses resulting from impact of COVID-19, Olumide Ohunayo, an aviation analyst, said.
BusinessDay checks show that US President Donald Trump signed a historic $2.2 trillion stimulus bill into law on March 27 which includes $61 billion in relief for the airline industry. The relief package includes a combination of direct grants and loans for the airlines, with the grants conditioned on the discretion of the government to take an ownership stake.
Ohunayo said Nigeria would not be at default if it looks at options of supporting the aviation industry to kick back the economy after the coronavirus crisis.
“There are so many options before the government in helping support the airline. It is either they give direct financial incentives to the aviation industry or they give loans to organisations to get back up again,” Ohunayo said.
“Another option could be approving corporate bonds through the Central Bank of Nigeria (CBN). Tax waivers could also help, and waiving some charges to ensure airlines get back on their feet.
What we have before us is not a matter of liquidation but insolvency and disappearance of organisations. These options are what we should take to save the airlines,” he said.
Further checks show the Australian aviation industry will receive a $715m relief package as the country’s central government waive a range of fees, including aviation fuel excise, air services charges on domestic airline operations and domestic and regional aviation security charges, to help support the sector reeling from the effects of the coronavirus and associated travel restrictions.
Cathay Pacific and other Hong Kong-based airlines will gain substantial financial benefits from a new COVID-19 aid package unveiled by the government. Direct relief includes subsidies based on aircraft fleet size. An airline will receive HK$1 million ($129,000) for every large aircraft registered in Hong Kong, and HK$200,000 for every small aircraft. The aviation measures are part of a HK$138 billion stimulus package for the broader economy announced late on April 8.
