BusinessDay
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COVID-19: Stakeholders count losses during four months shutdown as airports re-open

With the resumption of domestic flight operations from Murtala Muhammed Airport General Aviation Terminal (GAT), Lagos and Nnamdi Azikiwe International Airport, Abuja, after four months of airports closure, there are obviously new normal which will be observed as long as COVID-19 lasts.

A visit to the Lagos airport on the day flights resumed showed that airlines had to operate skeletal flights with about 60 percent load factor in adherence to social distancing protocols on board. Passengers were required to wear face masks, observe social distancing, use hand sanitisers and thermometers to check their body temperatures.

Airlines are heaving sighs of relief over the resumption of flights even though they may not realise as much revenues as they were making before the closure of the airports. With the re-opening, there may be hope for the industry again.

However, the industry stakeholders are still counting their losses as a result of the airports closure which lasted for four months.

Taxi driver recounts awful experience during closure

Resting his two elbows on the roof of his car and watching the sky absent-mindedly as the dark, scattered clouds gradually chased the sunlight out of sight that evening, it was apparent Taiwo Razaq, a taxi driver at the Murtala Muhammed International Airport (MMIA) Lagos, had a lot on his mind.

But he sprang back to life abruptly when our correspondent gently knocked on his car, momentarily masking his worries with calculated smiles, perhaps hoping his first customer for the day had finally arrived. Time was already 4pm.

The past few months have been the worst for the 57-year-old father of four and husband to a petty trader, following the closure of the airports on account of the COVID-19 pandemic, which has infected over 25,000 persons and killed over 500 persons in Nigeria alone.

Thus, his taxi business, which is his only source of income and one that fetched him about an average of N45,000 daily, has, like many other businesses, been badly hit by the lockdown imposed by the government to contain the spread of the virus.

His daily income did not only plummet to about N3,000 on days when business is good, there were days he went back home with nothing. The once bubbling car park used by millions of travelers, had become a shadow of itself.

“You know airports are closed and people are not flying, so there are no passengers,” he muttered when our correspondent asked how the airport closure had affected his business and public transportation around the airport generally.

Surrounded by an unusually quiet car park that is now characterised by inactivity that could make an idle mind slip into boredom or frustration, Razaq said he was going through the worst moments of his life. “Feeding my family has become a problem and the many things I had planned to accomplish in the year has all been on a standstill,” he added.

In an emotive voice that betrayed his stern looks, he said, “It has been four months of depression and living from hand to mouth. Before this COVID-19, I made an average of N40,000 to N50,000 daily. I had planned the things I wanted to accomplish this year, relying on my average daily income.

“All of a sudden, those expectations have been dashed because of the hardship brought about by the pandemic. Sometimes I can’t even boast of making N1,000 throughout the day. You can imagine that, in spite of the five people I have to feed. It’s been so rough these four months. I can’t wait for this nightmare to end.”

Meanwhile, as pitiable as Razaq’s situation sounds, it is a sad reflection of how many businesses and stakeholders in the aviation industry have been negatively affected by the raging coronavirus disease.

Individuals, corporate organisations and government establishments, airlines, regulatory agencies, air traffic controllers, ground handlers, pilots, crew members, engineers and other stakeholders have their respective bitter stories to tell as they have all suffered from the impact of the pandemic and the lockdown imposed to contain its spread.

BusinessDay’s checks show that about 250 taxi drivers operate around Lagos airport. Daily income of these drivers is between N35,000 to N50,000. This implies that in a day, taxi drivers at the Lagos airport make between N8.75million to N12.5million on the aggregate. However, while the airport was closed, these drivers made a daily return of between N1,000 to N3000, thereby realising between N250,000 to N750,000 daily.

The Minister of Aviation, Hadi Sirika, had said that Nigeria’s aviation sector had been losing N24bn monthly since the outbreak of COVID-19 in the country – N7 billion monthly for aviation agencies; N10 billion for airlines and N4 billion for ground handling, catering and others and the tangential N3 billion.

Beyond the losses incurred by the major stakeholders, the taxi drivers are no longer finding it easy.

Airlines park 120 aircraft, lose N40 billion

The Nigerian aviation industry which is totally denominated in foreign exchange has been badly hit by the pandemic. Other currencies are used for aircraft procurement, training of pilots, sourcing for jet oil and spare parts, as well as maintenance.

BusinessDay’s checks show that airlines operating in the country have since parked 120 airplanes and have lost an aggregated N10billion monthly as a result of the pandemic. This implies that in four months, airlines have lost N40 billion as a result of the airport closure.

The Airline Operators of Nigeria (AON) disclosed that with over 120 aircraft parked at various airports across the country, airlines are still required to pay accumulated cost on leased aircraft, staff salaries, allowances for crew, parking and maintenance fees, and recurrent training.

BusinessDay’s checks show that domestic airlines, on average, pay about 35 percent to 40 percent of a ticket cost as taxes and charges that come under the guise of statutory levies in addition to other charges.

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.

Many of these taxes and charges amount to double taxation such that any incentive seemingly provided by the government to airlines is taken back by the agencies.

Nogie Meggison, President of AON, acknowledged the adverse impact of the virus on the globe and Nigeria’s economy specifically, while urging the aviation agencies to take a cue from the Central Bank of Nigeria and seek ways to help airlines cushion the effect of the pandemic.

Meggison said: “It is instructive to note that about four weeks before domestic airlines decided to take the difficult decision to suspend both local and international flights to urgently support the government’s effort to curtail the virus, passenger traffic had declined drastically to about nine percent, leaving the domestic airlines in dire financial strait while raking avoidable cost.

He said he aligned with global concerns and reports which puts aviation sub-sector as the worst hit by the various containment efforts and strategies world-over, coupled with the recent announcement by the International Air Transport Association (IATA) that passenger airliners could lose up to $133billion in revenues this year.

He lamented that these troubling statistics are likely to threaten the existence of many domestic airlines in Nigeria who are still grappling with over 32 multiple charges if nothing urgent in the form of palliatives are not provided for the airlines.

Impact on government agencies

The minister of aviation had put losses incurred by all government agencies in the aviation sector as a result of the pandemic at N7 billion monthly. This implies that for the four months, all government agencies lost N28 billion as a result of the airport closure.

A document titled: ‘The Future of Aviation in Africa: Focus on Nigeria’ by Tolu Odutola indicated that the Federal Airports Authority of Nigeria (FAAN) has been most affected, cognizant of the fact that it has a workforce spread across a total of 22 airports in the country, and without an alternative source of revenue. Other agencies with similar predicament include the Nigerian Civil Aviation Authority (NCAA), which is the apex regulatory body for aviation, and whose monthly overhead stands at N750 million; the Nigerian College of Aviation Technology (NCAT), which requires N150 million monthly; the Nigerian Meterological Agency (NIMET), which requires N290 million monthly; and the Nigerian Airspace Management Agency (NAMA), which requires more than N500 million monthly, to sustain overhead expenditure. These agencies are funded through budgetary allocations by Federal Government and their Internally Generated Revenue.

The current crisis has left the agencies solely at the mercy of allocations by the Federal Government, whose revenue has equally plummeted substantially due to the drastic global fall in oil prices. This is further compounded by the downturn in the travel and tourism industry which has been left on its knees by the pandemic.

Impact on the economy/job losses

Prior to the COVID-19 crisis, aviation contributed $1.7 billion to Nigeria’s GDP, offering employment support to 241,000 persons. Figures by the Nigeria Bureau of Statistics indicate that by the end of Q4 in 2018, aviation was the second fastest growing sector in the country, taking the lead by Q4 in 2019.

According to IATA, this pandemic risks 124,000 Nigerian aviation jobs, which would see the country lose up to $900 million in GDP, (N328.5bn using N365 to a dollar). Already, the major carrier in Nigeria, Arik Air, has asked 90 percent of its 1800 staff to proceed on indefinite unpaid leave, with the remaining 10percent subjected to an 80 percent pay cut on their salaries/wages.

There are fears that up to 50 percent of the workforce may be compelled to resign, as the airline plans to right-size the workforce before flight resumption.

In April, Max Air followed suit by sending its staff on unpaid leave for the period of the imposed lockdown.

BusinessDay’s checks show that there are plans to bring back these staff but over 50 per cent workforce may be asked to go.

Ground handlers project loss of N20bn in 2020

The Association of Aviation Ground Handlers (AGHAN),which is made up of Nigerian Aviation Handling Company (NAHCO) Plc, the Skyway Aviation Handling Company (SAHCO) and Aviation Handling Services (AHS) has forecasted N20bn loss in revenue generations in 2020 due to the COVID-19 pandemic, which has hammered the global economy since the beginning of the year.

Adigun Olaniyi, Chairman, AGHAN, in an interview with BusinessDay decried the advent of COVID-19 virus, saying it had grounded handling business in the sector. He stressed that the partial unlocking of the economy by the Federal Government did not indicate the end to the crisis in the country.

Olaniyi regretted that due to the pandemic, the entire first quarter of 2020 was wasted, while a major part of the second quarter was also lost to the crisis, stressing that only the third and fourth quarter could be salvaged from 2020.

“We buy our equipment in dollars and when we purchased these equipment, the naira was still N360 to a dollar. We have import duties to pay to respective bodies. The government did not give us import waiver as it did to the airlines and others, yet, an ordinary forklift is not produced here in Nigeria, we only assemble them in the country. Furthermore, the ground handlers charge for their services in naira.

“One can say cargo is coming in, but remember what we call the multiplier effect. If America can lose up to 30 million jobs so far because of the crisis, can you quantify the number of jobs we are going to lose in Nigeria?

“If the importers bring in goods for instance, and we decided to clear it free of charge and Nigerians don’t have enough capital to purchase the goods because they have lost their jobs, recession will set it and the importers will not be encouraged to bring in additional goods. So, there is going to be reduction in the cargo inflow because there is no economic power to buy these goods and services.”

Travel agencies lament huge losses

Susan Akporiaye, the National Association of Nigerian Travel Agencies (NANTA) told BusinessDay that in the past four months; travel agencies lost N45 billion in ticket sales, when compared with sales from last year.

Akporiaye disclosed that an estimate of 50,000 jobs have been lost already, adding that as a result of the lockdown, all travel agencies have been temporarily unemployed.

“We are, therefore, pleading with the government to give us grants because loans cannot work for us since we don’t have a product.

“We are service providers and we can’t collect loans to pay our staff. Loans are interest based. We have to pay staff from income made. For the government to help save our jobs, they need to provide grants,” she said.

Tourism and hospitality industry not spared

The hospitality and tourism industry have also lost a huge sum of resources which has caused not only economic but psychological loss to the industry players.

Dauud Gbenga Sunmonu, the Lagos State Coordinator, Federation of Tourism Associations of Nigeria (FTAN), told BuinessDay that in the valuation of loss, the industry had lost well over N10billion naira.

Sunmonu said he expected government intervention to come in several ways, not limited to access to soft loans to hasten quick reopening of the MSMEs establishment; the provision of grants to the vulnerable micro establishment in the hospitality, arts and culture industry and the provision of enabling infrastructural support that will aid quick reopening.

“This is the time to promote Domestic Tourism, taking every site as an entity. The government needs to use agencies to provide business support and advisory services to investors in line with the new business order,” he said.

Way forward

Nogie Meggison, the AON President, suggested an option of approving corporate bonds through the CBN and completely waiving some charges to guarantee the survival of airlines and avoid over 100,000 direct job losses post COVID-19.

“We are aware that Russia, the U.S, Canada, Britain, and some other countries have come up with one measure of support or another for their airlines and Nigeria will not be defaulting, if it looks at options of supporting the aviation industry.

“AON are the only airline operators still paying VAT on commercial air transportation, which is not obtainable anywhere in the world. We have said this countless times that the VAT is adversely affecting the sector by subtly reducing the number of those who can afford air travel due to high fares, and in view of the impact that this pandemic will have on the economy, the VAT will continue to be an increased burden on Nigerian travelers,” Meggison said.

Seyi Adewale, the chief executive officer of Mainstream Cargo Ltd., suggested that the starting point would be to begin to plan for the next pandemic because this had become a recurrent feature that affected the aviation subsector more than other sectors within the polity, adding that the outbreak of Ebola, MERS, SARS and now COVID-19 should be enough lessons to know this, with reference to Bill Gates inspired next global threats and suggested next course of actions.

“Airlines, airports, fuelers and many other aviation services providers need to review their risk management documents and Standard Operating Procedures (SOP) to include proactive, preventive, containment and mitigation actions against the next Bio-Threat.

“These strategy documents must also be robust and broad-based to include actions from all departments and business units. This is particularly important for organisations that have business operations in different regions or states. A well thought-out strategy document would impact positively on the future survival of such entities in the next pandemic, hoping they survive the COVID-19 crises,” he suggested.

Adewale also suggested that government stimulus led packages and incentives must be given to limit the negative impact of this pandemic on the aviation sector.

These, he said, included 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, the Nigerian government could consider the followings:

“Expand definition of aircraft spare parts to include other important aircraft items such as brake ASSY, safety appliances, rafts, aircraft tires in order to enjoy zero per cent 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 five 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.”

‘New normal’ as airlines resume flights

Domestic airlines have raised fares by almost 50 per cent since flight resumed.

BusinessDay’s check show that a one-way ticket from Lagos to major destinations such as Abuja, Port Harcourt or Owerri increased by 48 per cent from between N22,000 to N28,000 to between N33,000 to N41,000.

For instance a one way ticket from Lagos to Abuja on Arik Air now costs N32,699, for Dana it costs N35,099 and on AirPeace it costs N40, 299.

With the implementation of social distancing on board, airlines may be having between 60 to 65 percent load factor when passenger traffic kicks off.

In a Boeing 737 aircraft with 200 passenger capacity, airlines could make N5 million on a trip. However, with about 120 passengers on a Boeing 737, with an average air fare of 33,000, airlines will now be making about N3.96million on a trip.

Airport taxies are required to carry one passenger in the front seat and two passengers in the back seat as against three passengers. This has made taxi drivers increase fares by 50 per cent. For instance a trip from the airport to Ikeja which cost N100 before, now goes for N150.

Following the approval of flight operations, FAAN released new procedural guidelines for air travelers and other airport users. The new Standard Operating Procedure (SOP) is aimed at protecting all stakeholders and preventing further spread of the COVID-19 virus.

In the ‘New Normal,’ departing passengers must comply with the following guidelines; All passengers must arrive the airport properly kitted with their face masks on.

They must also ensure a minimum of one point five meters (1.5m) physical distancing, Aviation Medical/Port Health personnel would screen each passenger and ensure the use of face masks, those travelling with pets must get necessary clearance from Nigerian Agricultural Quarantine Services, All passengers’ luggage would be disinfected before entry into the departure halls.

Passengers are required to wash their hands as often as possible, hand sanitisers would be provided for passengers before entrance, at the waiting halls/lounges and pre-boarding gates, All footwear would be disinfected or sanitised by foot mats placed at all entrances to the terminal building, amongst others.

For arriving passengers, on disembarkation from the aircraft, passengers would observe physical distancing, as they board the Co-Buses (hand sanitisers would be provided in the buses), physical distancing protocols must be observed at the baggage claim area, where hand sanitisers are also provided, disinfected trolleys would be made available for passengers.

All COVID-19 protocols must be observed while undergoing customs check, passengers would exit the halls and head straight to the car park for pick up. If they must speak to anyone around, then to a properly tagged Aviation Security (AVSEC) officer, physical distancing would be maintained while waiting to be screened by personnel of port health services, amongst others.

In addition to the above guidelines, passengers are required to observe social distancing and make use of the floor markings at the security screening area.

 

 This report was facilitated by the Wole Soyinka Centre for Investigative Journalism (WSCIJ) under its COVID-19 Reality Check project.

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