Alarm bells have been ringing in the aviation sector since Aero Contractors, the country’s oldest airline, suspended operations at the end of August and dispatched its personnel on an indefinite leave of absence. It cited the current economic headwinds buffeting the country as reason. And, less than 24 hours later, another airline, First Nation, caught the same cold; that of Arik lasted for some hours on September 13, as it waited for the “approval of aircraft documentation related to insurance renewal.”
The Chief Executive Officer of Aero, Fola Akinkuotu, in a statement, bared it all, “the airline has faced grave challenges in the past six months.” The suspension, he stressed, will remain in force until a robust plan that will return it to profitability is put in place. Aero and First Nation are not the only airlines in dire straits. Those still in business are as much troubled, forcing them to plead with the Federal Government to intervene recently.
Since February, airlines are reported to have lost 40 per cent of their passenger traffic due to the economic downturn. The cost of aircraft maintenance is denominated in United States dollars. With the scarcity of dollars and high exchange rate, put at N300 to $1, some airlines are unable to easily pay for the mandatory routine maintenance checks of their aircraft abroad.
The Director-General of Nigerian Civil Aviation Authority, Muhtar Usman, put this in capsule when he said that First Nation resorted to self-regulatory suspension because of its plans to replace an engine on one of its aircraft, and send another for maintenance. Three aircraft are the minimum statutorily required in the fleet of an airline before it could be allowed to fly the country’s air space. But some have fallen short of this. Besides, aviation fuel is scare, and it gulps as much as 40 per cent of operational cost of airlines. They also bemoan aviation authorities’ sundry charges: landing, parking, electricity, avio-bridge; passenger service and airspace movement, among others, with their crippling exertion on operations.
Before now, Nigeria had been a notable graveyard for airlines; therefore, the economic crisis of today might not be the only reason for the convulsions in the aviation sector. There was a time the wings of EAS, Sosoliso, Savannah, Triax, Oriental, Dasab, Albarka, Fresh, Okada, Harka, Harco, Capital, Selecon, Belview and ADC airlines caressed our airspace. All of them have either closed shop or suspended operations.
It bears repeating that aviation is a capital-intensive business with global standards. Shortly after Aero temporarily shut down, aviation stakeholders met with the Senate Committee on Aviation and demanded an urgent bailout. Clearly, no domestic airline has the capital adequacy to operate. This is evident in their huge debt profiles. One of them reportedly owes N40 billion to the Asset Management Company of Nigeria.
In an attempt to provide them with a lifeline, the Federal Government set aside a N500 billion intervention fund, out of which N120 billion has been released, says the Governor, Central Bank of Nigeria, Godwin Emefiele. This was under the immediate past administration. Only N39.5 billion has been repaid. While some of the indebted airlines have collapsed, there are allegations that some of the beneficiaries diverted the funds to other businesses.
A painstaking prognosis of the challenges of the sector has become absolutely necessary. However, what is obvious is that aviation business is suffering from some structural defects in the country. A network of viable airports or flight routes is critical to survival. Among the country’s 22 airports, operators concentrate mainly on the Lagos-Abuja route, which experts say is the only one that is viable. Lagos-Kano route is no more under such radar with the collapse of industries and other business activities in Kano.
Federal Airports Authority of Nigeria statistics of passenger flow in 2012 provide an insight. In February of that year, 17,636 persons arrived and departed the Kano domestic airport; lower than the 30,149 that the Sam Mbakwe airport, Owerri, Imo State, had. Ilorin, Minna and Akure, domestic airports had, 3,826, 115, and 639 passengers respectively. Conversely, Murtala Muhammed Airport, Lagos, (domestic), recorded 295,664 passengers, and 272,673 for Abuja domestic airport, within the same period – graphic pictures that underline the unviability of most of our airports.
Time has come for operators to consider the merger of airlines, as it was done in the banking sector in 2005, in order to form bigger and stronger airlines. The President of Aviation Round Table – an industry think tank – Gbenga Olowu, among others, had made the proposal in 2010, when the country had 54 commercial aircraft. He said, “Truth be told, the airlines as we have them today cannot be described as strong schedule players. All the existing seven operators should pool resources together, operate under one Air Operator Certificate.” Olowu reasoned that doing so would solve the perennial unhealthy rivalry among the airlines, which foreign carriers often take advantage of. This is sensible.
Indeed, the confusion or threats of airlines extinction will not abate until support infrastructure is provided and corruption defanged in the aviation sector. Local airlines, for instance, survive in Ethiopia because an enabling environment and strong regulatory framework are present. Since 2013, Ethiopian Airlines has been adjudged as the most profitable in Africa. In June 2015, it recorded a net profit of $148 million, recording 200 departures daily, as against the crisis here.
It is difficult to imagine that an aviation hub like Nigeria has no standard hangar for serious aircraft maintenance. This situation should be reversed. Now is the time for both the government and the stakeholders to work in concert to provide the required support infrastructure, which is critical to the survival of airline business.
In doing so, we have to, first, kill corruption and poor contract enforcement that drove Richard Branson, owner of Virgin Atlantic, out of Nigeria. He had redefined the business in the country after 11 years in operation. Therefore, it is not just the airline business that is in danger, but also tourism and thousands of jobs. We have to salvage the situation.
