- Government, stakeholders must rethink Nigeria’s troubled aviation sector
There is indeed cause for worry. When three major domestic airlines get grounded in weeks, you are bound to begin to imagine the country itself is shutting down.
This was the feeling recently as three airlines: Aero Contractors; First Nation and Arik announced in quick succession, their inability to continue to fly their domestic and foreign routes.
Although Arik Airlines, the biggest of them all, has announced its return to business, not so for the other two. Aero on its part insists it is undergoing “strategic realignment” for improved profitability, it may take a while to return as it is enmeshed in deep debt issues with the Assets Management Company of Nigeria (AMCON), which has already taken over management of the firm.
First Nation attributes its suspension of flying to operational hitches, noting that it was temporary, but Arik cites non-renewal of insurance cover for the aircraft on its fleet.
Whatever the reasons for the flight hiccups, it is a signal to the troubled state of Nigeria’s aviation industry. But even more worrisome is that the problems are plenteous and deep, requiring an urgent meeting of minds between the government, investors and stakeholders. As a strategic sector of the economy; the very gateway for foreign investors and the symbol of the economic health of any nation, solution must be holistic.
Airlines must re-imagine their business models. It is common knowledge that many airlines have been established largely on sentiments and sometimes as status symbols. For instance, over the years, many operators have acquired huge and bogus aircraft for short local shuttle flights of less than one hour. These types of aircraft are of course not fuel efficient for shuttle services.
Many do not carry out proper due diligence considering that the business is capital intensive and foreign exchange sensitive. Operating an airline in Nigeria, one earns in local currency but spends mainly in hard currency as nearly every input; including servicing, checks, spare parts and even aircraft insurance are procured abroad.
But beyond business strategy, there is no doubt that the ills afflicting the economy have also left the aviation sector prostrate. Just the way they impact on every facet of life in the country. Most notable is the foreign exchange crisis. With the scarcity of forex and the sharp drop in the value of the naira against foreign currencies, most airlines are having a hard time paying their bills.
Responding to the currency hiccups, price of aviation fuel has naturally shut up, almost doubling over a short period of time, among numerous other essential needs.
Short of government shovelling money to the airlines, what is to be done? The last time government bailed out troubled domestic airlines, it turned out a debacle as the airlines neither survived nor did the grant return to the government.
So, deploying taxpayers’ funds to help private businesses survive no matter how strategic they may be to the economy is out of the question.
We suggest that government could ameliorate the operation of airlines’ businesses by reducing the numerous regulatory levies, especially those dubiously and punitively imposed by the numerous federal agencies in the industry. Government can also intervene in the insurance costs by influencing the insurance sector to behave better. The so-called Local Content Act which has drastically inflated the premium paid by airlines could be reviewed, among other measures.
We urge government to intervene quickly by convening a stakeholders’ forum to review all the issues and generate immediate and long term solutions. We must remember that in this age, for a country not to have a viable aviation industry is akin to flying without wings
