Legislative Intervention for Ailing Aviation Industry

The House of Representatives Committee on Aviation recently held a public hearing to discuss with stakeholders short, medium and long term measures to save the country’s ailing aviation industry.  Damilola Oyedele writes

Nigeria’s aviation industry is not insulated from the current economic recession hitting the country. In recent times, the industry has been hit by suspension of operations by foreign airlines in Nigeria, while those who have managed to stay have reduced the number of flights they operate. Just last week, Emirates Airlines and Kenya Airways announced that they were suspending their Abuja operations. The major reason of the foreign airlines is that they are unable to repatriate profits due to inability to access foreign exchange.

Local airlines are also grappling with efforts to stay afloat. These and several issues necessitated a public hearing by the House of Representatives Committee on Aviation on the need to save the country’s aviation industry from imminent collapse.
The Hon. Nkeiruka Onyejeocha-led committee organised the four-day hearing where stakeholders, including government officials, air craft operator owners, unions and others interacted and proffered solutions on ways to move the industry forward. They also discussed modalities that would put the industry at par with world class standards.

Modernising its operations is particularly important for the sector following the International Air Transport Association and the International Civil Aviation Organisation’s predictions that air traffic in Africa would quadruple in the next 10 years. By this prediction, Nigerian airports can be boosted by 60 million passengers annually as against the current 15 million. If the nation however fails to put the necessary infrastructure in place, it risks losing such crucial economic hub to neighbouring countries, such as Ghana, which is already enjoying some benefits from Nigeria’s ailing aviation industry.

At the opening, Onyejeocha spoke on the need to restore confidence to the aviation industry.
“We cannot be doing the same things over and over again and expect different results. The sector must not collapse, not be allowed to stay under developed under our watch,” she said.
Airline operators who attended the hearing include Arik Air, Dana, Medview, Oveland, Chachangi, and Ethiopian Airways.

Public Hearing
On the first day of the hearing, the Minister of State, Aviation, Mr. Hadi Abubakar, maintained the government’s position of plans to go ahead with the concession of the four major airports in Lagos, Port Harcourt, Abuja, and Kano. The concessions, he said, are necessary as the government does not have the over N1 trillion required to overhaul and upgrade the airports to international standards.

Abubakar, however, assured that the concession process would be transparent and would be a departure from previous processes which he said were characterised by secrecy, underhand dealings and exclusion of stakeholders.
“I am not interested, neither is my boss at the villa,” Abubakar said, adding that the ministry intends to borrow from, and build on the manner of concession of the nation’s seaports.

He disclosed that the government planned to concession 100 per cent of its 21 airports eventually, even though only four were up for concession in the first phase.
“What we plan to do in the Abuja airport, for example, is to put a brand new runway and a brand new terminal opposite the current one,” he said. Abubakar added that the projects were expected to be completed between 24 and 48 months, with 30 million passenger capacity.

While conceding that the four airports were the economically viable ones, Abubakar noted that economic activities can be created around an airport to make it more viable. He cited Katsina State, whose dams are not being harnessed despite their potentials.
“If we plant vegetables, chilli, tomatoes, we can export to Europe in five hours. A handful of tomatoes there is 10 Euros, while in Nigeria, a basket is N200,” the minister said.

The minister recalled that the Central Bank of Nigeria recently approved a special foreign exchange policy for airlines to cushion the challenges in the industry. He also spoke on other issues in the industry, particularly, retrenchments, which he denied. He disclosed instead that the government recently carried out a “proper placement” exercise.
Abubakar stated, “The problem was that we had people who were graduates of just a few years in level 17, while we have people who had been working longer on lower levels. FAAN has 40 general managers. We have two each in the 20 airports, each with a personal assistant, driver and car. We cannot afford these.”

Concession Controversy
The unions in the industry, however, kicked against the concession, particularly, considering that the four airports, which are up for concession in the first phase, are the economically viable ones. National president of the Air Transport Services Senior Staff Association, Mr. Benjamin Okeowo, noted that the Federal Airports Authority of Nigeria paid salaries, wages and pensions of workers from internally generated revenue most of which came from the four airports.

This, Okeowo said, is in addition to the agency maintaining all airports in the country. “What happens to the remaining 17 airports? We have staff in all these 17, what becomes of them when the viable four are taken over,” Okeowo said. He added that about 35 per cent of revenue was being lost to leakages through the non-implementation of the cashless policy in FAAN operations

Okeowo also recalled that some of the terminals were constructed with loans from China and wondered how the loans would be repaid if they are concessioned. He noted that the federal government’s liability to the workers, from the scrapping of the Nigerian Airways, was over N200 billion and queried what would become of the liabilities.
“If we must concession, let’s go to virgin lands, airports can be built, runways, terminals built afresh and they can be operated on a build-operate-transfer basis. Selling FAAN amounts to selling the goose that lays the golden egg,” Okeowo said.

Challenges
One of the best submissions at the hearing was made by the secretary-general of Aircraft Operators Association of Nigeria, Captain Mohammed Joji, who blamed what he described as policy deviation and policy contradiction by the executive arm of government for some of the factors that have led to the closure of 47 airlines in the last 30 years in the country. Joji noted that the challenges identified in a 2006 Presidential Task-force Report on the industry existed till date and continued to hinder the growth of the aviation sector.

He regretted that the Nigeria Airspace Management Agency continued to charge dollars from domestic airline operators, despite the policy of the Central Bank of Nigeria against such practice. Joji also lamented that the country continued to charge Value Added Tax for purchase of aircraft, a practice which has been stopped in all parts of the world, as transportation is regarded as a basic service that drives the economy.
Presenting the 2006 report to the committee, Joji listed the recommendations to include that government accepted the recommendation to grant zero tariff and VAT on the aircraft, aircraft spare parts and ground equipment.
“Government also approved the removal of the five per cent VAT on the ticket sales and cargo charges…The taskforce recommendation can be corroborated by the VAT Decree N0.102 of 1993,” Joji said.

He added, “The approval of multiple destinations to foreign airlines has denied local operators earnings and this has to be stopped…
“NCAA policy of levying operators flying on schedule flight out of Nigeria is a punitive measure devoid of any economic sense to the airline…FAAN charges the most expensive land rate in the world at N60,000/sqm, which is more expensive than choice lands in Victoria Island, Lagos, and Asokoro in Abuja.”

Way forward
The minister noted in his presentation that there was an need for training of managers in the aviation sector as “the best pilots do not necessarily make the best managers.” He disclosed that plans for the establishment of an aeronautic university, to be based in Abuja, were already underway.

There is also an urgent need for the special foreign exchange policy for the airlines to be strictly adhered to, and expanded to take care of all the foreign exchange needs of a sector where almost all transactions are denominated in hard currencies.
In all, experts say any polices formulated for the aviation sector must be people-oriented, and while efforts must be made to uphold ailing airlines, optimum attention must be paid to safety issues.

They believe the government must create an enabling environment for businesses, whether local or foreign, to thrive, but more specifically, it should assist local airlines to compete favourably with their foreign counterparts.