THE FAILING AIRLINE INDUSTRY

To say that the airline business is going through a distressing period in our country today is to state the obvious. But to the extent that critical stakeholders in the industry know the consequences of cessation of operations by domestic airlines, it is important that there be a quick intervention from the relevant authorities to prevent the total collapse of the vital sector.

As things stand today, Nigerians do not have good alternatives to air travel with most of the roads in dilapidated conditions aside other challenges associated with land travels in the country. Besides, no other means of transport can be as fast as travelling by air, which is perhaps the only choice for top government officials, businessmen and women whose tight schedule of duty cannot afford long hours of road travels.

However, there are now palpable fears that the downturn in the nation’s economy may force more airlines out of business. First, it was the Aero Contractors which stopped scheduled services a fortnight ago. The First Nation Airways later announced it would suspend services until September 15 when its aircraft would return from maintenance checks overseas.  As air travellers were lamenting about low capacity and limited choices, Nigeria’s biggest carrier, Arik Air stopped operation for16 hours last Tuesday. Although it has since resumed operations, these incidents, taken together, are augury of what is befalling the industry. Therefore, if the present economic downturn continues, there may not be domestic travel anymore as the airlines would have gone under.

The major problem is easy to understand. Domestic carriers are threatened by the low value of the naira. Everything about the aircraft is imported – from the equipment itself to maintenance, technical personnel, spare parts, training and others. Most Nigerian airlines have expatriate personnel that they pay in dollars. So in a situation where over N400 is exchanging for $1, it is difficult for Nigerian airlines that sell tickets in naira to raise enough funds to maintain their aircraft and pay for the services in dollars. Besides, over 40 per cent of operational cost of an airline is spent on aviation fuel. Today that product sells at N220 per litre because it is imported. A year ago, it was selling for half that cost.

Meanwhile, even though the cost of operation is rising, airlines have not increased fares to reflect the change because many Nigerians have low disposable income, which continues to deplete as recession bites harder. But there are actions government can take to rejuvenate the airlines and these include the local refining of aviation fuel, which will drastically bring down the price of the product. Because the product is imported currently the price is determined by the exchange rate. But if government dedicates, for example, Warri refinery, which has the facilities to refine aviation fuel, Nigerian airlines would spend less on that commodity.

Government should also review the charges paid by airlines. Airlines pay five per cent of their ticket sales to the Nigeria Civil Aviation Authority (NCAA), they pay for passenger service charge, landing and parking to the Federal Airports Authority of Nigeria (FAAN) and they pay enroute and navigational charges to the Nigeria Airspace Management Agency (NAMA).

Aviation is a catalyst to economic development and that explains why many governments support their airlines through subsidy, waivers, etc. The Nigerian government does not give any incentive to domestic airlines. Rather, they pay comparatively exorbitant charges, even when successful airlines all over the world are known to make marginal profits. Although running airlines is a private business, because of the role they play in the economy, government cannot continue to look the other way while they are increasingly distressed.