Leveraging Government, Private Sector Collaboration to Resuscitate Aviation Sector

The four major challenges bedeviling aviation industry, which have been identified as high cost of aviation fuel, depleting fleet of domestic airlines, aircraft maintenance facility and paucity of foreign exchange, can be addressed through collaboration between government and the private sector, writes Chinedu Eze

The popular adage that no airline in Nigeria can succeed without government support literally means that government, which created the laws that made flight operations possible must enforce these laws and provide necessary services for orderliness to happen and for airlines to have conducive environment to render their own services.

But there are much more that the government must do to enhance air operation in Nigeria.

If government raises high taxes on commercial airlines, they will be driven out of business. If government removes tariff on imported aircraft and spares, it will enhance flight operation because the airlines will spend less on importation. If government does not protect Nigerian airlines on international services, their destination countries may not acquiesce to their request. So government’s role is crucial to airline operation in Nigeria and in other parts of the world. This is why government’s support in airline business is very critical.

Government signs Bilateral Air Service Agreement (BASA) with countries and imbedded in the BASA are commercial agreements that airlines abide by. So government through policies and regulations dictate how airlines should operate in every country. This explains why government airlines are held responsible largely for failure of airlines.

Forex

The major impediment to airline operation in Nigeria today is the inability of airlines to access foreign exchange. Domestic airlines are at the throes of extinction if the current situation continues to prevail; a situation they cannot have access to foreign exchange to buy spares, ferry their aircraft overseas for maintenance and also pay for insurance of their aircraft.

Travel expert and organiser of Akwaba African Travel Market (AKWAABA), told THISDAY that the Central Bank of Nigeria (CBN) should consider the request of Nigerian airlines to have access to dollars, just as it had responded to the request of foreign airlines, noting that the number of aircraft in Nigeria continues to deplete as the airlines could not bring in their aircraft that were taken overseas for checks. They cannot take the ones due for checks overseas and they find it very difficult to obtain forex and import aircraft spares to conduct ‘A’ and ‘B’ checks, which could be done in the country.

He said shifting from operating 60 aircraft fleet to about 30 aircraft fleet, meant huge investment loss, and expressed worry that the number of operating aircraft continues to shrink, adding that with the loss of aircraft seats and increasing passenger demand, airfares will continue to soar.

Spokesman of Airline Operators of Nigeria (AON), who is also the Chairman/CEO of United Nigeria Airlines, Prof Obiora Okonkwo, recently stated in a TV interview that domestic airlines needed government support because the operators are finding it very difficult to render their services in an environment where they have to go to the parallel market to access dollars at a very exorbitant price, noting that it is becoming increasingly difficult coping with operational challenges in the country.

He said if government should support domestic carriers and facilitate their push to operate international destinations, Nigerians would pay less for international travel and that there would be less money to be repatriated by international carriers.

“If the local airlines are supported we will build capacity and operate to more international destinations. If you check what the fares Air Peace charges to Dubai and what foreign carriers charge to the same destination, you know the level of exploitation on Nigerian travellers. So they have to support local airlines. The good news is that all the monies will remain in Nigeria,” he said.

Okonkwo also called on the federal government to review BASA and ensure that Nigerian carriers are given landing rights as they do foreign airlines in the principle of reciprocity.

Blocked Fund

Early this week, industry stakeholders commended the action taken by CBN by releasing $265 million to foreign airlines and described it as face-saving. They also called for the total liquidation of the balance of the debt owed the international carriers, put at $465 million by the International Air Transport Association (IATA) and urged that Nigeria should ensure that blocked fund never happened in Nigeria again. Industry analyst and the publicity secretary of Aviation Round Table (ART), Olu Ohunayo said that what CBN did was good for Nigeria, international air travellers and foreign airlines, noting that the payment has helped Nigeria to redeem its image.

He said that the challenge before Nigeria is to win back the credibility of a credit worthy nation and also expressed hope that what happened in the aviation sector would not affect other areas of the economy.

 “I hope we will not get backlash from other sectors of the economy based on our action in the aviation sector. We should not allow the industry to lump us together with Venezuela, Lebanon and Zimbabwe that have been on this for a while. We do not belong there. Now that the first tranche of payment has been made, they must continue to provide the forex so that by December/January they would have completed the payment,” he said.

BASA Review

There has been a call for BASA review so that Nigerian airlines could be given more opportunities in the commercial agreements with foreign airlines and their host countries.

Industry expert and Secretary General of Aviation Round Table (ART), Group Captain John Ojikutu (rtd), told THISDAY that the federal government should review the multi designation given to foreign airlines so that when they bring passengers to Lagos and Abuja, local airlines would help them to distribute the passengers to other airports.

“First, remove the multiple destinations given to the foreign airlines and limit them to either Lagos or Abuja and one other airport in the alternative geographical area to their choice in Abuja or Lagos; let them make as many frequencies as they wish to the given destinations. But they must make interlining arrangements with the domestic airlines to help distribute incoming international passengers to their final destination and connect outbound international passengers to the nearest international airport but payments must be done for the interlining connection in dollars.

“This way, you remove the foreign airlines out of our domestic routes and domestic markets of the domestic airlines. Finally, ensure that a Domiciliary Aviation Commercial Account is opened with the CBN where money generated by the operators in Aviation and Maritime are kept and naira equivalent given to the depositors. These dollars can be taken back when needed and the naira returned. That domiciliary account can be succour for the repatriation of the foreign airlines money. There is also a BASA Account with the CBN where the repatriation money can substantially be taken,” Ojikutu said.

Airline operator and industry stakeholders have said that prior to the liquidation of Nigeria Airways Limited (NAL), the airline negotiated all BASA on behalf of Nigeria. 

They said that in the BASA agreements then, there was commercial agreement, which required that the airline paid money for extra frequencies.

The airline operator said: “NAL then was jam packed with industry gurus and patriotic and proud citizens who were sometimes just proud to wear the colours without even monetary benefits as we have today.  They were then smartly limiting the BASA frequencies then to about three times or so per week so that they could make money on extras. Smart patriots they were!! And I believe some of those patriots are alive. That royalty money was also then going directly to Nigerian Airways if my memory is not failing me.

“Those who know, NAL was not designed as a profit making company then, it served government needs with officers traveling with warrants instead of cash and NGA 001/2 movements were also burdened on NAL. In fact, the government actually commandeered aircraft at will to serve government needs. NAL was also presenting and enjoying funding through the national budget annually as a parastatal of government. If am wrong about the above, I stand to be corrected.” 

 “About 2013 or so, Federal Ministry of Aviation (FMA) cancelled commercial agreement part of the BASA. I don’t recall the reason, but I think they said because Europe was no longer charging royalties, so we cancelled ours too. We scrolled the list of EU countries and alas! Nigeria was missing as EU member, so one wonders why? But it’s FMA, so no quarrels as master has spoken. 

“The multiple designation syndrome then started and still continues now. Whether we get money for them again or not, honestly, I lost count and stand to be corrected if I say we no longer make money. The effect is now contributing to the huge capital flight and the remittance pressure on the nation’s CBN amidst the global and economic issues we are currently facing generally because we consume way more than we produce,” the industry stakeholder said.

Informed source, however, told THISDAY that senior government officials in the Ministry of Aviation negotiate deals with foreign airlines unofficially and secure frequencies and also serve as go-between between airlines and the Minister.

“Yes, it became apparent in 2013 but it has not stopped because those who would have stopped it are benefitting from it. Recently I just heard that Qatar Airways is operating two times daily from Lagos. You may never know about it because there was no publicity. The airline did not even advertise it because they knew how thy got the increase,” a source told THISDAY.

Maintenance

Another major challenge facing Nigerian carriers is their inability to carry out major checks in Nigeria for many of their aircraft. It is estimated that when Nigeria had about 60 aircraft operating in the country it was spending near a billion dollars on checks and spares overseas. The difficulty of earning revenues in Naira and paying dollar to maintain aircraft overseas is real challenge for domestic airlines.

This is why many industry stakeholders have canvassed for government to facilitate the establishment of major aircraft Maintenance, Repair and Overhaul (MRO) facility in Nigeria.

The stakeholders said that government is not expected to put in money in the project but it would provide the land, enhance other logistics and give it the necessary it needs.

“A proper, internationally competitive MRO operation would need EASA (European Aviation Safety Agency) and FAA (US Federal Aviation Administration) certification, aside from the Nigerian Civil Aviation Authority (NCAA)’s. For this, and ab initio partnership with an already recognized international MRO player would help set the facility up properly for business. What they in turn would need is a committed, professional local partner, a proper, modern hangar facility and ‘due business safeguards’, especially during the start up phase. A competent local MRO available for local airlines would make a huge difference to the local airlines businesses,” a senior official of one of Nigeria’s major airlines, said.

For the aviation industry to be revitalized, there should be purposeful synergy between the private sector and the federal government with a vision to make the sector more rewarding to investors and the country’s GDP.