Experts: FX Challenge, Multiple Taxation, Poor Infrastructure Threat to Nigerian Airlines

Chinedu Eze

Aviation industry experts have warned that the continuous scarcity of foreign exchange, multiple taxation, poor airport infrastructure and lack of capacity, will have negative impact on airline business in Nigeria, if urgent measures are not put in place.

They are of the view that domestic carriers will remain unprofitable enterprise, except government reviews its policies in the sector.

The experts who spoke to THISDAY on the way forward for the industry, said since the last 40 years that the air transport sector was deregulated, airlines come and go without sustained profitability and with lifespan of average of 10 years, noting that such pattern of existence may continue, except there is drastic review of policies that are inimical to airline operations in the country.

The Managing Director and Chief Executive Officer of Aero Contractors, Captain Ado Sanusi, told THISDAY that the challenges, which the airlines faced in 2022 would reoccur in 2023 and continue to undermine the operations of domestic carriers because there have been no efforts to eliminate them.  

“In 2023 we are still going to face the challenges of scarcity of foreign exchange, multiple taxes, lack of capacity and aircraft maintenance because none of these problems was solved last year.

“So it is the same challenge we faced last year that we are going to face in 2023, but we are going to have some relief in sourcing aviation fuel if Dangote refinery comes on stream. This will guarantee supply but the price of the product may not come down. Reliable supply of aviation fuel will guarantee reliability in terms of flight schedule; no flight delays and cancellation due to late or non-supply of aviation fuel,” he said.

Sanusi also noted that even if supply of aviation fuel is guaranteed, moving the product to the airport would still face the same hiccups it is currently facing due to poor infrastructure, remarking that the solution to that challenge is the rehabilitation of the pipeline that links the airport to Ejigbofuel depot for faster supply of the product to the airport.

“As far as the supply of aviation fuel to the airport will be done by trucks they will still face traffic gridlocks at Apapa. Without improvement in infrastructure we will still face the problem of delay in the supply. We need to have hydrant facility at the ramp to make it easy to feed fuel to the aircraft. Until these issues are addressed, 2023 will still be the same thing like the previous years. The pipeline facility to the airport will eliminate pollution from trucks and the accident that occur while moving products by road, which has cost human lives,” Sanusi stated.

He also said that if there is runway lighting at most of the airports in the country and they are kept open by the Federal Airports Authority of Nigeria (FAAN) and the Nigerian Airspace Management Agency (NAMA), flight schedule by airlines would become more flexible, as operators could fix flights late in the night to airports that are safe in terms of security.

“If the needed infrastructure is provided by government, the industry will become attractive to private investors that will be willing to commit their resources to develop the sector,” Sanusi observed.

Speaking in the same vein, the CEO of Top Brass Aviation Limited and Also speaking, former Managing Director of NAMA, Captain Roland Iyayi, told THISDAY that the major drawback in the industry had been the inability of government and the aviation agencies to review the policies that guide activities in the industry, saying that this has retarded the growth of the sector and will continue to make it very difficult for Nigerian airlines to thrive.

“The major challenge plaguing the aviation industry is policy. We are so intoxicated by power and money that we have become blind. There is need to review some of the policies that guide activities in the industry because there were policies that were relevant at certain period in the industry, which are no more relevant today. Take for example, the five per cent ticket sales charge, which was introduced many years ago when we had Federal Civil Aviation Authority (FCAA), a parent agency to the Nigerian Civil Aviation Authority (NCAA), FAAN, NAMA and the Nigerian Meteorological Agency (NIMET). The then head of FCAA, Dr Harold Demuren, introduced five per cent ticket sales charge when the total passenger traffic was about two million. Today, the traffic is about 14 million and the same money is being collected.

“This is why it is believed in some quarters in the industry that the amount collected as ticket sales charge should amount to a trillion naira a year but some of these monies are allegedly being diverted and nobody wants to discuss it. This charge should be reviewed along with other policies that tend to retard the industry. It is the airlines that bear the brunt of these charges because they add to the total cost of airfares, which reduces passenger load factor because the higher the fares the more some travellers would choose other modes of transport that would be affordable to them,” he said.

Iyayi said some of these policies created the hostile environment and made airline business unprofitable and precarious.

However, the Secretary-General of Aviation Round Table (ART), Group Captain John Ojikutu, made recommendations on how the industry could be reinvented.

He told THISDAY that there were certain actions and policies that could be evolved to redefine the sector.

“Nigeria air transport can only be well defined if these actions are taken. We have to discard the idea of the national carrier and then project at least two airlines as national flag carriers. Flag carriers are now the global practices today as governments are not to be seen as business investors in civil aviation which they are obliged to regulate and oversight their operations in safety and security without compromise, especially where there would be competition between the government airline christened now as national carrier and the private operators. The flag carriers can find life in Arik, Aero and Air Peace, especially if their assets and debts liabilities are well assessed to attract foreign and local credible investors and technical partners. However, the national flag carriers must be ready to sell shares to the public in the Capital Stock Market to make it real national enterprise. This becomes important if they must operate the BASA (Bilateral Air Service agreement) routes, which I consider as commonwealth of the Nigerian people. 

“There should be a review of the concession of multiple destinations in the commercial agreements given to some foreign airlines that have exposed them into the domestic routes and therefore the domestic markets of the domestic airlines. The foreign airlines should be limited to either Lagos or Abuja and not to the two airports but they can go to any other besides the other of their choice between Lagos and Abuja,” Ojikutu said.