High insurance premium, high cost of operation, government’s unfavourable policies and challenging operating environment have been identified by aviation experts as factors responsible for poor performance of Nigerian airlines.
It has been established that Nigerian airlines have relatively very short life span of average of 10 years and largely while they generate revenue, they rarely record profits.
Many industry observers have accused government of introducing and implementing policies that are inimical to the growth of domestic carriers and identified one of such policies as the Bilateral Air Service Agreement (BASA) policy, which gave multiple entry points to foreign airlines that now undercut the market for domestic operators and discourages code-share with foreign carriers.
The CEO of Aglow Limited, an aviation support services company, Tayo Ojuri told THISDAY on Tuesday that high insurance premium digs a big hole in the coffers of Nigerian airlines and that comparatively other countries in Africa pay lower insurance premium than Nigerian airlines, except the counties in war.
Recently the airlines have called on the federal government to save them from the exploitative insurance premium they pay, which according to them, is the highest in Africa.
The Executive Chairman of Airline Operators of Nigeria, Captain Nogie Meggison who also identified the above factors as the problem of Nigeria airlines said the high insurance premium was not justifiable because it takes a huge chunk of their revenues, as aviation fuel alone takes over 30 per cent of cost of operation.
The airlines faulted the system whereby Nigeria Insurance Commission (NAICOM) insists that they must insure their aircraft through Nigerian insurance companies, which partners the international insurance companies to spread the risk, insisting that they would prefer to insure directly with the international insurers.
The Managing Director of Arik Air, Chris Ndulue observed that insurance companies’ assessment of Nigeria as high risk country might be responsible for the relatively high insurance premium Nigerian airlines pay for their aircraft.
He said that Nigeria is wrongly perceived as high risk country because of the activities of insurgents who operate at only one section of the country, adding that this might have influenced the high aircraft insurance cost in the country.
But NAICOM had said that as a regulator, it has the duty to ensure that Nigerian insurance companies participate in insuring airlines in Nigeria because that is the way it is done in other countries; besides, this abides with the local content policy of the federal government.
Ojuri said Nigerian airlines expend huge resources on their operation because of poor, obsolete or lack of facilities at the airports. For example, lack of airfield lighting at some of the airport runways deny airlines the chance to fly to such airports, which denies them additional revenue and in Lagos, which is the operational hub of many airlines, inadequate lighting of Runway 18L in the night forces flights to taxi from international runway to the domestic terminal at a waste of aviation fuel and wear and tear of equipment.
“The operating environment for Nigerian airlines is harsh because of obsolete airport facilities, inadequate supply of aviation fuel, lack of well trained personnel in the airlines and the fact that major aircraft maintenance is done outside the country. This means a huge cost in foreign exchange to these airlines. If these are addressed, domestic airlines will become stable,” Ojuri said.
He also noted that one of the things that has undermined domestic carriers is their inability to develop more domestic routes, noting that generally route development is poor in Nigeria because all the airlines concentrate on four major airports in Lagos, Abuja, Kano and Port Harcourt, adding that there could be other viable routes if developed, which may include Port Harcourt-Warri route; Enugu-Kano route and others.
CULLED FROM THISDAY
