Aviation industry stakeholders in this report recommend ways to improve air transportation in the country
The Nigerian aviation sector is still apprehensive about the effects of the second wave of the COVID-19 on passenger traffic. But the availability of the vaccine gives hope that the damage the virus would wrought in the sector henceforth would be temporary, as global health agencies and governments strive to ensure that coronavirus vaccine is distributed to every part of the world.
In Nigeria, old illness suffered by the airlines was exacerbated by the pandemic and left the operators writhing in pains. But so far, since after the lockdown none of the airline has gone under.
However, industry stakeholders identified key factors that would enable the airlines and the aviation industry to survive. One of the factors they pointed out was to ensure reduction of cost of operations, which includes cost of and availability of aviation fuel.
Others include permanent waivers on Customs tariffs for aircraft and spares and cost of aircraft insurance.
The stakeholders also want the federal government to stop squeezing the finances of the aviation agencies by insisting that they remit 25 per cent of their earnings to the government. They argued that in the struggle to meet the federal government target, the agencies increase the cost of services they render to airlines and other players in the aviation industry.
Besides, the International Civil Aviation Organisation (ICAO) and the International Air Transport Association (IATA) have stressed that government agencies, especially in Africa and Middle East should review downwards some of their charges because high charges up the cost of air ticket and reduce passenger traffic, thus making air transport elitist.
This was what prompted the Senate and the House Committee on Aviation to move for the permanent removal of VAT on air transport, waivers on Customs tariffs so that such waivers should not be at the whimsy of Customs, as the federal government since the Buhari administration has shown the inclination to eliminate those taxes on imported spares and aircraft.
Forex
The outgoing CEO of Aero Contractors, Captain Ado Sanusi urged the federal government to stabilise the exchange rate and adopt a standard for the airlines. He told THISDAY that operations of airlines in Nigeria would be adversely affected if government does not ensure a stable exchange rate, knowing that everything airlines do is dollar-denominated – from maintenance, training, aircraft acquisition, insurance, spares and others.
He said that government should adopt permanent waiver for Customs duty and should not be what is renewable on yearly basis and should also do the same with VAT.
On what the airlines are doing to sustain their operations and ensure they survive after the coronavirus devastation, Sanusi said the airlines are collaborating in different ways both in the technical area and in marketing and disclosed that Aero Contractors and Dana Air are about to sign passenger protection agreement, whereby any Dana Air passenger can fly Aero Contractors, if the former cancels its flight.
“There is a lot of collaboration going on among Nigerian carriers in the bid to revamp our operations. The Aero maintenance, repair and overhaul (MRO) facility has brought the airlines together. Now they share spares in order to cut the cost of operation and they are cooperating in many other ways,” Sanusi said.
Also Dana Air and Ibom Air have concluded plans for interline, which would enable the two airlines to cooperate at various levels of partnership.
Waivers
The Chairman and CEO of Air Peace, Allen Onyema while expressing gratitude to the federal government for giving the airlines bailout, told THISDAY that in order to protect the domestic operators there are key policy decisions government must have to make.
One of these key policies is the passage of Customs tariff waiver bill, which awaits President’s assent.
“This will help the airlines more than bailout because the airlines spend so much money paying waivers on aircraft and spares. Another is the removal of VAT. This will go a long way in stabilizing the industry. Government should also reinforce and sustain the ease of doing business policy, which will make clearing of aircraft and aircraft spares less cumbersome. This will positively impact on our bottom line,” he said.
The Chairman of Air Peace also canvassed for the suspension of 25 per cent remittances by aviation agencies to the federal government coffers, saying that such payment seem to create the impression that agencies are profit making enterprises but they are actually cost recovery organisations, which according to the International Civil Aviation Organisation are not supposed to be profit oriented so that they would not add so much financial burden on the airlines through charges and taxes.
“We thank government for the bailout out given to the airlines but what will benefit the industry is the waivers on imported aircraft and spares. Clearing spares right now is very cumbersome and this affects the bottom line. Government should also help in bringing down the cost of aviation, which prices are outrageous. Government should also review the remittances from aviation agencies, which is 25 per cent of their earnings. When they collect this money from the agencies, the burden is passed on us, the airlines,” Onyema said.
Improved Connectivity
The Chief Executive Officer of Mainstream Cargo Limited, Mr. Seyi Adewale, told THISDAY that there should be more airlines to help and improve airport connectivity, on-time performance to make the market more competitive so that travellers would enjoy better service from the airlines.
He also said he expects the federal government to have a firm conclusion on the planned concession of airport facilities, which process has lingered since 2016, pointing out the benefits of the policy, which include improving airport facilities through modernization and innovation to the benefit of airlines and travellers, would bring stability in the industry in terms industrial restiveness.
“My expectations regarding the aviation sector would be more of an aspiration and prayers that include that new domestic airline entrants begin real operations geared at improving airports connectivity, on time performance and good competition to the delight of domestic passengers; improved passenger facilitation across airports within the country; firm conclusion of federal government intended airport concession as veritable strategy to improve airport infrastructure, efficiency and passenger facilitation. This will imply firm agreement with aviation (trade) unions regarding the opportunities of improving the sector through this strategy and aviation regulators working more independently to ensure safer skies and accident free year,” Adewale noted.
He said there should be adequate and increased federal government based bailouts through grants and loan support to domestic airlines; alliance, code-share and synergies between international carriers and domestic airlines; real Covid-19 Vaccine early distribution that improves confidence of prospective air travelers and quick embrace of AfCFTA (African Continental Free Trade Area) to improve passenger traffic, aircraft turnaround numbers, trade volumes without compromising internal security or becoming a channel to reduce revenue generation capabilities.
Reduction of Taxes
“For the second input regarding reviving the sector, the followings are my prayers to government: federal government should agree to the need to allow airlines ‘breathe’ better through reduction on the number and range of tariffs and taxes to airlines and aviation allied service providers, noting that the five per cent passenger ticket charge and cargo sales charge are already adequate and appropriately distributed amongst all aviation regulators.
“Federal government should critically look into ways or channels of reducing the final cost of aviation fuel to airlines. Present price is negatively affecting the sustainability of domestic airlines because this will be passed on to the passengers. Increased or increasing ticket sales will meet passenger resistance at some point and thereby cause strain within the sector,” he said.
The CEO of Mainstream Cargo Limited also urged the federal government to increase bailouts through grants and loans, noting that N5 billion bailout fund, already distributed to the airlines and others, is not adequate for the sector and observed that quick and adequate disbursement of loans through grants to domestic airlines would go a long way into mitigating the negative impact of Coronavirus pandemic that was witnessed in 2020.
Bankruptcy
The Managing Director, Flight and Logistics Solutions Limited, Amos Akpan warned that with the cash squeeze occasioned by the coronavirus lockdown, which almost strangulated some airlines, has put them in a very precarious condition, so any airline henceforth would become bankrupt without financial base.
He, however, expressed optimism that scheduled flight operation would grow in 2021 because poor road infrastructure and insecurity in the country discourage other modes of transport; so those who can afford it would prefer to travel by air. To enable airlines survive, Akpan said the cost of seat per flight must not be below N35, 000.
“Scheduled commercial airlines without strong financial base will be bankrupt. Air Peace, Max Air, Azman Air create the impression that they have strong financial base to survive 2021, but their financial status is not revealed, so we make this statement based on the perception that they can access funds. Domestic scheduled flight operations will grow in 2021.
“The infrastructure and security situation in Nigeria discourage other modes of transport, but encourage air travel. Except you cannot afford it you’ll rather travel by air between Kaduna and Abuja.
“The price per seat for one hour’s flight will not be below N35, 000 because of cost of maintenance and operations. Forex is limited and very expensive to procure. This increases spare parts and maintenance cost for Nigerian airlines.
“The cost of loans and extra investment funds is very high. Service providers like the Federal Airports Authority of Nigeria (FAAN), the Nigerian Airspace Management Agency (NAMA), Skyway Aviation Handling Company Plc. (SAHCO) and the Nigerian Aviation Handling Company Plc. (NAHCO) may have to increase their fees/charges because of rising cost of production.
“Workers and suppliers will lose jobs because companies will need to reduce overheads. Government sponsored airlines like Ibom Air have the deep purse to grow in 2021. 2021 will be a defining year for the relationship between Arik, Aero and government’s equity participation via Asset Management Corporation of Nigeria (AMCON).
“Foreign Direct investment is difficult to access because of our peculiar political – economic environment. International flight operations will continue to constrict because of travel restrictions caused by covid-19. International cargo flight operations will grow but the income from cargo will not match or replace the income loss in low passenger operations. Private charters through FBO (Flight-Based Operation) will increase because VIPs will require secluded travel arrangements as the covid-19 continue to spread,” Akpan said.
Late last year, the National Assembly had moved to review the policies guiding the aviation industry, review that of the agencies in order to improve their services, give the Nigerian Civil Aviation Authority (NCAA) stronger powers to effectively regulate other agencies and ensure that new technologies and advancements are reflected in the policies guiding these agencies. It is expected that with the passage and endorsement of these bills by the Presidency, the aviation industry would have a big relief in 2021.
