Forty days after the resumption of domestic flights, statistics on passenger traffic continue to plummet, fueling symptoms of collapse for airlines. Even so, there are more seeming headaches for carriers already struggling to navigate around increasing cost of operations for aircraft, the threat of industrial disharmony, fluctuations in the exchange rate and multiple aeronautical charges. KELVIN OSA-OKUNBOR writes that timely injection of bailout promised by the government will get airlines out of the woods
These are not the best of times for operators in the aviation sector as combined factors of COVID-19-induced fear of flying and rising cost of operations continue to threaten the sustainability of the air transport business.
Statistics from regulatory agencies indicate a steady decline in passenger traffic on routes operated by scheduled carriers since domestic flights resumed operations on July 8, 2020.
Though the government staggered the re-opening of airports to make way for phased implementation of new travel protocols, commercial activities at airports are yet to peak.
To put it simply, domestic carriers are in a dire situation in an industry where the ‘bust and boom ‘ circle of airlines is becoming an interesting study for airline economists.
Aviation analysts adduce poor turnout of passengers to the low disposable income of Nigerians yet to recover from the throes of hardship triggered by the lingering pandemic.
Airlines whose major business is to ferry passengers from point to point are more affected in the dip in load factor as they are forced to deploy aircraft on major routes without a corresponding number of passengers on board.
Nonetheless, the problem of indigenous carriers is beyond low passenger traffic as they continue to navigate rising costs of operations, including multiple charges by aviation agencies.
Besides the Passenger Service Charge (PSC), which was recently increased from N1, 000 to N2, 000 by the Federal Airports Authority of Nigeria (FAAN), airlines are now paying more for Jet A1, otherwise known as aviation fuel.
Besides PSC, airlines in Nigeria are buffeted with multiple charges, including ground rent, en-route navigation charges, terminal charges, a ticket sales charge, apron levies, fuel surcharge, Value Added Tax (VAT) on tickets sold and other charges.
These multiple charges, operators say, constitute a clog to the wheel of progress of many carriers which, within 10 years of setting up, roll this aircraft to the graveyard.
Experts say indigenous carriers may be in for tougher times unless the government comes to their rescue by implementing the bailout package it promised during the outbreak of COVID-19 as a stimulus package to airlines already tottering on the brink of collapse.
Signs of early recovery for the carriers do not appear underway as regulatory statistics indicate further dip in passenger traffic.
The development, a source at the Nigerian Civil Aviation Authority (NCAA) hinted, has prompted airlines to scale down the operators to cut losses.
Investigations by The Nation indicated that since July when domestic flights resumed operations, airlines have reduced operational capacity to 20 per cent of their capacity as against over 120 daily flights by leading carriers pre-COVID-19 era.
A source close to Air Peace said the carrier has reduced its flights from 120 daily to just 20 flights on account of the sharp drop in passenger traffic on its major routes.
Other carriers, including AeroContractors and Arik Air, it was learnt, have also reduced their flights to cut losses.
Aviation analyst and Chief Executive Officer of Aglow Aviation, Mr Tayo Ojuri attributed the dip in passenger traffic to non-opening of international flights.
He said the sector could rebound when international flights resume soon, with the possibility to contribute over 30 per cent feed into domestic traffic.
In the interim, he said the government should assist airlines to keep their operations afloat because they play a major role in the national economy as catalysts for movement of people, goods and services.
Promises of a stimulus package
In the wake of airports closure in March 2020, Minister of Aviation, Hadi Sirika said the government had packaged a stimulus plan to save indigenous carriers from collapse.
The windfall, according to the minister, was not going to be the direct release of cash but other interventions that will assist airlines to cushion the losses they incurred during the period when there were no flights.
The promise by the government to indigenous carriers, Sirika said, was some form of intervention to cushion the devastating effects of the COVID-19 pandemic. The assistance, he said, was consistent with global practices to save a critical sector from imminent collapse.
But, a few months after the declaration nothing has happened
Other interventions
Investigations by The Nation revealed that besides the declaration by Sirika, the government had designed a bailout package of N27 billion for the restart of flights, which, to date, is yet to be implemented.
The N27 billion packages, it was learnt, was intended as a cushion for payroll grant to support airlines, aviation ground handlers, caterers, provision of single-digit interest loans with a long-term repayment plan, deferred payment of taxes and filing dates.
Some source hinted that the proposed intervention by the government was also pushing to ensure the removal of Value Added Tax from airline tickets, provision of COVID-19 tests for passengers and crew, waiver of airport rent fees to airport operators.
Experts’ view on the package
Though nothing is considered too much to get the aviation industry out of the woods, President, Aviation Safety Round Table Initiative (ASRTI) Gbenga Olowo described the grant proposed by the government as paltry.
He said it would do little to address the losses incurred by airlines and other players in the sector.
Olowo, however, said Nigerian aviation industry needs timely intervention as governments of other countries have done to assist their air transport sector from the challenges thrown up by the COVID-19.
He advised the government to consider airlines as a priority in the identified projects the intervention was meant to address.
Executive Chairman Airline Operators of Nigeria (AON), Captain Nogie Meggison said there was no better time to assist indigenous carriers than now.
The boss of the umbrella body of indigenous carriers urged the Federal Government to intensify action on the implementation of a stimulus package for the beleaguered sector.
Meggison said such stimulus grants or palliatives to domestic carriers as cushioning measure post-COVID-19 should be channelled through the Central Bank of Nigeria (CBN) to ameliorate the pangs airlines were experiencing.
He said: “We call on the Central Bank of Nigeria to implement the one-year moratorium on principal repayments of intervention loans it plans to give out to airlines. The bank should also reduce the interest rate from nine per cent to five per cent for one year and create an N50 billion target facility to cushion the impact of the virus on airline business post-COVID-19.
“We insist that without the government offering stimulus packages and incentives to domestic carriers to mitigate the impact of the pandemic on our operations, the business would not have achieved much effect.
“It will not be out of place for the government to include deliberate sourcing of loans, grants, tax waivers, special foreign exchange windows and rates, reduction of airport taxes or surcharge for airlines.
“We would appreciate the government if it could consider other options, including approving corporate loans through the CBN and waiver of some of the charges to guarantee the survival of airlines and avoid over 100,000 direct job losses post-COVID-19.”
Continuing, Meggison said: “What we are asking for is not unprecedented. For instance, in the United States of America, airlines are seeking a $50 billion bailout. As part of its response, an Emergency Stimulus Package Bill was passed by the US Senate and House of Representatives which reduced interest rates to 0.25 per cent. Also, the bill granted their airlines tax credit for their losses during the pandemic.
“Our government can do the same by granting the above-stated reliefs to Nigerian airlines as a way of assisting them to recover from their losses during this very difficult time.
“We are aware that Russia, the United States of America, Canada, Britain and other countries have come up with one support or the other for their airlines and Nigeria will not be at default if it looks at options of supporting the industry.
Also, the Chief Executive Officer (CEO) Belujane Konzults, Mr Chris Aligbe, said the government should cushion the severe effects of COVID-19 on the aviation sector.
Aligbe canvassed a loan of less than five per cent paid over 15-20 years for airlines.
Gale of a sack of pilots, engineers
As operators wait for action from the government to inject the stimulus package, matters are getting to a head forcing airline owners to erase jobs.
Three carriers namely Air Peace, Bristow Helicopters and AZMAN Air eased out over 170 pilots from their organisations.
Though Air Peace sacked over 69 pilots in a move calculated to put the carrier on the path of sustainability, it, last week, promised to recall the fired pilots.
The decision by the airline followed the intervention of Sirika.
Citing reasons for the right sizing, Air Peace said it took the painful, but the rightful decision in the circumstances the airline has found itself as a result of the devastating effects of the COVID-19 pandemic on its operations and financial situation.
Industry analysts, however, described as normal the erasure of jobs in airlines, saying global carriers were embarking on the steps to save their organisations from collapse in the face of zero-revenue propelled by COVID-19 restrictions on flights.
A pilot, Captain Idris Yuba said there was nothing unusual about airlines asking professionals to step aside to keep the business afloat.
He said:” Currently, all the airlines, including Air Peace, considered to be the biggest in Nigeria, are struggling in the face of traveller apathy.
“The carriers are seriously hit after they resumed flights in July because of COVID-19-induced challenges not limited the spike in operating costs which continues to increase for aviation fuel, aircraft lease rentals, aircraft maintenance, fluctuating exchange rate, insurance premiums and other obligations to aviation agencies, caterers, feelers, banks and many others.
“Imagine, an airline such as Air Peace with over 120 flights then has come down to about 20. Yet, it has a workforce of over 3, 000 and multiple taxes that are not easing out. The airlines are all closer to the brink than when they began operation.
“Sadly, airline owners are grappling with industrial relations issues such as the insensitivity of aviation workers, especially the pilots and engineers who pose a grave challenge to the survival of the airlines.
“While many of their counterparts worldwide were getting laid off, local pilots are insisting on regular pay despite the obvious. It is sickening that pilots and aircraft engineers’ union threatened to shut down the entire industry. If all carriers shut down, without help from the government, how do Nigerians move around?”
Need for industrial harmony
Meanwhile, the National Association of Aircraft Pilots and Engineers (NAAPE) had threatened to ground the operations of airlines because of the sack of pilots and engineers by three carriers, namely Air Peace, AZMAN Air and Bristow Helicopters.
Nevertheless, such a threat may be invalidated by last week’s interventionist stance of Sirika, the affected airlines and the Minister of Labour, Chris Ngige in Abuja.
Sirika had appealed for the recall of the maximum number of pilots that the airline could accommodate to prevent a possible collapse of the sector as a result of any action by the aggrieved pilots and Engineers.
President of NAAPE, Galadima Abednego said some missteps could have been made in the course of the standoff between Air Peace and the association.
Chairman, Air Peace, Allen Onyema expressed sadness over the ingratitude of some pilots considering the investment made in them to enable them to be comfortable on the job.
He recalled how the carrier trained over 80 pilots and a sizeable number of aircraft engineers with attractive pay packages only for them to disappoint at a time their understanding was needed.
Sirika called for understanding among industry players, including labour unions in the prevailing COVID-19 era, saying it is not the time for unnecessary upheavals.
According to Sirika, it was time for all stakeholders to put their hands on the deck in ensuring rapid recovery of the industry from the effects of COVID-19 pandemic.
Caution by operators
To avoid a crisis in the sector, lead consultant of ETIMFRI Group, Mr Amos Akpan said crucial times lie ahead in galvanising the industry for a rebound.
He canvassed dialogue among stakeholders, including airline owners, regulators and pilots’ association to resolve any form of anticipated industrial unrest.
Akpan said: “Disruption of operations could be disastrous at this stage for the recovery.
“Now we leave the real threat to the existence of our industry and engage in fights we don’t have control of how it will end; even as it is obvious it is an all losers’ fight.
“Workers need to show understanding. If businesses do not earn income, the unpaid fixed costs keep piling. Companies cannot meet obligations, redundancy sets in the industry may gravitate towards comatose.”
A United States of America-licensed flight dispatcher and ground instructor, Mrs Victoria Jumoke Adegbe said part of the pills, the sector needed for recovery is supported by the government to indigenous carriers.
The support, she said, should be in the form of loans and corporate bonds to assist carriers to make up for reduced revenues and liquidity brought about by the pandemic.
Without such pills, she said, some carriers were already showing suicidal symptoms on account of inability to meet their obligations.
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