Nigerian airlines are faced with so many barriers that have stunted their growth. To get out of these problems, the carriers need to be given a breather, reports Bukola Aroloye
One of the biggest impediments to sustainable airline operations in Nigeria is the humongous debt profile of the carriers. Nobody knows the exact debts the carriers owe different aviation agencies. The Federal Airports Authority of Nigeria (FAAN), the Nigerian Airspace Management Agency (NAMA) and the Nigerian Civil Aviation Authority (NCAA) have continued to give conflicting figures, but many are of the view that collectively, these debts are in the region of N40b. That is huge and the insistence that these carriers pay these debts under coercion or negotiation would only add to their burden.
NCAA talks tough
Just recently, the aviation regulatory body, the NCAA alleged that airlines plying the country’s domestic routes were evading the payment of statutory taxes to the industry.
The Director General of NCAA, Capt. Muhtar Usman, lamented that the non-remittances of taxes by both scheduled commercial airlines and those on charter operations had stifled the various parastatals in the industry whose operations are tied to the taxes.
Usman alleged that some of the airlines were not just remitting but also making use of the five per cent ticket, cargo and charter sales taxes which they collect from passenger tickets and which they ought to remit to the NCAA. He therefore asked the operators to reconcile all outstanding debts to the NCAA within 60 days.
“It is imperative that all unremitted funds must be forwarded in full to the NCAA immediately. These sales charges are to enable all aviation agencies carry out their responsibilities of providing safe, secure and efficient regulatory services for the overall benefits of all aviation stakeholders,” Usman said.
“The five per cent ticket/cargo/sales charges must be on gross ticket excluding VAT and passenger sales charge only. The airlines must desist from using these funds, ‘’ Usman said in a statement issued yesterday.
Usman also said all airlines must provide to the NCAA the breakdown of its recently introduced ‘taxes + fees’ component on all passenger tickets which included the amount due to the Federal Airports Authority of Nigeria (FAAN), Federal Inland Revenue Services (FIRS), and five per cent VAT to the NCAA.
Airlines can’t pay salaries, debts
Renowned economist and Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, has expressed concern over the nation’s aviation sector concerning the present economic recession, lamenting that Nigerian airlines are bleeding.
The consequence of this, he reiterated, would lead to brain drain, as other nations, especially China, could poach over 600 highly experienced pilots and engineers who are out of job, from the country.
This is coming as global network carriers are cutting back frequencies and capacity. Emirates has cut 50 per cent of its flight frequency to Lagos after United and Iberia exited the market. Lufthansa is reducing Abuja and Port-Harcourt frequency to four per week from seven this month.
The German carrier is contemplating cutting Lagos to five flights per week from December. Meridian now operates one flight per week from Milan to Lagos. Delta is cutting frequency from six per week to five on Lagos-Atlanta route. Round trip on economy fares to New York is now N700 – N1,000000. Passenger load factors are declining compared to 2015, which now average 80 per cent inbound.
The suspension of flight operations by Nigeria’s oldest airline, Aero Contractor, because of its inability to fix its five airplanes, coupled with a crippling debt running into over N30 billion, helped to put the airline in danger.
Rewane said global air passenger traffic rose by six per cent in first quarter 2016, adding that passenger load factor was up at 79.2 per cent in first quarter 2016, 0.2 per cent marginally lower than 2015.
He noted that premium class traffic is lagging economy, with airline profitability up marginally in 2016. The economic expert said that despite the consolidation in the domestic aviation, Aero and First Nation suspended flights, just as mounting bills are negatively impacting the airlines with declining revenue and static demand doing incalculable damage to their operations.
Suspension of services
For close to one month, First Nation Airways grounded its operations in order to fix two of its airplanes over some snags. FirstNation is expected to be back in operations this week. Two weeks after FirstNation shut operations to fix its aircraft, Nigeria’s oldest airline, Aero Contractors predictably also shut operations after the airline was left with just one airplane with five others unserviceable and on the Lagos airport tarmac.
As if that was not enough, Nigeria’s biggest airline by aircraft size, Arik was also caught in insurance renewal imbroglio, forcing the airline to be off the sky for 24 hours. The airline had since resumed operations. It is, however not Uhuru for the airline and many others that are seriously hemorrhaging and on life support,
Experts express concern
Chairman, Airline Operators of Nigeria (AON), Capt. Noggie Meggison disclosed that it was no longer news that airlines in Nigeria charge very competitive fares in local currency but have to carry out numerous operational activities including maintenance and purchase of spare parts in foreign currency (Dollars) thereby adding to the already unbearable burden the airlines have to carry on a regular basis.
An aviation safety advocate, Capt. Dung Rwang Pam was actually concerned with the rate at which the airlines were temporarily suspending operations, stressing that they are doing this because they are unable to send their aircraft for scheduled heavy maintenance normally called the C-Check.
He said some of the airlines have benefitted and are not operating, wondering what would happen to over N120 billion they got as intervention fund which seemed to have gone down the drain.
Ask for another intervention fund
As the economic recession begins to hit both public and private sectors of the economy, Airline operators in Nigeria recently, cried out to the Federal Government to bail them out to prevent them from imminent collapse.
The operators, who made the demand at an emergency interactive session with the Senate Committee on Aviation, asked the government to grant them Special Intervention Fund to remain afloat in business.
Speaking on behalf of the operators under the aegis of Airline Operators Association of Nigeria, the Chief Executive Officer (CEO) of Arik Airline, Chris Ndulue, noted that the present economic environment in the country has made their operations to move from bad to worse, saying, “The economic situation as it is today, is suffocating us out of operation.”
According to him, apart from Aero contractor airline and another one presently under distress, two other airlines might also follow suit, if urgent intervention was not made by the government in form of direct Special Intervention Fund to the Aviation Sector.