The Nation Newspaper

Tag: Airlines

  • ‘Bailout to airlines were misapplied’

    ‘Bailout to airlines were misapplied’

    Mr. Obi Mbanuzuo is the Chief Operating Officer/ Accountable Manager for Dana Air. In this interview with Bukola Aroloye, he speaks on various issues plaguing the aviation industry. Excerpts:

    What do you consider the way out of the current depression, especially now that the economy is in recession?

    Getting foreign exchange to run our business is very difficult. We require it to do business and it has become very difficult to come by. Times are hard. We are trying our best. Airline business is capital-intensive, everything in aviation is dollarised.

    We import everything we use, from the spare parts to jet fuel, which is not refined locally. Even in the good times, all these were imported, but the cushioning effect in the past is that, at least, the local currency, which we traded, was a bit stable, but of recent, naira has collapsed.

    So, what we pay for both spare parts and maintenance has gone up the roof and this affects what customers pay as well. Aviation has the potential to contribute, at least, four or five per cent to our Gross Domestic Product (GDP) in Nigeria, which is now the second biggest economy in Africa. If maintenance were done in Nigeria, we would not have wasted money abroad.

    But now, we have to spend almost a million dollars on each air plane. The money is coming from the naira that we are trading. So, it is very difficult for us. We are a private business, once the policies are correct, we will make headway.

    How has this policy flip-flop affected your operations and how have you been able to remain in business?

    Well, from Dana perspective, we want to see a Dana Airline that will be here for another 50 years, just like Aero that has existed for over 50 years now. Airlines do not owe because they want to owe.

    Sometimes, it is because some of those charges are duplicated. Why do we do reconciliation? This is because they do not know what we owe. We are only surviving despite the economic challenges.

    Aero is the oldest commercial airline and it is finding it difficult today because of some of the unfriendly policies we have in the sector. Dana Air has wide range of skilled staff and in terms of customer satisfaction, we are always on the top and we make sure we get very skilled people and we give them enough training.

    You talked about government policy not making it possible for carriers to thrive. Could you expatiate on this?

    Aviation fuel takes over 40 per cent of airlines’ revenue. There is the need to refine jet fuel locally. Currently, a lot of the supplies are imported. There are import problems, which are causing scarcity.

    If we can refine locally, there will be excess supply to satisfy growing demand. Secondly, government should make that zero per cent on import work so that when something lands from Abuja, Kano or the seaports, the airline should have their parts in less than five hours.

    The policies on maintenance should be such that we could get our parts and equipment, in and out of the country. There should be nothing that stops Dana Air, for instance, from taking a land in Lagos and building a hangar. But because the policies do not work, it is not viable.

    Airlines and aviation agencies have been at loggerheads over charges. Why do we have crisis when it is the turn of airlines to pay up what they owe?

    From an airlines’ point of view, I believe that five per cent of what we pay as charges should be completely done away with because we pay the regulators for everything that we do.

    We pay for aircraft registration, pilot licences, approval of manuals and approval of simulators, amongst others. There is a contentious issue of five per cent on tickets sales.

    The Nigerian Civil Aviation Authority (NCAA) says it is from the five per cent on ticket sales it finances itself. I am a supporter of the independence of the regulators and advance economy supports that regulators should be independent from government so that they do their job properly. They have to fund themselves somehow. Any service that the airlines need from regulators, they pay for it.

    If we want to get a pilot’s licence approved, we pay for it and that is how it is done in other countries. You pay for certain services. Apart from these charges, five per cent on ticket sales is also being deducted in Nigeria.

    The five per cent does not exist anywhere else. The five per cent is hard work of the airline. If I do my customers service properly, do my marketing right and do my staff training, amongst others and I charge my passengers, it is my hard work, not the regulators.

    The five per cent on ticket sales is shared among Nigerian Airspace Management Agency (NAMA), but NAMA also charges every airline separately from the percentage taken from the ticket sales on navigational aids per kilometre.

    They have a second charge called the terminal navigation charge, for using the radars. So, why impose double taxes? What is the need for the double taxation? In foreign countries, aircraft manufacturers can manufacture aircraft with a particular maximum take-off weight.

    Dana has five airplanes with different take-off weights, but the Federal Airports Authority of Nigeria (FAAN) has charged us, all the airplanes, at the maximum.

    Another issue is the fact that the money being collected from the airlines are not well utilised for the good of all. For instance, if I pay taxes and I see where my taxes are used, I will be happy to pay taxes, but if I do not see where they are being used, then we have a problem with that. The day we can see where our money goes, nobody will complain of anyone owing.

  • How airlines can survive, by operators

    How airlines can survive, by operators

    For domestic airlines to survive, the government must put in place the right policies, operators have said.

    Carriers will continue to have problem if the policies are wrong, they added.

    Dana Air Chief Operating Officer Obi Mbanuzuo, FMC Aviation Managing Director Hubert Odika and former Afrijet director Mohammed Tukur spoke in separate interviews in Lagos.

    Such policies, Mbanuzuo said, should include reduction in airport and air navigation charges, local refining of aviation fuel as well iuncentives for indigenous airlines to set up an aircraft maintenance facility.

    He described the airline business as “capital intensive”, saying everything is priced in dollars.

    He said aviation fuel, for instance, takes over 40 per cent of an airline’s revenue.

    “There is the need to refine jet fuel locally. Currently, a lot of the supplies are imported. There are import problems, which are causing scarcity.

    “If we can refine locally, there will be excess supply to satisfy growing demand.

    “So,we need the government support in the sense of making the right policies. Recently, Ghana reduced the price of aviation fuel by 20 per cent but government here says it is deregulated, but the currency is dropping every day. We should be looking at the Nigerian economy,” he said.

    Mbanuzuo also said the policies on maintenance should be such that airlines could get spare parts and equipment, in and out of the country.

    He said nothing should stop an airline from taking a piece of land in Lagos and building a hangar.

    “If maintenance were done in Nigeria, we would not waste money abroad. But because the policies do not work, it is not viable,” he said.

    Mbanuzuo also said getting foreign exchange to run an airline had been difficult.

    “We require it to do business and it has become very difficult to come by. We import everything we use, from the spare parts to jet fuel, which is not refined locally. Even in the good times, all these were imported, but the cushioning effect in the past is that, at least, the local currency, which we traded, was a bit stable, but of recent, naira has collapsed. So, what we pay for both spare parts and maintenance has gone up and this affects what customers pay as well,” he said.

    Mbanuzuo said aviation has the potential to contribute at least four or five per cent to the country’s gross domestic product. He also commented on the charges airlines pay, saying: “I believe that the five per cent of what we pay as charges should be completely done away with because we pay the regulators for everything that we do.’’

    He added: “We pay for aircraft registration, pilot licences, approval of manuals and approval of simulators, among others. There is a contentious issue of five per cent on tickets sales.

    Tukur canvassed the use of medium range aircraft to reduce operating costs for airlines.

    Such aircraft, he said will gulp less quantity of aviation fuel , thereby reducing cost of operations.

    Odika called on the government to harmonise aeronautical charges to reduce cost of operations for indigenous carriers.

    Odika said if operators must remain profitable in business, they need to introduce medium range airplanes.

    He said without the government’s intervention through policy, many domestic carriers could close shop .

  • Gale of flight suspension hits airlines

    Gale of flight suspension hits airlines

    In quick succession last week, two airlines, Aero Contractors and First Nation Airways, announced the suspension of their scheduled flight operations. The decision triggered anxiety in the aviation sector, especially among employees of the troubled carriers. In the wake of soaring exchange rate and rising operational costs, more domestic airlines are gasping for breath. The hash economy is forcing them to trim their workforce. Experts say the regulatory authority must wake up to its responsibility, to ensure viable, safe and reliable air transportation, KELVIN OSA OKUNBOR reports.

    These are not the best of times for the aviation sector. Airline operators are not insulated from the harsh economic climate that has forced many players out of business.

    So intense is the crisis in the industry that some carriers are closing shops. Just last week, two carriers: Aero Contractors and First Nation Airways announced the suspension of their scheduled flight operations. Investigations reveal that more carriers may soon tow similar path.

    The two airlines list soaring exchange rate, unfriendly operational environment as part of the reasons for their decisions.

    The ‘temporary’ exit of Aero Contractors and First Nation Airways from the local airspace has left six airlines to operate local flights. They are: Arik Air, Medview, Dana Air, Overland Airways, Air Peace and AZMAN Air.

    As the economy takes its toll on the aviation sector, regulators and operators are locked in accusation and counter accusation over multiple taxation and other charges, thus making the returns on investment in aviation business unattractive.

    In the last ten years, the number of domestic airlines has been on the decline. The casualties include: Okada Air; Albarka Airlines; Oriental Airlines; Savannah Airlines; Freedom Air Services; Skyline Airlines; DASAB Airlines; Capital Airlines; Spaceworld International Airlines; EAS Airlines; NICON Airways; Capital Airlines; Bellview Airlines; ADC Airlines; Sosoliso Airlines; Fresh Air; Afrijet Airlines; Slok Air; AIr Nigeria; Associated Aviation; Discovery Air and IRS Airlines among others.

    According to experts, the identified carriers went under because of faulty business plans, wrong operational models, incompetent management, harsh business environment and policy instability.

    It is no longer at ease for surviving carriers who are operating with borrowed aircraft as the lessors have served notices to repossess their equipment over the failure by the domestic operators to adhere to the agreed repayment plans.

    The soaring operational costs, prohibitive cost of offshore aircraft maintenance, increasing exchange rate, double taxation, lowering passenger traffic, huge overhead costs and other costs associated with aircraft maintenance have become burdensome for airline operators.

    The exit of Aero Contractors and First Nation Airways has exposed the underbelly of the industry. To stakeholders, the development has the unhealthy state of domestic carriers as many airlines can no longer meet up with regular payment of salaries.

    Besides, investigations show that the airlines are indebted to aviation agencies for aeronautical and handling services and to aviation fuel suppliers, caterers and other third party suppliers.

    Before the bubble burst last week, Aero Contractors – arguably the oldest local airline – was owing arrears of workers’ salaries and unable to meet other obligations to service providers and aviation agencies.

    But aviation unions and the management have been trying to manage the crisis, until it the lid blew off.

     

    Brief history

     

    For more than five decades, Aero Contractors navigated the twists and turns of air transportation. When it was formed in 1959 and registered a year later, it was a wholly owned by Schreiner Airways B.V. of the Netherlands.

    It operated helicopter services, fixed wing domestic and international scheduled passenger services, air charter and third party aircraft operations, largely in support of the oil and gas industry.

    The airline became a company with initially 40 per cent  Nigerian holding in 1973 and subsequently 60 per cent  in 1976 in line with the requirements of the Nigerian Enterprises Promotion Decree of 1977 (Indigenisation Decree).

    In January 2004, Schreiner Airways was bought by CHC Helicopter (CHC), which acquired a 40 per cent holding of its shares.  The 60 per cent majority share remained with the Ibru family. It became a scheduled flights operator in 2000.

    On July 1, 2010, CHC sold its interests in the company and the Ibru family became the sole owner. For many years, the airline dominated business, making inroad into routes in West and Central Africa.

    But, over the year, its crisis started and the airline withdrew its services from some viable routes.

     

    Genesis of the crisis

     

    According to investigations, trouble started for the airline following financial intervention by the Asset Management Corporation (AMCON), a Federal Government agency established to take over the management of loan-defaulting companies. Under the arrangement, 60 per cent equity of the airline was taken over by AMCON.

    In March, 2013, an industrial dispute over outsourcing and retrenchment crippled flights for 18 days. The March 13 to March 28, 2013 strike grounded the airline’s active fleet of nine aircraft. By the time the dust settled, the airline was reported to have lost at least N10 billion in ticket sales.

    There were speculations in 2013 on a plan by the Federal Government to adopt the airline as a national carrier and rename it Nigerian Eagle Airlines. It would have kicked off operation before the end of 2013.

     

    Rescue missions

     

    A Senior Advocate of Nigeria (SAN), Mr. Adeniyi Adegbomire, was appointed by AMCON as a Receiver Manager in February. The aim was to turn around the fortune of the airline.

    Since AMCON’s intervention in Aero Contractors in 2011, it has provided support for the airline to meet working capital requirements and fleet expansion. This was to ensure that the airline remained in business, servicing its clients and the general public.

    Earlier in the year, The Nation learnt that if Aero Airlines must survive, its managers must reduce prune its workforce from 1,453 to 700.

    Apart from the 51 per cent job cut, a source said  the airline needed serious surgical intervention including  fleet enhancement to accommodate the lease of eight aircraft and route expansion in  the West and Central African routes in addition to some domestic routes.

    The Nation investigation revealed that the airline’s failure to financially restructure to enable it pay its suppliers as promised may sound the death knell for the hitherto solid carrier.

    A source hinted that if the airline had carried out the restructuring, the benefits would have become manifest within years.

    It was learnt that the airline took a loan of more than N120 million from AMCON to stop its aircraft lessors from repossessing some of the planes in its fleet.

    The airline, investigation further reveal, did not get additional loan from AMCON without further rationalisation of its workforce.

    A few months ago, Aero operated two Boeing 737 and additional two Dash 8 aircraft with a staff strenght of 1, 453.

    The over bloated staff strength, according to industry analysts, puts the ratio to the four aircraft at 363 workers per airplane, a figure experts say is too high for an airline battling to survive.

    A few months ago, AMCON appointed a former Director- General of Nigerian Civil Aviation Authority (NCAA), Capt Fola Akinkuotu, to turn around the airline.

    Akinkuotu said he was pleased to be given the opportunity to turn around Aero Contractors.

    He said: “AMCON has given us a lifeline which is an opportunity for us to succeed. This option is a huge opportunity we must take as there’s no other option. I believe we can make Aero Contractors a success story.

    “Aero is a premium Nigerian legacy brand, and, I am determined to ensure that this airline continues to serve the Nigerian market efficiently, reliably and with its safety record intact.”

    In April, the management began the initial phase of restructuring by erasing some jobs, an action that was challenged by aviation unions. It was discovered that the victims of the rationalisation were those whose services were no longer required.

    AMCON had earlier this year dissolved the airline’s board and appointed a manager to oversee its affairs. The corporation also hired an accounting firm to forensically audit the airline’s accounts in the last five years.

    A statement issued by the public relations firm handling the airline, SY&T, explained that the takeover of the airline by AMCON is in furtherance of the statutory responsibility of acquiring eligible bank assets and putting them to economic use in a profitable manner.

    The statement reads: “AMCON has also engaged a reputable accounting firm to undertake a forensic audit of the airline’s accounts over the last five years. AMCON is both the majority shareholder and creditor of Aero.

    “An Industry based management team will be put in place to provide the highest level of professional competence which would ensure a quick repositioning of the company.

    “The management of AMCON decided to make changes in the management of the airline to protect the brand heritage of the airline.

    “AMCON also maintains that its intervention is in the public interest to sustain and improve the robust and premium quality service which Aero is known for in the country.

    “AMCON would like to assure the regulatory authorities, the traveling public and key stakeholders that the airline will continue to operate on the solid foundation of safety and security with excellent customer service.”

    Undercurrents for failure

    A huge debt overhang, running into N20 billion, heavy overhead cost and depleting fleet size were responsible for the temporary shutdown of Aero Contractors, sources said.

    One of the sources claimed the carrier could not have  continued operations with its huge trade debts owed lessors, banks, handling companies and aviation agencies.

    According to the source, the revenues accruing from the lean operations from it few serviceable aircraft could not march the wage bill of about 1,500 employees.

    The source hinted that many aircraft belonging to the airline are idle at maintenance facility overseas.

    It listed shortage of aircraft, inability to bring back aircraft from C-Check as the major reasons the airline collapsed.

    The airline, The Nation learnt, was indebted to between N18 billion and N20 billion in trade debts, AMCON (N14 billion), fuel marketers and other aviation agencies (about N15 billion).

    Another source said: “The airline is not meeting its schedules and the service has been epileptic. It’s a painful decision for the airline to take. Aero has a high rate of high trade debt to lessors, banks, AMCON and others.

    “The brand value has been eroded among air travellers despite the supports of AMCON. I am sure AMCON is seriously looking for a way to revitalise the place.

    “The airline collapsed also because of the disagreement between the management and the unions because the workers insist on the regular payment of their salaries and kicked against the reduction in their wages.”

    Decision to suspend operations

    After failed attempts to convince aviation unions on the way out of the crisis, the airlines management said it had to take the bold decision to suspend scheduled operations to enable it restrategise.

    While announcing the suspension, its Chief Executive Officer (CEO) Capt Fola Akinkuotu said: “Aero Contractors Airline will suspend its scheduled services from Thursday September 1, 2016. The development is part of the strategic business realignment to reposition the airline and return it to the part of profitability.

    “This business decision, which is a result of the current economic situation in the country, has forced some other airlines to suspend operation or out rightly pull out of Nigeria. In the case of Aero, we have faced grave challenges in the past six months which impacted its business and by extension the scheduled services operations. These factors are both internal and external environmental factors that have made it difficult for the foremost airline to continue its scheduled services.

    “During  the period in review, Aero, which was hitherto revered for its safety, timeliness among other virtues witnessed epileptic operations and services to the external publics that are caused by non-alignment of fundamental issue of the business, which in some cases have been frustrating and embarrassing to all parties including staff, customers and indeed all stakeholders.

    “Unfortunately, the operating environment within and outside the airline have hindered any possible progress especially in the last six months when the Naira depreciated against the dollar thus making it impossible for the airline to achieve its operational targets.

    “With these realities coupled with protracted engagements with all relevant stakeholders, the Management of Aero has strenuously reviewed and assessed options and opportunities on ensuring viability, safety and sustainability of operations during the period with a lot of sacrifices.

    “The impact of the external environment has been very harsh on our operational performance, hence management decision to suspend scheduled services operations indefinitely effective September 1, 2016 pending when the external opportunities and a robust sustainable and viable plan is in place for Aero Contractors to recommence its scheduled services.

    “The implication of the suspension of scheduled services operations extends to all staff directly and indirectly involved in providing services as they are effectively to proceed on indefinite leave of absence during the period of non-services.

    “We are aware of the impact this will have on our staff and our highly esteemed customers, hence we have initiated moves to ensure that we are able to return back to operations within the shortest possible time, offering reliable, safe and secure operations, which the airline is known for.”

     

    Regulator’s intervention

     

    To the Nigerian Civil Aviation Authority (NCAA), there was nothing suggestive that any of the domestic carriers have closed shop. According to the regulator, some carriers have only temporarily suspended their operations to enable them undertake certain operational overhaul and re-launch.

    NCAA’s Director-General, Capt Muktar Usman said: “Domestic airlines are not folding up but merely suspending their operations temporarily. Aero Contractors at present has only one serviceable aircraft and this in contradiction to the Nigerian Civil Aviation Regulations (Nig.CARS) which stipulates that no airline operator shall carry out schedule commercial operation with only one aircraft. The minimum acceptable number is three aircraft.

    “In other words, any airline with one aircraft is in contravention of the authority’s regulations therefore cannot be adjudged to be capable of providing safe operation. The only option available is to suspend your operations temporarily while other aircraft arrive in due course.”

    He, however, stated that the regulations provide a window for such operator to embark on non-schedule operations in the interim.

    Muktar disclosed that “First Nation Airlways on its part is in the middle of an engine replacement programme for one of its aircraft, stressing that another aircraft is due for mandatory maintenance as allowed by the regulatory authority.

     

  • NCAA: why airlines ‘re suspending operations

    NCAA: why airlines ‘re suspending operations

    •First Nation blames 70% naira devaluation for woes

    •Aero workers protest

    The Nigerian Civil Aviation Authority (NCAA) yesterday said domestic airlines are not folding up but merely suspending their operations.

    The suspension, the airline industry regulator said, was to enable the carriers undertake operational overhaul and strengthen their overall operational outlay.

    Its Director-General,  Captain Muhtar Usman in a statement said Aero Contractors, at present has only one serviceable aircraft, adding that this in contradiction to the Nigerian Civil Aviation Regulations (Nig.CARS) which stipulates that no airline shall carry out scheduled commercial operation with only one aircraft, adding that the minimum acceptable number is three.

    He said :”In other words, any airline with one aircraft is in contravention of the Authority’s regulations therefore cannot be adjudged to be capable of providing safe operation. The only option available is to suspend your operations temporarily while other aircraft arrive in due course.”

    He however, stated that NCAA’s regulations provides a window for such operator to embark on non schedule operations in the interim.

    He said First Nation Airlines on its part is in the middle of an engine replacement programme for one of its aircraft, stressing that another aircraft is due for mandatory maintenance as its allowable by the regulatory authority.

    In these circumstances, these airlines he said clearly cannot continue to undertake schedule operations, hence the inevitable recourse to self-regulatory suspension.

    “The NCAA wishes to reiterate that on no account will it compromise safety and security of airline operations in the airspace,”he said.

    Meanwhile, First Nation Airways yesterday said it is not operating because its Airbus 319 fleet is undergoing maintenance.

    The airline said its current operational challenges are attributable to the over 70 per cent devaluation of the naira.

    Its Head, Commercial, Serah Awogbade  said the aircraft maintenance will be completed by September 15, 2016.

    ”First Nation is currently undergoing maintenance on A319 fleet.This maintenance exercise will be completed on or before September 15th, 2016.The Airline planned this maintenance action well ahead, notified passengers and flights are currently loaded online effective September 15th, 2016 – this will ensure that passengers continue to enjoy safe and reliable service that the airline is reputed for.

    “ Current foreign exchange constraint coupled with over 70 per cent devaluation of naira partly contributed in no small l measure to the development. The Airline’s plan remains on track to reinstating service as advised herein,” its statement explained.

    Aviation unions comprising Air Traffic Services Senior Staff Association (ATSSSAN) and the National Union of Air Transport Employees (NUATE) yesterday occupied the head office of Aero Contractors at the Murtala Muhammed Airport (MMA), Lagos, following the decision of its management to suspend operations.

    The workers described the directive that they proceed on compulsory leave as unacceptable.

    They said they should not be held liable for the incompetence of the management in mismanaging Nigeria’s oldest carrier.

    ATSSSAN President, Comrade Benjamin Okewu said the take over of the airline followed the indefinite leave given to the over 1,400 workers.

  • Aviation fuel scarcity cripples airlines’ operations

    Aviation fuel scarcity cripples airlines’ operations

    Despite several efforts Airlines have been battling with the scarcity of aviation fuel scarcity. Correspondent KELVIN OSA-OKUNBOR reports that the ongoing collaboration among stakeholders including, airline operators, regulators and fuel marketers may bring succour.

    For stakeholders in the aviation sector, these are not the best of times. To domestic airline operators, passengers and regulators, the scarcity of aviation fuel, known in aviation parlance as Jet A-One, has become a nightmare.

    The problem has been lingered for the past few months with operators groaning under the burden of huge financial losses. The scarcity of Jet A-One is causing disruption in flight schedules. It is also leaving bitter tales for passengers to tell. They argonise  over occasional delays and in some cases, flight cancellations.

    Aggrieved passengers, who often demand to know the status of their flights and the inability for airlines to provide satisfactory response, has become a challenge to the industry regulator – the Nigerian Civil Aviation Authority (NCAA).

    The scarcity has pit many passengers against airlines’ personnel at the various airports nationwide, even as fuel marketers and the affected airlines trade words and accuse each other alleges sabotage. The situation has put the NCAA under tremendous pressure, as it battles to defuse the tension generated by passengers’ complaints.

    Investigations show that beyond the crisis of fuel shortage, the instability in the price of the product has also created problem in the supply chain. Several efforts made in the past to resolve the problem defied solutions.

    The two immediate past Aviation Ministers – Mrs. Stella Oduah and Chief Osita Chidoka, set up ministerial committees to resolve the crisis. But their efforts failed to yield results. The problem outlived their tenure and the scarcity has continued to put stakeholders in the industry under pressure.

    Many local airlines, including those operating international routes have been forced to scale down their operations. The airlines, who absolved themselves of blame for the readjustment in their route operations, said that marketers might be grappling with infrastructure challenge.

    However, some players, who spoke with The Nation, blamed the scarcity on fuel marketers.

    An aviation security expert, Group Captain John Ojikutu, accused the marketers of creating artificial scarcity to pave the way for product price hike.

    To Ojikutu, the airlines and marketers have questions to answer. He said: “Yes, the airlines are shouting. Are the marketers shouting? Are they concerned? What exactly is the problem? Is it a problem of scarcity or one of cost?

    “If it is a problem of cost, is it that of the marketers or that of airlines? Cost in what form? Is it that it is high or because the marketers are not getting foreign exchange?”

    Ojikutu urged the government should look into the problem. “It is a cabal. This is why the NCAA should be involved in providing aviation fuel”, he said.

    According to him, the NCAA must be involved in the importation, distribution and marketing of the product. “It should find out why the airlines are not getting fuel. That is why I said there is a problem somewhere, because only the airlines are shouting; the marketers are not”, the expert said.

    Also, the domestic carriers, under the auspices of the Airline Operators of Nigeria (AON), urged the Federal Government to wade into the problem.

    AON’s Chairman Captain Nogie Meggison, urged the government to address the acute shortage of aviation fuel.

    Meggison said the call became imperative because of the perennial product scarcity, which according to him, has led to 50 per cent of the delays in flights and cancellations.

    He said: “We have been forced to cry out over this perennial problem because it continues to put us in difficult situation to go the extra mile to fulfil our obligations to our customers in spite of the inconveniences that go with it. “However, we are at the mercy of oil marketers and many times our hands are tied such that we are left with no other option than to cancel flights.”

    The AON chief alleged that apart from the Jet A-1shortage, marketers have raised the price.

    “Until April this year, I bought Jet A-1 for N105 a litre. About a month ago, the price jumped to N145. Two weeks later, it rose to about N200 a litre. Today, the price has skyrocketed above N200 a litre. This has greatly increased our operational cost”, Meggison said.

    According to Ojukutu, “fuel cost accounts for about 40 per cent of operational costs of most airlines. So, the astronomical rise in its price by over 100 per cent has equally increased operational costs.

    “In the light of this, operators’ feasibility studies and financial projections were threatened, thereby putting the airlines in financial difficulty.

    The AON chair described as unfortunate that despite the development, airline operators have not increased ticket prices so as not to discourage customers, who have been overstretched by the harsh economy.

    He said the economic downturn has reduced the disposable income of many customers.

    Meggison said: “For most of them (customers), the alternative means of travel is by road; our major competitor. It should be put on record however, that road transport uses Premium Motor Spirit (PMS) also known as petrol, which is highly supported or assisted by the Federal Government with the exchange rate made available to marketers at N285.

    “On the other hand, airlines don’t have such foreign exchange support or availability from government with regards to helping to make Jet Fuel available to airlines or at an affordable price”, he said.

    The AON chair however informed that had met earlier in the year with the Minister of State for Aviation, Hadi Sirika, to seek a solution to the problem. The minister, he noted, assured the delegation of his assistance.

    As operators await the government’s intervention on the matter, they have called for the revitalisation of the Aviation Turbine Fuel (ATF) at Warri Refinery and the pipeline -hydrant system supplying aviation fuel to the Murtala Muhammed International Airport (MMIA), Lagos.

    The operators said that beyond reactivating the Warri Refinery, the Atlas Cove and Mosimi pipelines -hydrant system, hitherto supplying aviation fuel to the airport should also be fixed.

    It was learnt that before the pipelines were shut in 1996, aviation fuel hydrant at the MMIA was supplying fuel to aircraft through the pipeline from Atlas Cove and Mosimi.

    Meggison urged the Nigeria National Petroleum Corporation (NNPC) to upgrade the pipelines, which must have become rusty, having been abandoned for 18 years. “We need NNPC to revive this pipeline so that airlines can get cheaper and cleaner aviation fuel,” he said.

    He pointed out that one of the causes of high cost of aviation fuel is the cumbersome distribution chains it passes through before getting to airline operators.

    Pumping fuel through the pipeline and hydrant, the AON chief said, is safer and more cost-effective compared to using tankers and fuel bowsers, adding that airports no longer use tankers to distribute fuel.

     

    Fed Govt steps in

    The aviation stakeholders may soon heave a sigh of relief with the intervention of the Federal Government. The Nation learnt that the stakeholders in the aviation fuel supply chain are being engaged not only to ensure availability of the product but to end the perennial scarcity.

    The NCAA said the government and fuel marketers are in talks to clear the hurdles in the supply of the product for stress-free operations of the airlines.

    The regulator which acknowledged the prevailing scarcity of Jet A-1 and its effect on airline operations, said it has also taken note of the efforts being made by the airlines to ensure hitch-free air transportation.

    Last month, Arik Air said it was grappling with flight schedule disruptions caused by severe scarcity of aviation fuel across the country.

    Its spokesman, Adebanji Ola, said since the beginning of this year, Nigeria has been grappling with inadequate supply of aviation fuel leading to shortages of the product and consequently the disruption of flight operations.

    Ola said: “The airline operates an average of 120 daily flights, requiring about 500,000 litres of fuel daily. Due to the large number of domestic and international flights, it is the most affected by the inability of oil marketers to meet its daily fuel requirements on a timely and consistent basis. This has forced the airline to postpone flights while waiting for the fuel marketers to source and deliver the product.

    “On many occasions, despite all efforts in engaging the marketers, fuel could not be sourced and flights may eventually be cancelled, causing not only revenue loss for the airline but also inconveniencing passengers.”

    He, however, identified marketers’ supply and infrastructural challenges as some of the key factors responsible for the epileptic supply of aviation fuel.

    Ola said: “At the root of the fuel supply crisis is low stock due to the inability of marketers to source for foreign exchange to import more Jet A-1 fuel into the country.

    “There is also a distribution challenge, as the discharging of vessels bringing Jet A-1 and other petroleum products are done in the same jetty. Loading various trucks for distribution to cities like Kano or Abuja takes considerable effort and time.

    “The situation in the North is even more difficult since the product takes a longer time to be delivered due to the trucking distance. Oil marketers have also resorted to trucking of aviation fuel to the airports because hydrants are not consistently available at the airports.”

    According to the Arik Air’s spokesman, in the course of the ongoing dialogue between the government and oil marketers, the operators appealed to customers to bear with them on the flight delays and cancelations being experienced due to the prevailing scarcity of aviation fuel.

    Until the outcome of the ongoing talks between the government and the stakeholders, airlines have the problem to contend with.

  • ‘Single African Sky ‘ll deepen market for airlines’

    ‘Single African Sky ‘ll deepen market for airlines’

    The implementation of Single Sky for Africa will deepen the  air transport market in the  continent, Rwanda Air Country Manager,  Ms. Ibiyemi Odunsi, has said.

    She said the removal of all restrictions on air agreements among African countries will enable African carriers spread their tentacles across  the continent.

    If the single airspace policy is accelerated, the challenge of intra – African connections, which has been a nightmare to  many passengers, would be eliminated, she said in an interview with The Nation.

    According her, this informed the various initiatives by players in the sector to promote the Single Sky Policy, which is expected to give opportunity to not very strong African carriers to leverage with the stronger carriers from Eastern and Southern Africa.

    She canvassed the pooling of resources among African countries to build aircraft maintenance facilities. Such facilities, she argued, would not only reduce the individual cost of aircraft maintenance, but create a pool of expertise in aircraft maintenance on the continent.

    Ms Odunsi said a review of some policies by the  government of some African countries would  assist the growth and development of African carriers and, ultimately, create more competition on the continent. She described Rwanda Air’s operations   in Nigeria in the last four years as phenomenal, because of the gaps the carrier has filled in providing air transport services.

    Ms. Odunsi said if more African carriers are encouraged through policy reviews, fares on routes within and outside the continent would reduce significantly, because some passengers have to travel to Europe first before they could access some African countries because of poor flight connectivity.  She said Rwanda Air has remained relevant on Nigerian route because the carrier has kept its promise to passengers, who are daily asking for improved services .

    She said : ” It has been good operating as an African carrier into Nigeria for the past four years, trying to raise the bar in the provision of transport services. But we have had to grapple with serious perception imbalance when we started operations in Nigeria four years ago because of the history of the country- Rwanda, the genocide war and rebuilding and other issues.

    “But we have overcome all that now with the services we are rendering. Just like every country with its history, the narrative has since changed.”

    She said healthy competition among African carriers would help to grow carriers on the continent.

    In her words: ”The passenger is the reason we are in business, that is why we keep pursuing integrity of flight schedules and deliver on time performamce.  We try to leverage on customer satisfaction.”

    She spoke of on-going unilateral, bilateral and multi-lateral agreements  that Rwanda Air has struck with other airlines to enable it remain relevant in the market.

    She said such relationships with other partners, including the agreement with Kenya Airways and another organisation in Brussels has assisted Rwanda Air to carry out seamless operations on the routes it operates within and outside Africa.

    She spoke of plans by Rwanda Air to extend flight services between Kigali and China as well as Mumbai in India.

    Odunsi said: “We are planning to launch two new routes for the Nigerian market. They are Mumbai and Quanzou in China. We did our marketing research and discovered that Nigeria has need for more carriers into the Far Eastern routes, and as  a strong player on our routes, we thought there is great need to satisfy our passengers.

    “By September, Rwanda Air is taking delivery of an airbus, with a flat bed in  the business class  cabin,  which will serve these new routes. By December, we will  take delivery of another airbus to complement our Nigerian routes.

    “As an airline, we need to empathise with our customers by giving them quality aircraft as travel time increases on the routes.”

    The country manager said the airline has pursued an ambitious fleet growth programme when it started  a few years ago. At the moment, the airline has eight aircraft, and hopes to increase them to 10 before the end of the year.

    She said the carrier will offer Nigerian passengers, generous baggage  allowance on the new routes, in addition to introducing  a bigger aircraft with competitive fares for  passengers interested in medical tourism in India.

    According to Ms Odunsi, the decision to fly to Mumbai and Quanzuo in China is to close the gaps in service that currently exists on the routes for Nigerian passengers.

    Odunsi said: “There is a huge gap in flight services for Nigerians interested in flying into Mumbia and Quanzuo. The number of airlines flying into these routes are not enough. That is why Rwand a Air is tapping into this opportunity to  add value for our passengers,” she said.

    She spoke of plans by the airline to expand flights into more African destinations, including Khartoun, in Sudan, Abidjan, Cote D’Ivoire and  Cotonou.

    She said Rwanda Air will key into te proposed Single Sky for African airlines because the policy when implemented will encourage the carrier to increase capacity and connect more African cities seamlessly .

    Ms Odunsi said: ”The Single Sky Policy will benefit Rwanda Air; it will encourage us to pursue  sealmess connectivity  into more African cities. You know  the difficulties, many passengers face trying to connect within the continent. it is not seamless by any imagination.

    “For some countries, you have to fly into Europe first before coming into Africa, that is not seamless by any sense.

    “We need the support of African governments to see this policy through . African governments need to fast track, or possibly  carry out a  review of some policies, to make aviation grow on the continent.

    ”Some people have argued that the Single Sky for Africa will favour some strong carriers from some parts of the continent. I do not think so, the key to sucessful airline business in Africa is for players to   pursue  partnerships of all sorts.

    “All  carriers have a role to play, all they need to do is to pursue different layers of partership, whether it is a  code share or  interline agreements, ultimately, these will drive growth.”

    She urged the government to review some policies on airport taxes, which are not only prohibitive, but also multiple.

    She said the new forex policy introduced by the Central Bank of Nigeria (CBN), is not too favourable for airlines because of disparity between the official  and parallel market rates.

    Such disparity,  she said  sends  signals that something is not too right with the operating environment.

    She said: “The government needs to consider reduction in airport charges and taxes. Not, just about harmonisation, but reduction, this would enable airlines have good returns on their investment.

    “Since 2012, when Rwanda Air commenced operations in Nigeria, the flight frequency has been increasing. We started with four flights weekly; now we are operating six flights and very soon, if we get the approval from the government, we will commence flights between Abuja and Kigali.”

    Ms Odunsi also spared a thought for   air fares offered passengers, saying a lot of factors are responsible.

    She said air fares were high in Nigeria partly because of the exchange rate regime.

    She said: “Airlines are not really increasing the fares as most passengers believe. But, fares are fixed based on the exchange rate.

    “Another  reason air fares are high in Nigeria, is the inability of Nigerian and African carriers to develop routes within the continent.

    “This is a game of demand and supply, if we open up African destinations, the air fare will come down due to increase in passenger traffic . Other reasons  responsible for air fare increase is the few number of European carriers flying into Nigeria. As some carriers have withdrawn services, the demand and supply mix is likely going to bring about higher fares. But, if the carriers are more, competition will bring down the fares.”

  • NCAA: airlines’ tariffs have been liberalised

    NCAA: airlines’ tariffs have been liberalised

    The Nigeria Civil Aviation Authority (NCAA) yesterday said airlines’ tariffs have been fully liberalised.

    The affected services include fares, rates, add-on charges or terms and conditions of service.

    A statement by the General Manager, Public Relations of NCAA, Mr Sam Adurogboye, said this was to clarify reports in the media that the NCAA authorised airlines to increase their fares.

    According to the statement, air fares and sundry charges were statutorily deregulated and subjected to market forces.

    “However, all air carriers or their agents shall file, with the authority, a tariff for that service showing all rates, fares and add-on charges.

    “These include the terms and conditions of free and reduced rate transportation for that service, as specified in Part 18.14.1.1 of the Nigeria Civil Aviation Regulations (Nig.CARs).

    “They shall obtain approval from the authority to introduce and or increase add-on charges or surcharges, such as fuel, Internet booking, insurance, security and similar surcharges, prior to implementation,” it said.

    The statement said the section also requires all tariffs to be filed at least seven days before the rates come into effect, except in the case of matching an existing rate for which no prior notification was required.

    “The NCAA will, therefore, approve the fares accordingly. Prior to the approval, all fares filed with the authority are subjected to Breakeven Analysis and this continues intermittently.

    “This analysis is to curb anti-competitive pricing among airlines and to ensure that fares are not too low as to impact on safety arising from inability to carry out prerequisite maintenance on their aircraft.

    “On the other hand, NCAA will similarly intervene if the fares are too high to avoid overpricing that will deny the passengers access to air transportation,” it said.

  • 300,000 jobs ‘ll be lost if foreign airlines leave Nigeria, says NANTA

    THE National Association of Nigerian Travel Agencies ( NANTA) has said the country would lose about 300, 000 jobs if the foreign airlines stop flying into Nigeria as a result of the $591 million foreign airlines money trapped in Nigerian banks.

    Speaking during a press conference at the NANTA House in Lagos, NANTA President, Mr. Bankole Benard, called on the airlines not to rush in withdrawing their services as the action would further deepen the current crisis which will affect 300, 000 jobs in the aviation sector, both upstream and down stream.

    Bankole said the development was going to affect every body ,the travel agencies, government and the general public, stressing that if a ticket that supposed to be issued in Nigeria is issued in Ghana, the government will lose money.

    He said: “The government is equally losing revenue to neighbouring countries as tickets can be purchased from outside the country and once that is done, the taxes on such tickets will not go to the government through the withholding tax which they would have benefited from such transaction.”

    While calling on the government to resolve the matter quickly, Bankole noted that the aviation industry contributes to the country’s Gross Domestic Product, GDP.

    Bernad also observed that if the industry is allowed to go down, it will affect the country as it will lead to more job loss like what is happening in the banking industry.

    He, however, informed that the federal government has already instructed the Central Bank of Nigeria, CBN, to come up with a flexible foreign exchange policy that will assist airlines to repatriate their funds.

    NANTA boss stated that he is trying to build on what the previous executives have done.

  • Concern over airlines’ trapped funds

    The effects of unstable crude oil prices have hit the airline industry as many carriers are reworking their operations.

    The reworking by some of the affected carriers, is predicated on their inability to repatriate revenue accruing from ticket sales because of new policies designed to protect foreign reserves.

    According to the International Air Transport Association (IATA), this trend has occasioned global concerns on the future of air transportation in the affected countries.

    At the IATA meeting in Dublin, aviation players expressed worry over the effects of trapped funds to global carriers.

    Investigations revealed that foreign airlines’ trapped funds in Nigeria have risen to $591million.

    The clearing house for over 250 airlines also listed other countries where airlines are having difficulties repatriating their funds.

    The countries include Venezuela which topped the list with $3.7billion in the last 16 months. In the last four months, Sudan’s rose to $360million, while Egypt’s figure rose to $291 million in the last four months. Angola’s trapped funds hit $237 million in the last seven months.

  • Much ado about airlines’ debt recovery

    Much ado about airlines’ debt recovery

    The picketing of Arik Air’s flight operations by aviation union workers for alleged N12.5 billion debts has sparked a controversy in the sector, KELVIN OSA OKUNBOR reports 

    Arik Air did not see it coming. Last Wednesday was a day it looked forward to. Tickets had been sold. Passengers looked forward to their trips. Unknown to the airline, workers were out to ensure its flight operations were stalled.

    The National Union of Air Transport Employees (NUATE), the Air Transport Services Senior Staff Association of Nigeria (ATSSSAN) and the Nigerian Union of Pensioners (NUP), said they disrupted the operations of Arik Air at the General Aviation Terminal (GAT) of the Murtala Muhammed Airport, Ikeja, Lagos over  N12.5 billion debts. Many Arik Air passengers  cancelled their trips. Business appointments and meetings had to be cancelled too.

    The unions said Arik Air’s failure to pay the debts has incapacitated the Federal Airports Authority of Nigeria (FAAN) and made it unable to meet its obligations to employees and pensioners.

    To Arik Managing Director, Mr Chris Ndulue, the disruption is unfortunate.

    He said: “When the revenue drive was ongoing and our operations were grounded, we tried to reach the management of FAAN via phone calls and they did not respond and even text messages and up till now we are speaking they have not responded.

    “It is curious, why is it only Arik, others are owing even some foreign airlines but why Arik? The figures they bandy about sometimes its N7b or N11b or like yesterday N12.5b.”

    Although the management of FAAN has remained silent on the action by the unions, aviation experts say its continued silence may be mistaken for a tacit approval.

    An operator, who declined to be named, said though it was wrong for any airline to owe, using labour union members to recover debts is laughable in a globally regulated industry like aviation. He accused union members of taking the law into their hands in a matter that is before the court.

    The Airline Operators of Nigeria (AON), a source hinted, may withdraw service in solidarity with Arik Air to express disenchantment over how FAAN is allegedly using labour unions to armtwist airlines.

    A lawyer, Emeka Nwigwe from Babajide Goku Chamber, said what the unions did  was an affront to the Federal High Court.

    Nwigwe said: “It is an affront  to the Federal High Court and the state. A situation where staff, whether individual or group, decide to turn themselves into debtor collecting agency is absurd.

    “FAAN has no documents to back their claims; they simply resorted to intimidation. The case is in court. FAAN’S action is contemptuous. The law is very clear; no party should take anticipatory action when a case is pending.”

    He added that FAAN took the matter to court last year but that it seemed it was not able to satisfy the court why Arik’s airplanes should be arrested.

    Arik Chairman Sir Johnson Arumemi-Ikhide said the airline had paid FAAN N18.9 billion from its inception.

    Arumemi-Ikhide frowned at the way the unions took the airlines by surprise while alleging that FAAN had been frustrating the reconciliation process initiated by both the court and past aviation ministers.

    “We have paid N18.9billion and we are saying that we need to reconcile. FAAN was the one that took us to court and are the ones that are not respecting court judgment. And anytime we want to reconcile these debts and get to the bottom of this matter once and for all, they (FAAN) become evasive.

    “We are prepared to pay for services rendered to us but we are not going to be bullied into false payment.  And when they feel like, they resort to intimidations. They took us to court and said they will impound our aircraft later rescinded but what happened yesterday was quite unfortunate. It is not good for aviation and not good for Nigerian industries.”

    Arumemi—Ikhide recalled how efforts were made to resolve the dispute by the Senate Committee on Aviation, headed by Senator Hope Uzodima, former Aviation Minister Mrs Stella Oduah and former Permanent Secretary, Ministry of Aviation, Mrs Binta Bello.

    He added that while the matter was there, FAAN allegedly asked the committee to give it two weeks, adding that after that it asked for four weeks and finally stopped coming.

    He said:” FAAN took us to the committee two years ago. FAAN, which initiated the moves to reconcile the accounts, is not ready for reconciliation. We have been reminding them that we want to reconcile the account so that we can move forward.”

    The Chairman said Mrs Bello told him that any claim or claims not backed with documentary evidence should be considered null and void.

    For its inability to operate flights on that day, Arik Air led a protest to the Ministry of Transportation to express its disenchantment over what its Managing Director, Mr Chris Ndulue, described as FAAN’s affront on legal procedure.

    The airline’s team was received by Minister of State, Aviation, Senator Hadi Sirika.

    At the end of the parley, Sirika gave a two-week ultimatum to FAAN, the Nigerian Airspace Management Agency (NAMA) and Arik Air to resolve all indebtedness issues and report back to him.

    The two weeks ultimatum, it was learnt, is to enable feuding parties reach resolution on the amounts owed, payment plans and others.

    The minister noted that airline operators must conform to industry rules and regulations, including payment of applicable fees and fines

    Sirika said the well-being of an airline is measured by its ability to pay for services rendered it.

    The amicable resolution of the rift may be far judging by a communiqué obtained by The Nation issued after a meeting between the feuding parties.

    The content of the communiqué has raised more questions than answers. In it, Arik Air and the unions agreed that revenues services rendered to the airline from September 2015 till date at the Murtala Muhammed Airport(MMA), Lagos would be reconciled within two weeks by the airline and unions in the presence of the police and officials of the Department of State Services (DSS)

    The communiqué also noted that the union would give Arik prior 14 days’ notice before disrupting its activities in future.

    The communiqué was signed by Arik Managing Director Chris Ndulue, NUATE General Secretary Olayinka Abioye, President, National Union of Pensioners (NUP), Ope Rasaki and others.

    The communiqué reads: “That all revenue services rendered to Arik Airline from September 15, 2015 till date at the Murtala Muhammed Airport (MMA), Lagos shall be reconciled within two weeks from the day by a team of Arik Airline staff and FAAN staff with NPF, SSS and the unions’ representatives in attendance.

    “Arik Airline shall go immediately to confirm from their accounts department, agreed bills by Arik for services rendered by FAAN to Arik Airline from September, 15, 2015 till date and pay same before the conclusion of the reconciliation of the disputed bill.

    “It was also agreed that 14 days’ notice should be served to Arik Airline in case of future aviation workers/union action.”

    It was learnt that this communiqué covered only revenue in Lagos, such as landing charges, electricity, service recovery charge and rent.

    A new twist emerged when the chairman of the airline said he had resolved

    that the airline would not be bullied into any form of arbitrary payment.

    He alleged that the airport authority brought an electricity bill of over millions for a month and that since Arik started using the prepaid card, its monthly electricity bill has been less than N700,000 monthly.

    This, he said, raised questions on the template used for generating electricity bills by FAAN.

    He also said that the airline pays Passenger Service Charge to FAAN but still ferries its passengers to the aircraft from the terminal. According to him, so many other things have to be reconciled.

    Arumemi-Ikhide recalled an incident in Calabar where a man broke in and rammed his car into Arik’s aircraft, adding that he was aware that FAAN had paid damages to foreign airlines but had not talked about compensating it for the incident.

    In a matter of days, the deadline set by the minister for the reconciliation of the dispute will be over but it remains doubtful if that will mark the end of the crisis.