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Tag: domestic carriers

  • ‘How domestic carriers can operate sustainably’

    ‘How domestic carriers can operate sustainably’

    Managing Director/Chief Executive Officer, Aero Contractors Airlines, Capt Ado Sanusi has prescribed pills for the survival of indigenous carriers, urging the Federal Government to facilitate access to aircraft to operators by providing sovereign cover for airlines before aircraft lessors.

    Such cover, Sanusi said, would be a guarantee that the Nigerian carrier would live up to the prescribed conditions in the payment of lease rentals and other obligations to the aircraft lessors.

    Sanusi told The Nation that the Federal Government could also come to the rescue of indigenous carriers by ensuring it strikes deals that will ensure a formidable partnership between aircraft lessors and manufacturers for a flexible financial option to make the acquisition of airplanes convenient and stress free.

    Besides, Sanusi said the Federal Government could go a step further by ensuring that challenges confronting indigenous carriers border on multiple taxation by aviation agencies.

    Sanusi said without looking at the escalating cost of operations, indigenous carriers will continue to navigate strong tail wind to make their business sustainable.

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    He spoke of plans by the Aero Contractors Airlines management to secure more operating aircraft from the current fleet to rev the revenue profile of the airline in order to meet its various obligations.

    Sanusi said to drive the profitability of the carrier, it needs to boost its fleet size, enjoy policies of the government such as the Ease Of Doing Business to facilitate the return of more aircraft into service, remove obstacles created by Nigeria Customs Service and other agencies bent on frustrating the efforts of the government.

    Sanusi said: “There are low hanging fruits the Federal Government could harvest for the growth of the sector.The most important being creating easier access to getting aircraft from lessors. One of the best ways of getting this is to ask the Federal Government to get sovereign cover for the aircraft. This will involve a guarantee that the operators will not default on their lease rentals on the equipment. And if they do, there is assurance that they could repossess their property.

    “As much as intervention is good for indigenous carriers, such efforts in the past has  not been better managed. But, the Federal Government could put some measures in place to assist local carriers, to navigate the very turbulent operating environment.”

    Sanusi said the fluctuations in the exchange, rising cost of aviation fuel, otherwise known as Jet A1, has compounded the problems of local carriers.

    Describing local carriers as entities hanging on the brink, the Aero Contractors Airlines boss said the acquisition of more operating aircraft would enhance its revenue projection and boost its credit portfolio management with its creditors.

    Sanusi also alluded to its credit portfolio management in the resolution of issues bordering on the payment of outstanding benefits to some staff separated from the company in the last seven years.

    Offering clarifications on the development, Sanusi said Aero Contractors Airlines is working round the clock to find closure on the payment of benefits to some staff members put on redundancy about seven years ago.

    Sanusi said as much as the airline, in line with its investor – Asset Management Corporation of Nigeria (AMCON) – is poised to clear outstanding benefits with some staff of the carrier, the prevailing economic situation has slowed down the process.

    Sanusi said: “The carrier said it is working diligently to address the issue noting that it acknowledges with concern the reports attributed to the National Association of Aircraft Pilots and Engineers (NAAPE) officials, protesting the failure of the company to pay off some of its workers pulled out since seven years.”

    Sanusi said the carrier is miffed about the role played by the National Association of Aircraft Pilots and Engineers (NAAPE) on the resolution of the outstanding payment for some members of staff separated seven years ago through a redundancy programme.

    According to Sanusi, the carrier has successfully disbursed redundancy payment to at least 95 per cent of the affected staff.

    He said: “A few clarifications need to be made to put things in context and clarify issues. The company has successfully disbursed redundancy payments to at least 95 per cent of affected staff.

    “Admittedly, we still have outstanding financial commitment to a few affected staff. However, plans are under way to defray these and we have been engaging with affected staff to carry them along in all the company has been doing and going through.

    “For the avoidance of doubt out of a total number of 237 staff affected by the redundancy, 225 have been paid off representing 94.94 per cent of those affected.

    “Nonetheless, we still have a total of 12 outstanding staff that are yet to be paid. This represents about 5.06 per cent of the original population. Of this number 3 are ATSSSAN members and 9 belong to NAAPE. Efforts are being made in the near future to pay the outstanding to the staff.

    “Aero Management empathizes with the discomfort and strain this experience has put on the affected individuals as well as the whole company. We ask for more understanding as we work towards resolving all outstanding issues.

    “We believe it is important to situate the whole experience within the operational context that Aero Contractors in particular and the industry in general has had to operate over the period in question.”

    Citing harsh operating environment within the aviation industry, Aero Contractors Airlines, Sanusi  said it has  been  overwhelmingly challenging, with the company enduring significant challenges including two instances of cessation of operations for extended periods.

    “The first was in August 31, 2016 to late December 2016 and the second was in July 20th, 2022 to December 4th, 2022. After about a five  months shut down we have assiduously worked on defraying outstanding payments and commitments, not only to affected personnel but to ensure the viability of operations and to continue as a going concern.

    “This is in spite of additional challenges posed by escalating cost of operations, particularly the substantial cost of the fuel component of our operational costs which has severely constrained our finances and affected allocations to various expense headings, including terminal benefits owed to former employees.

    “Be that as it may, as the figures show, management has been relentless in ensuring a vast majority of affected persons are settled. We assure you that Aero Contractors remains committed to fulfilling its obligations to all stakeholders. We continue to actively work to resolve all outstanding issues and ensure that affected individuals receive their rightful entitlements.

    “Since the return of the company in December 2022 to operations, we have ensured a call back of all employees and reintegrated them to be in a position to contribute to building the organisation they love back to the stature for which it has always been known. It is an onerous task that we (former and current staff)owe to the company and the heritage we have laboured for over the years. We shall succeed. We appreciate your understanding. Our commitment to operating with integrity and accountability remains unwavering, and Aero Contractors remains steadfast in its dedication to the well-being of its employees, past and present,” he said.

  • Operator seeks low cost capital for domestic carriers

    The Chief Executive Officer of Overland Airways, Capt. Edward Boyo, has canvassed the provision of low cost capital to indigenous airlines by the Federal Government to keep their operations afloat.
    Boyo said such initiative would not be too much a price to pay to make domestic airlines viable as access to funds would enable the airlines acquire aircraft at lower interest rate.
    The repayment of such funds he said should spread across a long period.
    Speaking in Lagos, Boyo explained that some governments across the globe have taken such steps to bail the airlines from collapse.
    He described the provision of low cost capital as the best reform government could carry out to resuscitate the domestic carriers as previous attempts to provide intervention funding for the carriers did not yield the desired results.
    He listed some of the factors militating against the domestic airline operators in the country to include low capacity of funding institutions, which hampers aircraft acquisition and high lending rate to airlines which has become a major challenge for many operators.
    Other factors, according to Boyo, are prohibitive maintenance costs which have made domestic airline operators to ferry aircraft abroad for major checks, such as C and D, high import duties and taxes on aircraft parts which adds to operators operating cost.
    He listed skyrocketing price of aviation fuel which has caused operators over 40 per cent of their operating costs.

    The chief executive officer added that there is no level playing ground for operators in the airline business in the country.
    Boyo said: “But the quickest reform the government can make today is to provide low cost capital for the airlines. And it is nothing new; governments in other countries have done it for their airlines.
    “Every government must protect the economy for the benefit of their people, not opening the economy for foreigners to come and take advantage of them. Due to the high cost of capital in Nigeria, you have a situation where European, American and other foreign companies are coming to drop their aircraft in the Nigeria market. And it is because they have access to cheaper capital
    “The problem that Nigerian operators have is high financing of aircraft. This is a problem with Nigeria and Africa, generally. We have lower financing cost in Europe and more advanced countries of the world. An aircraft is measured by its airworthiness, not by the age.”

  • Domestic carriers bogged down by mismanagement, others

    Domestic carriers bogged down by mismanagement, others

    Even before the economic recession, most domestic airlines were unable to evolve a sustainable business model for survival. Many of them hardly operate for one decade without hiccups.  MUYIWA LUCAS reports that over the last two decades, more than 40 airlines have shut down operations, while the existing ones are struggling to stay afloat. Experts, however, point the way forward.

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    He was prepared for the trip to Gombe, where he, along with other members of his team, were to attend a crucial meeting between a subsidiary of his company, the host community and representatives of government. Armed with a confirmed ticket, he walked to the check-in counter of Arik Air inside the departure hall of the General Aviation Terminal (GAT) of the Murtala Muhammed Airport, Lagos, to begin the process that would lead to his flight to Abuja slated for the early morning belt.
    But Mr. Ademola Ojolowo, Head of Media, Lafarge Africa, and his travelling team, were not prepared for what eventually happened. “The morning flight to Abuja has been cancelled and would now depart at 1pm,” an Arik Air official explained to him and his team at the counter. No reason was given for the cancellation.
    Desperate to be in Abuja on time to catch a connecting flight to Gombe scheduled for the same airline, Ojolowo and his team opted to forgo their confirmed ticket and hurriedly bought another airline ticket to Abuja. Again, they met a brickwall- the earliest flight to Abuja on all other airlines checked was 3pm. So, the team had no option but to stick with Arik Air.
    He opted to communicate with his team waiting in Abuja to verify flight availability to Gombe on Arik Air. He was shocked to hear that flights to Gombe had also been cancelled by the airline.
    Determined to get to Gombe by all means, the team opted to fly to Kano on Azman Air where they had hope to endure a-five hour drive to Gombe. That option also meant that he and his team would have to wait till 8pm for the only available flight to the “Ancient City” operated by Azman. Therefore, left with no option, Ojolowo and his team returned home, dejected.
    The experience of Ojolowo is one out of the many domestic air travellers are daily subjected to in the country. So many of them have lost contracts and other opportunities as a result of the sorry state of domestic airlines in the country.
    The state of the economy cannot be divorced from the fate that has befallen domestic carriers. As an oil producing nation, the country has had to depend on importation of fuel to run the economy. It is sad to note that for the greater part of last year, domestic airlines grappled with scarcity of aviation fuel also called Jet A1. Most of the airlines blamed this on their inefficiency last year, leading to frequent flight delays and cancellations by airlines.
    For instance, the Consumer Protection Department, a unit under the Nigerian Civil Aviation Authority (NCAA), lamented that between January and September last year, the eight domestic airlines operating in the country recorded a total of 43,196 flights, had 24,075 delayed flights cases, while 854 flights were cancelled.
    Experts in branding and marketing are convinced that delays and cancellations affect the brand integrity of an airline, including the entire domestic aviation industry.
    But while some have blamed the ailing airline sector on the recession, others insist that running an inefficient business model by airline operators, among other factors, brought the industry to its present precarious state.
    This school of thought argue that the bad business model, rather than the recession, accounts for many airlines’ collapse in the country.
    Checks by The Nation revealed that no domestic carrier has exceeded 40 years of operation at a stretch. The longest was Pan African Airlines which operated for 39 years. It was established in 1961 and collapsed in 2000. The average year spent by Nigerian airlines is usually about 10 years before closing shop. This is in sharp contrast to other African carriers such as Ethiopian Airways and South African Airways, which have spent over 70 years in business. Last year, British Airways celebrated 80 years of flying into the Nigerian market.
    Further investigations by The Nation revealed that so far, about 44 domestic airlines have collapsed or stopped operations in the country. For instance, NICON Airways, owned by Jimoh Ibrahim, Chairman of the NICON Group, hardly operated for one year, after it was bought from Executive Aviation Services (EAS) in 2006. EAS was owned by Captain Idris Wada, former Kogi State governor.
    By April 30, 2007, the only functional aircraft in NICON Airways fleet suffered birdstrike preparatory to take off from Lagos airport. The other aircraft in the fleet had its engine removed for servicing in an Ethiopian MRO hanger. That was the end of the airline.
    Similarly, after showing so much promise, Air Nigeria, also owned by Ibrahim, went out of operation too after barely two years. The management had claimed that it would resume operation by September of 2012 after the business would have been overhauled.
    As of the last quarter of 2012, the situation was so bad that only three airlines – Arik Air, IRS, and Aero Contractors – were left in operations. Overland Airline operates largely into fringe airports. Dana Air, whose suspension was lifted about the same period following its air crash of same year, delayed the commencement of its operations till later.
    Old timer, Aero Contractors also stopped operations last year following the huge debt it owed the Asset Management Company of Nigeria (AMCON). The airline has however recently resumed flight operations.
    The entry of new carriers into the market has not really given much hope to the industry. This is because they are equally struggling to remain afloat barely less than three years after entering.
    The Chief Executive Officer, Belujane Konzult, Chris Aligbe, is sad the airline sub-sector of the aviation industry has remained a toddler in spite of the many years of its existence. He is, however, not surprised at the precarious situation domestic airlines have found themselves.
    The situation got so bad that airlines operating in the country were under threat of being blacklisted over failure to pay their insurance premiums by Lloyd’s of London.
    The airlines were severely affected by acute shortage of foreign exchange, no thanks to the monetary policy of the Central Bank of Nigeria (CBN) which led to acute forex scarcity. This situation still poses the challenge of safety to the society because the airlines now find it hard to obtain aircraft parts which are largely denominated.
    “The challenges of sourcing forex with constantly changing CBN policies and Rate of Exchange (ROE) leaves us sometimes in situations where aircraft parts cannot be obtained when ordered,” the Director of Flight Operations, FirstNation Airways, Captain Chimara Imediegwu, explained.
    One problem that has kept airlines in dire strait is finance. A former President, Airline Operators of Nigeria (AON), Steve Mahonwu, said while airlines may be heavily indebted to the industry’s regulatory agencies, it is only part of the larger financial crisis that is threatening to cripple the industry.
    The recommendations of the Paul Dike task force on aviation reforms of 2006 was expected to breathe new life into the airlines. One of the recommendations of the task force was that domestic airlines needed to shore up their capital base.
    Depending on their choice, airlines interested in only domestic operations were to have a minimum of N500 million; airlines wishing to combine both domestic and regional-N1 billion; and those interested in domestic, regional and international-N2 billion.
    This explains the forced recapitalisation of airlines in 2008. However, nine years after the recapitalisation exercise, the airlines are now moving at an alarming rate back to the old order, as most of them have either stopped operating or are on the verge of doing so.
    Even the N200 billion bailout granted to airlines in the past has turned out to be meaningless. The Chief Executive Officer, Overland Airline, Edward Boyo, was chairman of a presidential sub-committee set up to find lasting solutions to the challenges facing the airline industry in the country.
    While submitting the committee’s report on February 18, 2010 to Mansur Muhktar, the then Finance Minister, he canvassed for a 50 per cent reduction in airport charges for airlines just as the five per cent ticket sales charges should be slashed by 50 percent. The report equally requested that the Nigerian Airspace Management Agency’s (NAMA) terminal navigation charges and third party revenue collections be set aside, while airlines should retain 10 per cent of any charges collected on behalf of the agencies as administrative charges and NCAA statutory fees.
    For retired Captain Dele Ore, re-capitalisation is not the only solution. Operators should emulate the defunct national carrier, Nigeria Airways, which employed the strategy of route development for its growth. “Route development is a major part of an airline’s asset, not just financial re-capitalisation. When they develop routes, then they would make a lot of money from it later; for now, they are only enjoying the routes that have been developed by the defunct Nigeria Airways,” he said.
    An aviation consultant, Olumide Ohunayo, is sad that domestic airline operators have failed to explore the merger option. He explained that though mergers and acquisitions would do the industry a lot of good, no operator was willing to let go of his airline. Business owners in this country, he said, are sentimentally attached to their businesses such that they hold on tenaciously to them even in the face of an imminent collapse.
    Ohunayo’s views may have been dealt a big blow with the collapse of NICON Airways. This is because at the beginning of the aviation reforms in 2006, industry watchers and stakeholders had thought the merger /acquisition of EAS by NICON Airways would breathe a new lease of life into the ailing airline, which was struggling to remain afloat after its air crash of May 4, 2002.
    Today, more than a decade after the merger, the airline is completely grounded.
    Top airline managers are of the opinion that the country’s domestic airline operators need to emulate standard global practice. For instance, they harped on the need for local carriers to interline.
    Interlining is a voluntary commercial agreement between individual airlines to handle passengers travelling on itineraries that require multiple airlines. When a ticket is issued for an interline itinerary, one of the carriers marketing flights in that itinerary will be selected by the ticketing agent as the “plating carrier”. The plating carrier collects the entire fare from the customer and is responsible for distributing the proceeds to other carriers in that itinerary, so long as those carriers carried the passenger. A plating carrier therefore gets the benefit of cash flow. With this system, airlines would have saved cost flying an almost empty aircraft to a destination.
    Aligbe’s prediction about six years ago that four airlines would collapse has come to pass. This, he said, has made it very imperative for airlines to merge or form an alliance. “Airlines Alliance is an agreement formed by two or several airlines to establish cooperation in the global aviation industry. This cooperation helps the airlines better their performance with respect to air transport and customer service. Though the degree of cooperation differs between alliances, airlines alliance is more helpful for small airlines,” Aligbe said.
    Group Captain John Obakpolor (rtd) observes that such unions create a global network that can be used by airlines to benefit air travelers to reach a larger number of destinations with ease and extend their services to passengers worldwide. Benefits that can be enjoyed by travelers include lower airfares, increase in the options of departure times, availability of flights to a greater number of destinations, reduced travel time and various special offers. “Very soon, we might not have more than 20 major airlines globally, because all of them have fused into alliances,” Obakpolor said.
    This view is supported by a past Assistant Secretary of AON, Mohammed Tukur, who explained that such arrangement would augur well for the industry and operators. “Why would I fly eight passengers to Jos in a 120 capacity aircraft, and another airline fly 20 passengers to the same destination, when we could have an arrangement to merge passengers and then have a sharing formula,” he said.
    Indeed, airline managers of repute are said to be very scarce in the country. Therefore, as Ore argued, why should there be bailouts for operators or managers that crippled their airlines. He is convinced that an operator who could not manage his operation effectively with his funds or bank facility may just be unable to do same if given a bailout by government. Consequently, he is canvassing that government should probe how operators ran themselves into their present situation.
    For instance, the case of the now defunct Bellview Airline, founded in 1992, has not ceased to amaze industry watchers. At its peak, the airline flew 11 international destinations – among them Amsterdam, London, India and others. It was the first domestic airline to be certified by the International Air Transport Association (IATA). By June 1997, Bellview was worth $15 million, winning both continental and domestic laurels.
    Also, Afrijet Airline, which staged a comeback with fanfare in 2011 soon ran into turbulent waters as it could no longer finance its operations. It had to withdraw due to inability to pay workers’ entitlements. There was no aircraft to operate, as it could not foot the bill to sustain its operations and lease payments.
    Drawing from these, Ohunayo said consolidating by merges was the best option for domestic airlines. He explained that an airline owner may have done well trying to invest in the business, but if his effort has not yielded much result, then he should think of bringing others in to strengthen the business. “Why own 100 per cent of a loss making investment, instead of owning 10 per cent of a thriving and profit-making investment which mergers can create for you,” he asked.
    One point stakeholders are unanimous on is the need to stop the granting of multiple entry slot to foreign carriers. They warned government to be weary of the type of Open Skies agree and Bilateral Air Services Agreement the country enters into, as it is usually a disservice to domestic airlines. “Multiple entry slots to foreign carriers kill our local airline because it allows them to compete with them. For instance granting a foreign airline entry into Lagos and Port Harcourt muscles out local airlines. Instead, the domestic airline should be made to carry passengers to other cities in the country once they land in Lagos. This leaves a window of revenue for the domestic carriers,” Aligbe reasoned.
    Until this is done, domestic airlines may gradually be heading for extinction.

  • Troubled times for domestic carriers

    Troubled times for domestic carriers

    These are not the best of times for the aviation sector. Many domestic carriers are under severe pressure due to the harsh operating environment caused by huge debt overhead, multiple aeronautical charges and prohibitive taxes, among others. Experts are calling for an urgent intervention to stave off the impending collapse of the sector, hit by series of flight cancellations and other problems. KELVIN OSA OKUNBOR reports.

    The domestic airline sub-sector is troubled. The temporary suspension of flight operations by three carriers has sparked fears over the fate of the sector. For those schooled in the dynamics of aviation, the development clearly indicates that all is not well with the sector, and that urgent interventions are needed to stave off its impending collapse.

    Some of them who spoke with The Nation said, for instance, that the situation is so bad that some aircraft lessors, who loaned their airplanes to indigenous operators, have moved to repossess their equipment over failure to adhere to the repayment plan. They blamed this carriers’ faulty business plans, wrong operational models, incompetent management and harsh business and policy environment, among others.

    The Chairman of Air Peace, Mr. Allen Onyema, said aircraft lessors were afraid to lease their airplanes to Nigerian investors because of the high rate of payment default. He added that lack of integrity, poor financial planning, and misapplication/diversion of funds injected into domestic carriers by government in the past are also responsible for the declining fortunes of domestic carriers ­— some of which recently announced temporary cancellation of flights.

    The local aviation sector has been hit by a spate of flight cancellations in recent times. The development, which unleashed hardship on passengers and various stakeholders, including banks, leasing companies and prospective investors, has raised concerns over the health of the sector. The thinking is that unless some interventions are made, the situation may result to total collapse of the sector and loss of jobs.

    AlthoughArik and First Nation Airways have resumed flight operations, Nigeria’s oldest carrier, Aero, is yet to do so. This is coming on the heels of the collapse of several domestic airlines that have suspended operations in the last decade. Some of them are Okada Air, Albarka Airlines, Oriental Airlines, Savannah Airlines, and Freedom Air Services.

    Others are: 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.

     

    No cause for alarm, says NCAA

    Bad as the situation is, the Nigerian Civil Aviation Authority (NCAA) says there is no cause for worry, as the affected airlines are merely complying with statutory regulations to ensure that they have the required technical expertise to operate without compromising safety, while also making profit.

    NCAA’s Director General Captain Mukthar Usman said the agency was speeding up its technical, safety and economic oversight duties on airlines, and that domestic carriers were not folding up, but complying with statutory regulations to ensure safety of operations. “Domestic airlines are not folding up, but merely suspending their operations temporarily,” he said.

     

    ‘Carriers’ problems are

    self-inflicted’

    To some industry operators and experts, the crisis threatening to bring domestic carriers to their knees could have been avoided if they were more circumspect in the running of their businesses. For instance, Onyema said operators failed to take a critical look at corporate governance issues; they also failed to lay a solid foundation that did not depend on revenue accruing from ticket sales, which would be spent on one major offshore aircraft maintenance check.

    The Chief Executive Officer of Centurion Securities, Group Captain John Ojikutu (rtd), however, observed that the problems of domestic carriers go beyond insufficient funds. While noting that domestic airlines failed to merge, he said “It is better to voluntarily collapse the airlines into manageable numbers for effective and efficient operations than to allow them go into extinction.”

    Captain Ojikutu also identified inadequate skilled manpower, poor financial management and ineffective oversight from the NCAA as other factors threatening the industry’s survival.

     

    Calls for intervention intensify

    To avoid the collapse of more airlines, experts say that there is need for government’s intervention by way of tax reduction. They also called for reduction of levies and charges to reduce the huge burden on airlines.

    The Executive Chairman of Airline Operators of Nigeria (AON), the umbrella body of domestic carriers, Captain Nogie Meggison, said government must come to the aid of struggling carriers, warning that many of them may close shop if government does not intervene urgently.

    “Government has to urgently come to the aid of domestic airlines. This could be done by reducing the multiple charges paid to the agencies. The charges are too many,” Meggison said, adding that aviation agencies give phantom bills to airlines. “How do they expect the struggling carriers to survive?” he asked.

    “There are better ways of doing things. Instead of forcing the airlines out of business by denying them access to fly or employing arm-twisting tactics, the agencies should be working closely with the airlines to reduce costs and make their operations more efficient.”

    Yoked by high aircraft

    maintenance cost

    Apart from multiple charges, the high cost of C-Check has forced some carriers to abandon their airplanes in countries of repairs. The Chief Executive Officer of Aero Contractors, Capt. Fola Akinkuotu, said this constituted a major part of airlines’ operating costs, which puts a huge strain on their finances.

    According to regulatory provisions, airlines are expected to carry out various types of maintenance checks on their aircraft – A, B, C and D checks and others. A C-check costs about $1 million.

    Akinkuotu said airlines could make significant savings if the maintenance facilities were available in-country. He said many airlines whose aircraft were flown to places like Ethiopia, Morocco, Egypt and others for maintenance did not return due to inability to pay for the  maintenance.

    This must be why Mbanuzuo called on government to come up with a deliberate policy to encourage airlines to set up aircraft maintenance facilities in Nigeria.

     

    Operators urged on use of

    right airplanes

    The Managing Director of FMC Aviation, Mr. Hubert Odika, said using the right equipment could guarantee carriers’ sustainability. He also said fleet harmonisation would assist airlines to reduce cost of maintenance.

    The former Operations Manager of Chanchangi Airlines, Mohammed Tukur, agreed with Odika. He noted that the use of turbo propeller airplanes, for instance, was more economical for domestic operations in Nigeria. He said with the increasing cost of aviation fuel and other charges, using the right aircraft was imperative to sustain profitability.

    An airline pilot and President of Nigerian Aviation Safety Initiative (NASI), Captain Dung Pam, observed that most airline operators entered the business without robust plans, warning that more airlines could go under if operators failed to do the right thing by not underestimating the financial and human resources required to sustain their businesses.

    Mergers to the rescue

    Onyema said operators needed to forge closer ties to salvage the industry. “Owners of these airlines should be blamed because they have failed to come together to articulate a position that would be helpful to them, the flying public, and the government. Instead, they allow unhealthy rivalry to becloud their sense of judgment. That is what is happening,” he charged.

    He argued that if domestic carriers could come together and articulate their position to the government, the industry would be better for it. Describing the strategy as “a win-win situation,” he said it would help the government generate revenue, while also ensuring that the flying public have seamless travelling experiences.

    To Onyema and, indeed, other operators the options have become necessary to ward off the impending collapse of the sector. At a recent meeting with the Senate Committee on Aviation, the Managing Director of Arik Air, Mr. Chris Ndulue, said domestic carriers were dying slowly.

    He, therefore, called on the government to intervene to save the carriers from collapse. Ndulue, who spoke in an interview in Abuja, warned that unless urgent steps were taken, many domestic carriers might close shop soon.

    “The economic situation today is suffocating,” Ndulue told the Senate Committee on Aviation, adding that challenges such as the high interest rate of 24 per cent on bank loans, worsening exchange rate and multiple charges from various regulatory agencies, among others, are militating against the sustenance of aviation business in Nigeria.

    “If you have to borrow money and pay 24 per cent interest, and you don’t make a margin of 24 per cent, it means you will find it very difficult to pay back the debt. This is part of the fundamentals we need to address,” he said.

    According to Ndulue: “There are a lot of economic indicators that have made business more difficult, which are now manifesting in the inability of airlines to continue to operate.” He said airlines were operating in an industry that had very little profit margin.

    Pointing out that there hasn’t been a bailout targeted at salvaging the airlines or addressing their finances, he said this was where the committee could assist operators by interfacing on their behalf with the Federal Government.

    “The economic situation has moved from bad to worse. I think the intervention needs to take place to avoid total collapse of the industry,” Ndulue said, warning that “two airlines have closed shop; there could be more airlines doing the same if the trend continues.”

     

  • NCAA expresses worry over increase in flight cancellation

    The Nigerian Civil Aviation Authority (NCAA) has expressed concern over increasing spate of flight cancellations by domestic carriers .

    The regulatory agency stated that several reports from the Consumer Protection Officers (CPOs) and aggrieved passengers have inundated its offices from across the nation’s airports.

    A statement signed by the general manager public relations of NCAA, Sam Adurogboye noted that though the regulatory authority is aware of the prevailing challenges as regards aviation fuel, it is expected that the airlines should follow strictly the requirements of the Nigeria Civil Aviation Regulations (Nig.CARs) in carrying out their operations.

    Adurogboye said the circumstances should not open a window for outright impunity and a flurry of cancellations which has consequently rendered air travel in the country a nightmarish experience.

    He said: “All Airline Operators are therefore warned to adhere to the Standard and Recommended Practices (SARPs) while dealing with passengers. Many of whom have parted with their hard earned cash in return for comfort and value while commuting to their destinations.

    “Therefore sufficient notice must be accorded all intending passengers prior to any operational cancellation.

    “Where there is a delay in the service, passengers must be duly informed and light refreshment provided.”

    Adurugboye advised operators to ensure that tickets are not sold to air travelers when there are perceived or real hitches concerning sourcing of aviation fuel (Jet A1).

    He observed that while NCAA is not unmindful of the efforts being made by the airlines to avoid operational hiccups, passengers are similarly enjoined to exercise restraint and cooperate with airline officials during eventualities.

    According to him, it is noteworthy that the federal government of Nigeria is already taking measures that would ameliorate the paucity of Jet A1.These steps would guarantee availability and allow operators provide adequate services.

    “However, the Nigerian Civil Aviation Authority (NCAA) wishes to reiterate that all airlines should henceforth guard against frequent flight cancellations that will jeopardise the conditions of carriage agreed with the passengers.
    The authority has therefore intensified monitoring at all the nation’s airports.

    Subsequently, any unjustifiable or avoidable flight cancellation will be viewed with utmost seriousness and where culpability is established very stiff sanctions will be applied”, the NCAA spokesman noted

     

  • Operators fault planned recapitalisation for domestic carriers

    Plans by the Federal Government to raise the capital base of domestic carriers has received knocks from experts who described the proposal as  an inappropriate measure in addressing the challenges of airlines .The chairman of Air Peace,  Allen Onyema, said recapitalisation by airlines is not sufficient evidence that the carriers are in sound financial health. He said pegging a fixed amount for any airline is insufficient evidence that the carrier has the technical wherewithal to operate safe flights .

    :”’ I am in support of any policy by government that would make the aviation sector stable . Any policy that would make airlines operate very safely. I have  not heard anybody in government talking about anything about recapitalisation of airlines . But we are hearing rumours that they are proposing about N5 billion recapitalisation for domestic airlines . It is strange to me that figures are being thrown about. The airline sector is not like the banking sector. It is strange to hear this in Nigeria, it is unusual in other parts of the world to propose this.

    “Airlines are not banks that had to recapitalise because they need to give out depositors money daily  The reason is that banks need more money as back-up to give out . The same model cannot be said of airlines. Banks need solid financial base because they daily have to give money to people to trade with . Airlines do not trade with money , so the whole idea of requesting them to have a N5billion recapitalisation base is not ideal,” he argued.

    He said when government is proposing recapitalisation in aviation, the model for the banking sector should not be applied to aviation.

    “What I think government should do is to put In place policies that would assist airlines to source cheaper access to funds, ease the problem of aviation fuel , by reducing the taxes , the new airlines should be given four years tax holiday,” he said, stating that  there is no gain In the airline business.

    He said what should be paramount is to ensure that airlines are categorised  to operate according to the number of aircraft they have. For instance, airlines should be restricted to operate limited routes according to the number of aircraft in their fleet . To me this is the best form of recapitalisation .Airlines  operations should be restricted to the  number of aircraft they have . Not to set N5billion by the side, he said.

    Onyema warned that If government’s plan is to forge mergers in the industry, this proposal will not materialise, saying that mergers are not forced. He called for the creation of a conducive environment that would encourage collaboration among the carriers. He said partnership among airlines is the way to go, as against the recapitalisation that is being proposed.

    On his part, an Aviation analyst and the Director, Zenith Travels,. Olumide Ohunayo argued that the planned recapitalisation of domestic airlines is not a solution to the several challenges facing local operators.

    He said, instead of embarking on another round of recapitalisation, he said the Federal Government through the NCAA, should strengthen its regulatory functions regarding the issuance of Air Operator’s Certificates (AOCs), to local carriers.

    Also speaking, an Aircraft Engineer and Executive Director, Centre for Aviation Research and Safety, Sheri Kyari, said the recapitalisation will lead to the death of some of the airlines that are currently struggling to survive due to several challenges confronting them. He said this is not the time to recapitalise as it may not lead the industry anywhere, adding that this may be a ploy by the authorities to force the domestic airlines to merge.

    On the minimum capital base he thinks the Federal Government is looking at, Kyari said that government may be thinking of raising it from N500 million to N5billion.

    In April 2007 , after the spate of air crashes in 2005 / 2006, the Federal Government raised capital base of airlines  flying domestic routes to  N500 million, while regional operators were required to have N1 billion, and those on international routes were required to recapilise with   N2 billion.

     

     

     

     

    Kyari stated that the committee does not understand the dynamics of the aviation sector, arguing that the recapitalisation in the banking sector is not the same with that in the aviation industry. He said any re-capitalisation attempt at this time would be perceived as a step by the government to kill the indigenous carriers in favor of the planned national carrier.

    He argued that it would be better for the authority to carry out an economic audit on the domestic airlines, as the rate at which domestic operators are going under is alarming .He said besides asking airlines to recapitalise, the Federal Government itself must provide conducive atmosphere for domestic airlines to operate, by granting them waivers, as it is applicable with the importation of aircraft spares.

    According to him, “Recapitalisation I will say it is good, but any move again this time to introduce such to the airline, I think will be suspect. A lot of people are likely to think that any recapitalisation is to kill more airlines and allow the Government to achieve their national carrier objective. Government has to be extremely sensitive about this and then, you are looking at recapitalising, those who cannot recapitalise only to find themselves outside, and will lose their investments in the industry. I think the Government must do this thing at least sensibly and while they are doing this, they must work out what I would call incentives for these other ones to recapitalise.

    He continued, “Government is doing all this and not creating market for the airlines. They will want to say it is still private sector arrangement, but Government should also do one or two things to alleviate the sufferings of the airlines. “