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Welfare row, picketing expose airlines to fresh risks

By Wole Oyebade
18 December 2020   |   3:44 am
The colossal loss in aviation should not have come as a surprise. Air travel is a high-end, tight budget industry where every minute counts and is accounted for. Three months of lockdown could only mean collateral doom.

Federal Airport Authority of Nigeria (FAAN) staff protesting against planned concession of federal airports at Murtala Mohammed Airport in Lagos . PHOTO: AYODELE ADENIRAN

The unions’ clampdown on air travel operations over workers’ welfare is hurting insolvent airlines more than it aims to help comrades. And at a time of devastating pandemic, arm-twisting measures may win the battle but lose the war. WOLE OYEBADE writes.

The colossal loss in aviation should not have come as a surprise. Air travel is a high-end, tight budget industry where every minute counts and is accounted for. Three months of lockdown could only mean collateral doom.

The unexpected was the workers and management face-off that has dogged the tedious recovery phase since flight services resumed five months ago. In fairness to the workers, they have been the first set of victims when businesses started heading south. They were either furloughed without compensation or retained on meagre allowance.

The fortunes of their employers were not better either. But when aviation unions get into the mix, and in-between workers-management tango, battles become hard-won and peaceful resolution is more of wisdom in the long run.

Stakeholders have, therefore, warned parties that the entire industry faces a grim future unless they could moderate demands, tailor expectation along the COVID-19 realities, and bargain for peace with patience. Of primary importance, is the survival of airlines, to create wealth for all and meet obligations.

Love takes a flight
Arik Air has one of the protracted management-workers conflicts in the sector, and especially worsened by the pandemic. The airline out of desperation laid off 300 workers a fortnight ago, as part of measures to steady the ship. It was at a time when aviation workers’ unions shut the airline’s headquarters in Lagos and disrupted services for two days – further worsening Arik’s fighting chances.

The workers’ unions, under the coalition of the National Union of Air Transport Employees (NUATE) and Air Transport Senior Staff Services Association of Nigeria (ATSSSAN), said the picketing was not unconnected with alleged refusal of Arik management to fulfill an agreement on payments of workers’ terminal benefits months after they were furloughed.

ATSSSAN Chairman, Arik Air branch, Innocent Atasie, explained that the negotiations had been on for a while. To avert industrial action last November, a joint meeting was held with stakeholders to find a lasting solution to the lingering crisis. It was agreed that Arik management would pay a package of basic salary, housing and transportation, as part of workers’ terminal benefits.

According to Atasie, the payment should be made within three weeks to workers’ earrnings above N330, 000, while those earning less than N330, 000 should be paid within four weeks.

“We, under ATSSSAN, accepted the offer and moved on, only for the management to call for a meeting in November 19, at which it said it will only pay 58 per cent on terminal benefits to workers against the 100 per cent agreed earlier.”

The Guardian learnt that the management had to resort to the “half bread is better than none” logic, in the light of cash burnout, pressing operational needs and the imperative of making some drastic decisions.

While the picketing was going on, the management in a statement said “arising from the devastating impact of the COVID-19 pandemic, leading to the constrained ability of the airline to complete heavy maintenance activities and return its planes to operations, stunted revenues against increasing operational costs, the management of Arik Air declared 300 staff members redundant to its current level of operations”.
Still water runs deep

The present crisis dates back in time and prior to Arik’s takeover by the Asset Management Corporation of Nigeria (AMCON). Recall that AMCON, a special purpose vehicle of the Federal Government for the recovery of debts, took over Arik in February 2017. The rationale was to save the airline from imminent collapse, citing gross mismanagement by the owners and debt in excess of N300 billion.

Assessments showed that staff pension, vendors including fuel suppliers, spares suppliers, leasing companies, aviation agencies and staff salaries, among others were owed. Customer service was at its lowest ebb, flight cancellations and delays were the norm.

The Federal Government quickly injected the sum of N4 billion in loans into its operations to stabilise the airline. Besides paying salaries and meeting basic obligations, about nine out of 30 aircraft owned by Arik returned to operation, sustaining both local and regional operations.

Aviation enthusiast, Steven Akinsiku, said he was initially not optimistic about AMCON’s intervention, but the receiver manger had done a good job.

“I didn’t know AMCON to have a track record of managing a complex business like aviation, not to talk of two airlines at the same time. That is why many stakeholders were skeptical. Besides, the rot on ground was grandiose. How many years of profit would the airline make to pay debt of N300 billion? That may take between 50 to 100 years.

“But the management has tried to steady the airline’s operations into a reliable brand and set it on a recovery path. I’m aware that they make regular payment of salaries, statutory pension, pay vendors and trade creditors, and improved customer service. Though it could not have solved all problems overnight, the profile of the airline was on the rise until COVID-19 upset the balance,” Akinsiku said.

Aviation under threats worldwide
The weight shedding measures are not peculiar to Arik Air or the local airlines. It is a global storm predicated on insolvency. The clearing house for 280-plus airlines worldwide, the International Air Transport Association (IATA), recently estimated that the airline industry’s global debt could rise to $550 billion by year-end.

The debt is a $120 billion increase over debt levels at the start of 2020. The details showed that about $67 billion of the new debt is composed of government loans ($50 billion), deferred taxes of $5 billion and loan guarantees of $12 billion.

The global debt crisis is forcing operators to explore difficult reforms, which will affect 25 million direct and indirect aviation jobs. For instance, Turkish Airlines has implemented a 55 and 30 per cent pay cut for senior and junior staff in April, while some employees were dismissed.

Some 200 jobs are going at Gatwick Airport as it “protects the business” against the impact of Covid-19. Stewart Wingate, the chief executive officer, and his executive team will take a 20 per cent salary cut and waive any bonus for the current financial year.

For Arik, over 50 per cent of 1,600 staff have been on furlough in the past six months and on a base allowance of 20 per cent monthly. “The decisions to let go of 300 staff is naturally a difficult decision,” the airline said in a statement.

How not to agitate
Inside source explained that the airline was especially worst-hit by the absence of financial stimulus package from the Federal Government, at a time of disruptions like EndSARS protests, industrial actions, Naira free-fall to N500/1$, maintenance-due aircraft either idling at airports or stuck overseas because of no forex to repatriate equipment.

“It is indeed a very tough time for all, which all workers could see. It is most disappointing that an internal crisis got into the mix and further created injuries to our operations. Following the last crisis, customer confidence has gone down again, and you cannot blame the customers.

“This is a business of freedom and of trust. Shutting down our own sector will only drive customers away, yield no revenue and bite us the most. Without the little revenue from flights, how will the workers get the benefits they want? They have protested, but the airline is the worst for it. Another protest may just sound the death knell; leaving us all with nothing to fight over.

“These incessant disruptions are unhelpful to the airline and our highly esteemed customers. Our challenge is to ensure we strengthen the airline, secure jobs and staff welfare which is given priority in every AMCON exit strategy,” the source said.

The chief executive officer of Mainstream Cargo Limited, Seyi Adewale, observed that some of the local operators did tow the path of peace, but the workers wanted it their own way.

Adewale said instead of the unions shutting down their own sector, they should sit-down with the operators and agree on a win-win for all.

“The pilots said the owners of the business should not only be focused on making profit but I would like to ask, who would pay for the losses? Airline operators are going through a lot now and they need to be considered,” Adewale said.

Olumide Ohunayo, an aviation analyst, hinted that in this era, everybody needs to calm down; from the unions, to the workers, to the airlines, most importantly to the regulators and the supervising ministry.

Ohunayo said the airlines at this time cannot be threatened, abandoned or left on their own. He condemned the action of the unions, who recently threatened that the airspace will be unsafe for flight just because they had disputes with two airlines.

“What we are having now is a 40 to 50 per cent confidence level in industry operations by passengers. This means we are having 40 to 50 per cent load factor compared to what it was before the COVID-19. This pandemic is the worst ever for the industry. The priority here is for airlines to get back to full operations.

“There is very little happening in the Nigerian airspace now. Even Lufthansa that has collected palliatives from their government is downsizing. So, what is the big deal? There is a need to re-orientate the unions, the government and the agencies to see that it is a time that we all need each other,” Ohunayo said.