How not to support local airlines for growth, mutual benefit
With 14 million passenger traffic at 20 per cent growth rate yearly, local airlines and investors are apparently doing much for the economy and deserve some concessions. But tightening the regulatory noose will be most unfair.
WOLE OYEBADE writes.
Consumer Protection Directorate of the Nigerian Civil Aviation Authority (NCAA) recently released industry figures for year 2018, with no fewer than 14.2 million air travellers recorded. The traffic, compared to 2017 estimate of 11.2 million, represents 20.8 per cent traffic upsurge – apparently a return on investment for committed operators.
Specifically, 34 airlines on the international routes flew 4.08 million passengers, while nine domestic airlines collectively hit the 10.09 million passenger mark in 2018.
The record, though implicit in the regulator’s account, tells more of the exploits of local airlines, weathering the storm of a toxic business environment that has almost made it impossible for airlines to last beyond the fifth year anniversary.
Local airlines’ strides amid hurdles
Status of the airlines says much about the environment and the potential that abound too. Med-View Airlines Plc., with support of First Bank Plc. and foreign partners acquired Boeing 777 aircraft for its Hajj operations and revival of the truncated London and Dubai operations. The airline has, however, continued to slide; downsizing more operations and staffers lately.
Arik Air, following its takeover by the Asset Management Corporation of Nigeria (AMCON) in February 2017 and the Federal Government’s injection of N1 billion into its operations, showed signs of stability, but not recovery. Besides paying salaries and meeting basic obligations, about nine out of 30 aircraft owned by Arik remain in operations.
Air Peace is, however, the most stable of the airlines and it is not by accident that the airlines accounts for about 40 per cent of the 2018 total passengers on the local front.
Indeed, the airlines led the way with an unprecedented investment in aircraft in its bid to make a strong case for Nigerian flag carriers on regional and international skies, even as “no city is left behind” on the home front.
To this effect, the airline recently placed a firm order for 10 brand new Embraer 195-E2 aircraft. The order comprises purchase rights for another 20 E195-E2 jets. Also, 124-seater jet in dual class and 146-seater jet in single class configurations respectively. With all purchase rights exercised, the contract is valued at N640.5 billion ($2.12 billion) based on current list prices.
The carrier also set a regional record in September 2018 when it ordered 10 brand new aircraft from Boeing, increasing its fleet size then to about 37 aircraft. With the new order, Air Peace’s fleet size has increased to 67 aircraft.
Air Peace had earlier set a domestic record as the first Nigerian airline to acquire and register the Boeing 777 aircraft in the country. Three of the four wide-body aircraft it acquired for its long-haul operations to Dubai, Sharjah, Johannesburg, London, Houston, Guangzhou and Mumbai have so far been delivered.
Industry stakeholders, though marveled at the unparalleled investment in capacity, they are optimistic that the 14 million passenger record may as well double in a year, when at least half of Air Peace new orders join the current operating fleet. But, the worry is the systemic hurdles that will shackle the enormous potential and attendant benefit.
Multiple taxes and charges
According to the airlines, sundry charges, under the guise of taxes and levies at airports nationwide, account for at least 65 per cent of revenue accruing to them. Besides the five per cent charge on every ticket bought by passengers, which goes to all five regulatory agencies, there are other “illegal” charges on the operators.
They include the second popular five per cent Cargo Sales Charge, five per cent Value Added Tax (VAT), Passenger Service Charge of N1000 per ticket on local route, Charter Sales Charge, Aircraft Inspection Fees, Simulator Inspection Fees, Landing Charges, Parking Charges and Terminal Navigational Charge. Others are Enroute Charge, Fuel Surcharge, Airport Space Rent, Electricity charges, Apron Pass, ODC, Registration Fee, Service Recovery Charge, Processing Fee, Avio Bridge, Aircraft Registration and Processing Fee.
The airlines also pay Toll Gate Fee, VIP Lounge, Trolley Service, Clearance Fee, Check-In Counter Charge, Courier/Tarmac/Pre-Release charges, Import Charge (Dom), Export Charge (Dom), Import Royalty, Export Royalty, Ports Charge, Exports Charge, Transhipment, and Concession Fee.
Together, these charges eat deep into earnings leaving the airlines with less than N10, 000 on a passenger ticket sold at an average price of N30, 000. Chief Executive Officer of Air Peace, Allen Onyema, recently said if this current regime of taxation is not removed, no airline will survive.
Onyema said though the charges had been in the system for long and some of them as fallouts of legislations, it was high time they were reviewed to ease the burden on commercial airlines.
“Let even the government raise a consulting firm to go round the country to find out why airlines have been dropping off. Heavy taxation is part of it. We are suffering.
“Air Peace supports payment of taxes to government; no government runs without the citizens paying tax. Airlines must pay their taxes. What we are asking is for these taxes to be streamlined in such a way that it will help us to help the government and help the country.
“Commercial airlines are a catalyst to economic development in any country. That is why every country supports its airlines. We are not asking for any financial assistance but for an enabling environment that makes things work. It is not complimentary for us as a country that all our airlines are dying,” Onyema said.
Chairman of the Airlines Operators of Nigeria (AON), Captain Nogie Meggison, observed that over 50 indigenous airlines have existed in the country in the last 18 years, but only nine are flying presently.
“The mortality rate of airlines in Nigeria is high. The owners of the defunct airlines have all been success stories in other business endeavours except in aviation.
“Could all of them have been responsible for the failure of their airlines? The answer is no! Rather, the unfriendly policies and harsh operating environment have been the bane of aviation sector’s growth in Nigeria.
“We are mindful that if these issues and policies are not addressed urgently, the remaining airlines run the risk of becoming defunct in no time,” Meggison said.
Regulate to safety, survival not extinction
Aviation rules and regulations are binding, and it must be implemented to the letters. But making it antagonistic by tightening the noose just for the sake of it will not help anyone, but erode confidence and hurt the industry.
President of the National Association of Nigerian Travel Agencies (NANTA), Bernard Bankole, said the airlines, as well as other stakeholders, have a lot to gain working in harmony than in silos and with a policy direction for growth and mutual benefit.
Bankole said Nigeria should take a cue from countries like Ghana that are creating the enabling environment for aviation to thrive.
“Today, a lot of airlines still prefer to go to Ghana to fuel up or to make repairs. Why? Because they have made available the processes and infrastructure for the comfort of any airline that is coming to their country.
“I can say to you categorically that it is not possible for Airbus A380 aircraft to land in Nigeria. Even if they want to, we don’t have the infrastructure. That is one of the biggest aircraft in the world. But this same aircraft landed in Ghana.
“What makes Ghana better off than us? This is not about politics; it is about doing the right thing. We have the capacity to do the right things; we just choose not to do them.
“There are a lot of things we can tap into. If the plan is to have Nigeria Air as our national carrier and it is not working out yet, are we saying there are no alternative plans to improve the sector?
“In what way have we supported the local airlines? Because the same problems facing the local airlines also lie in wait for the Nigeria Air and it will kill it within a short period. So, it will be just another white elephant project. It is high time we wake up from our sleep and understand that the aviation industry is a sensitive one that requires the government’s full attention.
“Because it is the fastest and safest means of moving from point A to point B. More so, when foreigners come into your country that is the first port of entry that showcases your worth as a nation.”
A call to mutual benefit
It is in this light that airlines like Air Peace are quite central both to the industry and the economy at large. They need all the support to remain in operations and succeed.
With about 30 aircraft in its fleet, Air Peace alone has staff strength of over 4000 workers – which more than triples the entire Nigeria-based employees of all 35 foreign carriers plying the Nigerian route.
Gradual expansion of its fleet with the arrival of new aircraft will also expand the workforce to about 10,000 direct staffers and more than 50,000 in the auxiliary category.
A more stifling operating environment will not only affect jobs, but connectivity of over 14 million passengers that currently travel the entire network in a year.
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