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Local airlines in dire straits as losses hit N360 billion

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Murtala Muhammud International Airport, Lagos. PHOTO: AYODELE ADENIRAN

The current restriction of both local and foreign commercial flight services has forced domestic carriers into financial distress as cumulative losses hit N360 billion.
  
The sum, spread across eight airlines, is the running cost of operation, which include aircraft leasing, routine maintenance, debt servicing, staff salaries and allowances, parking and maintenance fees, and recurrent training, amid nil revenue.

Recall that the Federal Government about three weeks ago restricted commercial air services and shut down the airports in efforts to contain the Coronavirus spread.  

  
The Guardian learnt that a total of 120 aircraft have since been grounded nationwide. Two airlines paid employees half salary and allowances for the Month of March, while uncertainty clouds April disbursement across the board.
  
But the airlines are not alone in the dire effects of the Covid-19 pandemic. Almost all 6,000 travel agencies nationwide have laid off staffers over the collapse of businesses.
  
Top officials said the airlines’ management could do very little to salvage investments and save the airlines from collapse without major help from the Federal Government.
  
The Chairman of Airline Operators of Nigeria (AON), Capt. Nogie Meggison, said it was instructive to note that about four weeks before domestic airlines suspend operations, passenger traffic had declined to about nine per cent leaving the airlines in dire financial strait while raking avoidable cost.
  
“At the moment, over 120 aircraft are parked at our various airports across the country, with airlines required to pay accumulated costs. The domestic airlines have lost an estimated N360 billion and still counting with no end in sight,” Meggison said.
  
The International Air Transport Association (IATA), earlier estimated that the temporary restriction of all flights had a potential to affect at least 3.5 million passengers resulting in a $0.76 billion revenue loss for Nigeria.
   
IATA, the clearinghouse for 285 global airlines, said the general loss called for urgent action from governments in Nigeria, other Africa and the Middle East countries to provide financial relief to airlines against imminent collapse.
Depending on how long the disruption lasts, no fewer than 91,380 jobs are at risk in Nigeria, with $0.65 billion in contribution to the economy.
  
Meggison said operators aligned with global concerns and reports which put aviation sub-sector as the worst hit, as a result of the various containment efforts and strategies world-over.
  
“These troubling statistics are likely to threaten the existence of many domestic airlines in Nigeria, who are still grappling with over 32 multiple charges.
  
“The AON wishes to commend the CBN for announcing a moratorium of one year on all principal repayments of intervention loans effective March 1, 2020; reducing interest rates from nine to five per cent per annum for one year; and creating an N50 billion targeted credit facility to cushion the impact of the virus on businesses.post-Covid-19.
  
“The airlines remain the only operators still paying VAT on commercial air transportation, which is not obtainable anywhere in the world. We have said this countless times that the VAT is adversely affecting the sector by subtly reducing the number of those who can afford air travel due to high fares, and in view the impact that this pandemic will have on the economy, the VAT will continue to be an increased burden on Nigerian travellers. The AON, therefore, calls for the immediate implementation of VAT removal in line with global best practices,” Meggison said.
  
Aviation expert, Chris Aligbe, said the effects of the disruption were far-reaching and might affect air safety during a recovery phase.
  
Aligbe observed that the elimination of waivers and extensions at safety-critical levels of local airlines’ operations aided the five years of zero fatal accident record in commercial aviation said the local aviation could not afford to return to the era of waivers. Rather, “there should be intervention funds directly from the CBN to the airlines and the industry at large.

“The support should not be through the banks to prevent holding airlines to ransom. The CBN should look at grants of about two to three per cent interest rate over 10 years period. This is because the airlines will not get back to the pre-COVID-19 era until another 18 or 24 months,” Aligbe said.


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