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‘Soft loans will save airlines, not waivers on licences, charges’

By Wole Oyebade
24 April 2020   |   3:35 am
Chris Aligbe is an aviation consultant with over four decades of experience in the local air transport operations. In this interview with WOLE OYEBADE, he shared perspectives on the challenges

Chris Aligbe is an aviation consultant with over four decades of experience in the local air transport operations. In this interview with WOLE OYEBADE, he shared perspectives on the challenges of the current lockdown and difficult recovery ahead. He proffers a 10-year soft-loan period to save the airlines and keep aviation parastatals running, among other sundry issues. Excerpts:

How much of a problem is the current disruption to the airlines and aviation industry?
We are in a very serious trouble but it is not peculiar to us in Nigeria. The airlines’ industry globally is in very serious trouble because about 96 per cent of the aircraft worldwide are on the ground. Only few activities are happening; talk of cargo and emergency flights. This means that there is almost a total loss of revenue and the International Air Transport Association (IATA) has projected that. Sometimes, when we look at the impact, we talk about the airlines alone. But what of the airports? Without the airlines’ operations, there is nothing for the airports to generate – aeronautical or non-aeronautical revenue. It is the passengers that constitute that revenue.

What fate awaits the local industry in all these?
The local industry worries me the most. First and foremost, our aviation sub-sector has been weak over time. It has not been as strong as it should be. We have only eight airlines operating and among them are few bigger ones. But we cannot still say that we are strong as an airline industry. That is not to say that they are not doing a lot of job at the domestic level. But when they are all on the ground, it is a very big problem.

An aircraft on the ground is like a car not used and it begins to deteriorate. Whether operating or not, the aircraft requires maintenance at a certain time. So, they will need to be maintained to be fit to fly after the lockdown. The airlines have their safety certifications that are usually timed for renewal. Whether they are flying or not, the assets are clocking. So, it is either they are maintained or keep getting waivers and extension of validity.

But we must note that what has saved our country (from air crashes) for quite some time was the elimination of waivers and unnecessary extension, except when it became very necessary and it was for a very short period of time. That is why we have a five-year (fatal) accident-free record – an enviable record in the global industry. But now, it is already being contemplated that they should have the extension of their certification, including pilots, crew, engineers and all others. When you start to waive safety licences, then you begin to bring back the old regime that led to crashes, which we are praying not to have again.

For how long can the airlines endure the don’t-fly directive and what is the likelihood of business picking up?
Maybe this lockdown may last for about two months maximum. But when the airlines come back, they will not be up in terms of revenue. Passengers are not likely to be there. If they are even going to be there at all, it will not be as much as they used to be before coronavirus.

Currently, the airlines’ operators are already cash strapped, which mean returning to operations will as well be difficult. What measure should we be contemplating for recovery?
That is where the intervention fund which the Central Bank of Nigeria (CBN) has mentioned should be earmarked for aviation, particularly the airlines sub-sector. But they should not be like the intervention fund of the past. It should not be like the one the banks used to hold the airlines to ransom. It should be one that comes directly from the CBN. Even if it has to go through the banks, the apex bank must put a caveat that the bank charges must not be more than one per cent addition to the CBN’s three to four per cent interest rate, with over a period of 10 years to pay back. The moratorium should be two years because airlines will not get back to pre-COVID-19 status until 18 or 24 months. The condition which the government will give to the airlines is not to sack their workers. The government has to be interested in not adding to the unemployment level in the country.

Do you think the Federal Government is that buoyant and will be will to support this venture?
Of course! Emefiele talked about the trillions worth of intervention fund for the economy. It is not a government’s budget but a loanable fund. It is like what they give overseas at one or two per cent interest rate. That is what we are going to do on a rescue mission. Trump is giving $5billion to United Airlines. This is not a grant, but money to get the industry to move. That is why I said it should come straight from the CBN. The apex bank should be able to put down N100 to N150 billion for this purpose. And it is not for any airline to say I want N20 billion or that. It must be clear exactly what the airline needs it for so that it can be effectively monitored.

That, again, is to make sure that operators do not go to aviation agencies and parastatals (NCAA, NAMA, FAAN, NCAT, NIMET and AIB) to ask for waivers. Because parastatals too are in trouble, so why will they give waivers? That is their only source of income – airlines’ operations like landing charges, overflight, parking, en-route charges and so on. Airlines are asking for these waivers, but if this intervention fund is there for them to loan and keep their operations on, then they will be able to pay the charges. All that can be asked is for the agencies not to increase their rates in the next three or four years.

What the government’s parastatals depend on are from the passengers and the majority of that is from the foreign airlines. Fares on foreign airlines are more. A five per cent on N300, 000 is by far higher than five per cent on N25, 000 or N50, 000 local flights. Airport charges are like that too. So, if the airlines do not pick up to the level of pre-COVID-19, then the revenue will not come to the agencies too. And if you look at it on the average, the AIB need N350 million monthly for its operations, NCAT needs N150 million monthly, NCAA N750 million for recurrent expenditure alone, NIMET N290 million and FAAN needs close to N4 billion to run its 22 airports in a month.

More so, we don’t expect normalcy to return until about 18 months because travellers will still be afraid of infection without vaccines, there will be restrictions in some countries and then because of recession, lack of funds to spend will prevent people from travelling like before, except when it is very important. This will impart on airports too and the agencies.

What do you think should be done to sustain these airports and agencies alike?
These are all government’s parastatals. By the virtue of their Acts, unfortunately, none of them can go borrowing. It is only government that can borrow for them. They all still need their revenue monthly for sustenance and keeping the safety records intact. Then, the government has no choice than to place them on grant level. They should receive grants to cover their expenditure, while the support is gradually reduced as the revenues start coming from airlines operations. I worry very much about FAAN. If you leave the carrousel unused for one month, for instance, it will get cranky. So, you need to keep maintaining the airport infrastructure that they may work properly the day operations resume. Unfortunately, apart from Lagos and Abuja airports, all others are running at a deficit.

Is it not better to temporarily close down some of these unviable airports to safe cost?
That is why I have to be a supporter of airport concession. It is because of this problem that we are talking of grants for them. Otherwise, they should be concessioned. While some of these unviable airports are government-owned, others are State government-owned, built for political aggrandizement. It was after building them that they found that they don’t have resources to run them and quietly push them to the Federal Government through the back door. That is how they get into the care of FAAN.

But we cannot shut them down, especially for political reasons. It is never going to be easy. If you try to do that, the impact will be more on the northern airports than on the south. The airport in the south that has become the ghost of its old self is that in Calabar. It records only one flight a day since Donald Duke left. Uyo has taken over. Owerri is bubbling. Enugu will pick up because, at a time, it was behind Lagos and Abuja, even ahead of Port Harcourt International Airport. But in the north, you will have to shut down Sokoto, Bauchi, Gombe, Minna, and Ilorin maybe, among others. In the west, maybe Akure. So, it becomes highly political and more dangerous. So, for the length of time that it will take the airlines to bounce back, the agencies and the airports will have to keep running with the government’s supports.