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Leveraging mutual concerns to optimise local aviation, opportunities

By Wole Oyebade
24 June 2022   |   3:12 am
Almost on the eve of the Federal Government’s move to concession airports to private handlers, the Federal Airports Authority of Nigeria (FAAN) and aviation stakeholders came to a roundtable to have a candid discussion...

Interior of the new terminal at Murtala Muhammed International Airport, Lagos.

Away from rancorous debate on why the sector is not working to potential, the recent national airport conference opened a new vista in stakeholders’ engagement. WOLE OYEBADE writes that having a sincere conversation on a myriad of challenges and working out win-win solutions is a sustainable way forward.

Almost on the eve of the Federal Government’s move to concession airports to private handlers, the Federal Airports Authority of Nigeria (FAAN) and aviation stakeholders came to a roundtable to have a candid discussion about the air transport sector and in enlightened self-interest of all.

Clearly, the fate and future of all parties will be uncertain under a concession regime. The new arrangement will solve some problems and create new ones as experiences have shown globally. But more sustainable intervention is for the stakeholders – regulators, operators, and service providers – to collectively look inwards and work to salvage their industry.

Meeting at the FAAN National Airport Conference (FNAC) recently, it was clearer that the sector has enormous opportunities in the post-pandemic era and challenges that must be surmounted. But it begins with a common understanding of problems created by policy flip-flop, high cost of operations and multiple charges, high exchange rate and capital flight due to overseas maintenance, and possible solutions that are mutually beneficial to all.

Enormous prospects for all
Emerging from the devastating effects of the COVID-19 pandemic that left everyone grounded, regional air transport sectors globally are rallying back to recovery with a spike in demand, and projected profitability in 2023. Developing economies, where Nigeria belongs, will lead the gainers’ table.

Indeed, the projection is not far-fetched. With a total of 23 airports dotting the landscape, less than five per cent of the population currently travels by air. The rest are untapped opportunities, given the insecurity that has made road and rail travels risky.

Analysts, therefore, projected that Nigeria’s passenger traffic would exceed that of the global growth rate of 5.3 per cent to reach seven per cent in the next 10 years.

The Director, Commercial and Business Development FAAN, Sadiku Rafindadi, stated that the aviation industry remains pivotal to the socio-economic growth of the national economy.

Rafindadi recalled that in 2020, the domestic and international passenger traffic stood at 9.3 million as against 15.8 million in 2021, representing a 41 per cent upswing. The industry also provides a total of 241,000 direct and indirect jobs and revenue in excess of $1.7 billion (N1.054 trillion).

He said those figures were testament to what awaits the economy and investors, with better harnessing of the potential of the huge market.

The Director added that FAAN aimed to optimise available opportunities with the 21 public airports in its care, by “changing its business model to a self-sustaining framework through increased private sector participation, thereby, reducing the financial burden on the government.”

Opportunities in challenges
Managing Director of FAAN, Capt. Rabiu Yadudu, reckoned that there were enormous areas for new investors and entrepreneurs to invest, and aircraft maintenance capacity is the most inviting.

Yadudu, in welcoming participants to the conference, noted that overseas maintenance of commercial airplanes that are flown in the country, currently cost Nigeria at least $2.5 billion (N1.55 trillion) yearly – a capital flight that could have been saved if the country had high-capacity Maintenance Repair and Overhaul (MRO) facilities that could adequately cater for all types of commercial airplanes.

He regretted that Nigeria’s potential and capacity in the global air transport industry was being grossly under-utilised, adding that if stakeholders in the industry were indeed desirous of attaining the status of a major player in the global aviation sphere, it was high time the country leveraged backward integration to move the industry forward.

He explained that the focus of the conference was on Nigeria, because the country had the largest fleet of aircraft within the sub-region. “It was reported that Nigeria lost $2.5 billion (about N1.52 trillion) in MRO investments to neighbouring countries. Having such investments here would have created more employment opportunities for Nigerians, revenue generation and training of technical personnel for maintenance of aircraft.

“The link and value-chain between the air transport, tourism and hospitality industry for economic growth cannot be over emphasized. Today, the Eiffel Tower in Paris, London Bridge, Dubai Mall, Burj Khalifa, the British museum in United Kingdom, and so on, have all been consciously developed into major tourist attractions that drive passenger traffic to those destinations and by implication attract businesses and generate employments for the locals and foreigners alike. Those are worthy examples for us to emulate,” Yadudu said.

Besides maintenance, another area the airline operators would want a quick attention is that of aviation fuel. Vice President of the Airline Operators of Nigeria (AON), Allen Onyema, in fact warned that if the present challenge of aviation fuel was not fully addressed, about three airlines may quit operations due to unbearable burden on the cost of operations.

Onyema, who is the chairman of Air Peace Airline, noted that the aviation fuel challenge was not exclusive to Nigeria, but “ours is made worse because of the slump of naira against major currencies, especially the dollar.”

He regretted that the essential commodity that sold for N200/litre barely 18 months ago had increased by more than 300 per cent. “That is why we ran to the government and the Federal Government has given us a temporary leeway. The problem is not peculiar to Nigeria. Some foreign airlines have closed down because of the effects of rising aviation fuel. If these things are not addressed in Nigeria, it can affect the bottom-line of all airlines in Nigeria,” Onyema said.

Other players, including aviation fuel marketers, ground handling companies and catering services, in their separate presentations, complained about the state of infrastructure at some of the airports. They, however, said FAAN, in the last three years, had improved on facilities at the aerodromes.

Vice Chairman, Aviation Ground Handling Association of Nigeria (AGHAN), Bashir Ahmed, decried the level of infrastructure at most of the airports, saying it limits the turnaround time of operators at the apron.

According to Ahmed, the scarcity of foreign exchange further reduces the operations and expansion of ground handling businesses in Nigeria. He appealed to the Federal Government to take a critical look at the challenges in the industry and devise a means to address them.

“We still want to appeal to the Federal Government to grant waivers to handling companies on importation of ground handling equipment. Also, we need more scanning machines by FAAN to further improve our operations and create seamless services to our clients and the airlines,” Ahmed said.

Together, we can fix it
Director General of the apex regulatory body for aviation, the Nigeria Civil Aviation Authority (NCAA), Capt. Musa Nuhu, remarked that the entire industry had a lot to gain through mutual cooperation to address those challenges that affect all.

Nuhu said that the Federal Government had demonstrated commitment to aviation development through the Aviation Roadmap and dedication of 12,000 hectares to aviation projects and investors. He said: “We are going to unbundle our regulations through enabling Acts so that people can be encouraged to invest. The Aviation Roadmap being implemented under the leadership of the Honourable Minister, Hadi Sirika, offers significant opportunities for investments.

Although the Federal Government is initiating these projects, it is going to be private-driven. So, it offers excellent opportunities for investments in different areas of the aviation industry.”

General Manager, Vicven Integrated Services, Obinna Emeazo, however, warned that one of those booby-traps to avoid is policy flip-flop that has been the scarecrow against good investment.

Emeazo noted the misfortune of Tinapa Resort in Cross River State as a graphic example of what policy summersault could do to a noble initiative.

“Everyone, especially tourists, goes to Tinapa to shop and enjoy their holidays. So, it is policy inconsistency on the part of the government that ruined it. You brought out policies that attracted investors and mid-way, you changed such policies.

“If they have to focus on the special economic zones, we have to make it right. Nigeria Export Processing Zones Authority (NEPZA) must stand its ground and make it strong. The regulations must be strong. If you cannot manufacture, you cannot export. How much are you able to attract? When was the last time you heard about Tinapa? It is still at the elementary stage and one would have expected that it would have gone beyond that,” he said.

Emeazo further decried multiple regulations between FAAN and NEPZA as one of the major factors slowing down the growth of free trade zones in the country, stressing that both agencies had to harmonise their policies for the progress of the country.

“NEPZA has to show strong leadership and must be able to show strong collaboration with other agencies. You have the Federal Inland Revenue Service (FIRS), which is tax; there is still an argument on the tax investors enjoy. Some states still come to tell the investors to pay tax. They should be able to bring all the states together.

“In their board of directors, you see all the government agencies like Customs, finance ministry, FIRS and others, yet you do not see a strong stakeholder like FAAN. At the level of implementation, FAAN will tell you it is against its own approval. That is not how to attract good investors,” he said.

Clearly, everyone is on the same page on the problems that need solutions. How soon they will get the deserved attention to upturn fortunes of the industry, only time will tell.