Airlines panic as FG ‘withdraws’ N27b support

• Operators cut pilots’ salary, sell assets to pay debts
• Unions kick, serve ultimatum over wage cuts
• Stakeholders rally carriers to survival strategies

The plight of local airlines has taken a turn for the worse as more become insolvent, struggling to meet financial obligations.

The fate of the beleaguered operators is not helped by the Federal Government’s alleged withdrawal of N27 billion bailout funds that was earlier pledged to the industry.

As at weekend, all the operating carriers had slashed pilots and general workers’ salary by between 50 to 80 per cent, much to the displeasure of the unions.

In a bid to safeguard the interest of their members, the National Union of Air Transport Employees (NUATE) has issued 15-day ultimatum to Arik Air, to reverse alleged anti-labour measures or face the wrath of the unions.

After three months of COVID-19-induced lockdown, eight local airlines have since July 18 returned to operations, but still struggling with traveller apathy and average load factor of 30 per cent. To cushion the effects of the downtime, the Federal Government in May pledged to support the industry with a N27 billion bailout, in the mode of soft loans and grants.

Though some of the airlines had submitted request for funds, the operators had yet to get any feedback. Sources at the Ministry of Aviation also said they were not aware of any bailout.

“We also read the bailout thing in the media. If it is meant for the aviation sector, the ministry will know about it and its processes would have started. But as of now, there is nothing like that,” a senior official said.

The COVID-19-induced financial distress is not peculiar to Nigerian airlines. While others are getting bailout funds, local operators are not. The International Air Transport Association (IATA), in a recent update on bailout progress on the African continent, noted that Rwanda, Senegal, Côte D’Ivoire and Burkina Faso accounted for a total of $311 million in direct financial support to air transport.

A further $30 billion has been promised by some governments, international finance bodies and other institutions including the African Development Bank, African Export Import Bank, African Union and the International Monetary Fund (IMF) for air transport and tourism. However, much of the relief has yet to reach those in need due to institutional bureaucracy, complex application and creditworthiness processes, as well as cumbersome conditions to secure finance.

Chief Operating Officer (COO) of one of the airlines said operations were like a “pressure cooker” since commercial flights resumed, citing poor revenue inflow.

“It is month-end, so we are all struggling to pay our salaries and our creditors. But where is the money without the traffic? The bigger challenge will emerge when the aircraft are due for maintenance. It is just frustrating, to say the least.”

Signs of the times showed recently when pilots in the operations of Air Peace airlines and their management had a spat over pay cut.

The Guardian learnt the pilots protested against 50 per cent cut in salary and boycotted work, forcing management to lash out at the “insensitive” workers, as the chairman threatened to shut operations.

Air Peace has the largest fleet and accounts for about 40 per cent passenger traffic in aviation sector. Its Chairman, Allen Onyema, in a memo, noted that the prevailing “unfavourable” circumstance warranted the pay cut, which would last for 90 days in the first instance.

He said the management would return to status quo when passenger traffic improved. Yet, “the pilots still chose not to fly; thus, embarrassing the company and portraying the airline in an unpleasant image in the estimation of its passengers.”

Arik Air is walking a tightrope too. The airline, currently under the care of the Federal Government, had in the wake of the COVID-19 lockdown furloughed 80 per cent of its workers without pay. The remaining 20 per cent have had to make do with about 20 per cent of regular pay.

NUATE, in a letter to the Managing Director of the airline, protested that Arik had continued to overwork its few hands despite 20 per cent pay.

The union stated that, “the slave-camp regime at Arik whereby one person is being compelled to perform the function of five or more persons has to end immediately. This is especially so as more workers are at home on forced leave.”

NUATE has given Arik 15-day ultimatum to correct the development; otherwise, the unions would take the next step “to which we shall not be held responsible.”

Spokesperson for Arik, Banji Ola, yesterday said the management was making efforts to engage the unions to settle the issues.

Similarly, the board of Med-View Airlines Plc has agreed to sell two aircraft to pay some debts and use the balance to restart operations.

The airline last year quit operations when all its aircraft went out of service. Med-View, which is one of the firms that failed to file its financial statements to the Nigerian Stock Exchange (NSE), said it resolved to sell its B737-400 5NMAA aeroplane in Estonia and the B737-400 5NMAA aircraft in Lagos.

Industry experts said even before COVID-19, local airlines had been struggling largely due to poor and inconsistent government policies, high user charges, bad corporate governance by the operators and very harsh economic environment, and it would be harder keeping them afloat at this time.

Financial analyst, Solomon Akinnifesi, reckoned that it would be very tough for the airlines because the exchange rate had been technically devalued or depreciated, revenue had dwindled, while cost of funds had gone up.

“In the global industry, even stronger and more mature players are suffering massive losses. The Middle Eastern airlines are laying off staff and cutting costs. It is a tough time for everyone.

“The future looks bleak, especially considering our macroeconomic indices. Can local airlines grow beyond our macroeconomic indicators where inflation is increasing, per capita income is diminishing, the middle income group is gradually vanishing, when crude oil prices are hovering between $40 and $50, when the government which drives the economy is broke?”

Akinnifesi advised the airlines to develop niche markets, think out of the box and get financial support. Government policies must change to help airlines grow. The airlines need to strengthen their corporate governance structure to attract investor confidence.”

An operator, who did not want to be named, said for airlines, survival was key.

“We must pay salaries but we must also cut costs to survive. Unfortunately, staff salary is one of the cost cutting measures that we must take. It is not enough for the unions to be threatening airlines. We have a common problem on our hands.

“On our part, we have started small with very few routes and I believe that is what all others are doing. We used to operate 28 routes before COVID-19. Now, we have about four. Once we have a good standing and comfortable on those ones, then we can expand. Government too should support us before it is too late. This is the time to rescue the airlines,” the operator said.

Chairman, Association of Aircraft Maintenance Organisation of Nigeria (AAMON), Isaac Balami, urged operators to unite to sustain their operations through code-sharing and merger.

Balami said it was time to set ego aside and cut losses at this time of traveller apathy. He said a situation where three airlines fly to the same destination, carrying 20 to 30 passengers each on 120-seat aircraft, did not make good business sense.

He argued that if the operators reach a code-sharing agreement, all passengers could be taken to a destination on a full aircraft operated by an operator, adding that this had been proved to be a win-win for many airlines in the world.