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Flight restrictions cost aviation sector N180b in job losses, passenger traffic revenue

By Wole Oyebade
10 May 2020   |   4:20 am
About two months of local and international flights restriction has cost the local travel sector massive job and financial losses in excess of N180b. In fact, the cost may be more going by the International Air Transport Association’s (IATA) estimates, which showed

• IATA Wants FG To Implement Specific Financial Relief Measures For Aviation Sector

About two months of local and international flights restriction has cost the local travel sector massive job and financial losses in excess of N180b. In fact, the cost may be more going by the International Air Transport Association’s (IATA) estimates, which showed that the prolonged lockdown and the Coronavirus disease (COVID-19) crisis put 124,000 Nigerian jobs at risk, and some $900m (N324b) of the country’s Gross Domestic Product (GDP) in jeopardy.
It would be recalled that the Federal Government in March placed a restriction on both local and international flights as part of efforts to contain the spread of the pandemic. The restriction, however, excluded cargo, emergency and essential flights as approved by the Minister of Aviation, Hadi Sirika. The government, last Wednesday, extended the flight restriction by another four weeks.
According to the Chief Executive Officer (CEO) of Finchglow Travels, Bernard Bankole, losses from passenger traffic revenue is in excess of N180b because the crisis may just last till July.  

This is going by last year’s N360b raked in as total ticket sales revenue. As at April, Bankole said, unused ticket refunds and payments to airlines had already cost travel agencies over N100b.
With the extension of restriction for another four weeks, he said, the entire potential Summer sales has been wiped out, meaning that a half of the year’s revenue is all gone.
Bankole said: “We (travel agencies) are stuck in the middle. As it stands, we have to keep encouraging our members to pay the airlines on schedule. Meanwhile a lot of clients have not paid us for tickets issued. But while we are keeping our end of the bargain, the airlines are not. They don’t have money to pay and they are not even ready to push money into Nigeria to settle our customers, who cannot fly because the airspace is shutdown.
He continued: “We are forced to give some of these passengers their refunds (out-of-pocket) because we want to keep the relationships. But the airlines are saying that for those trips they have not even made, we should still pay them. We are forced to cough out money (to airlines), yet the airlines are saying they don’t have funds to pay us for unused tickets,” Bankole said.
The former Vice President of the National Association of Nigerian Travel Agencies (NANTA), Lola Adewole, said all agencies were now in debts and have had to lay-off their staff.
Findings have shown that about 1, 500 agencies registered with NANTA have laid off over 10,000 staff since business tumbled in March.The airlines are not left out. All the eight operating airlines have reduced staff strength by 80 per cent, with massive pay cuts for the 20 per cent that are retained.   
Without revenue in the last one month due to lockdown, sustaining the heavy overhead and keeping the critical facilities serviceable are already a tough call among the government parastatals.
Worst hit is the Federal Airports Authority of Nigeria (FAAN) that has thousands of staff spread across all 22 airports nationwide. With almost nothing generated in revenue in the last one month, FAAN will require the Federal Government’s support to defray N4b monthly overhead costs.
Aviation consultant, Chris Aligbe, said all government parastatals in the sector depend on airlines’passengers, and the bulk of the revenue is from foreign airlines that have all been shut out because of the Coronavirus.
Aligbe said the government would have to support both the airlines and regulatory agencies, because they are mutually interdependent. He said: “If airlines do not pick up to the level of pre-COVID-19, then the revenue will not come to the agencies too. More so, we don’t expect normalcy to return (to air travel) until about 18 months. Because, in the absence of vaccines, travellers will still be afraid of infection, and there will be restrictions in some countries. Also, due to economic recession, lack of funds will prevent people from travelling like before. This will have serious impact on airports and travel agencies.
“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 so that they will work properly the day that operations will resume. Unfortunately, apart from Lagos and Abuja airports, all others are running at a deficit,” Aligbe said.
Meanwhile, IATA has called for aviation-specific financial relief measures from the government to address the severe impact of COVID-19 crisis on the air transport sector.
The body observed that along with the direct impact on jobs and companies in aviation-related industries, including tourism, hospitality and trade have all been hit hard despite all playing essential roles in creating jobs and powering economies.

Prior to the crisis, aviation contributed $1.7b to Nigeria’s GDP and supported 241,000 jobs, IATA stated.

IATA’s Regional Vice President for Africa and the Middle East, Muhammad Albakri, acknowledged that the Nigerian government had introduced broad economic relief packages to mitigate the devastation caused by COVID-19, but the body is now urging the government to implement specific financial relief measures for aviation in order for the sector to be capable of driving the recovery.

Albakri said: “Nigeria has announced general relief measures for sectors affected by COVID-19, but not specifically for aviation. Given the importance of air transport for Nigeria’s economy and connectivity, the government must not let aviation fail.
“The industry faces a liquidity crisis. Without a viable aviation sector Nigeria’s eventual recovery from COVID-19 will be longer and even more painful. Aviation-specific financial relief measures are urgently needed as a matter of survival,” he said.
IATA advised the government to consider implementing some or all of the following relief measures like direct financial support to passenger and cargo carriers, loans, loan guarantees and support for the corporate bond market by the government or Central Bank.
Also, tax relief and rebates on payroll taxes paid to date in 2020 and/or an extension of payment terms for the rest of 2020, financial relief on airport and air traffic control (ATC) charges and taxes, reduction, waiver or deferral of government-imposed taxes and fees and foreign exchange availability.

“As the aviation industry looks to restart, it is important that key regional players like Nigeria are ready and able. Aviation is a strategic pillar for social and economic development. Supporting aviation now will mean that Nigeria’s economy can pick up from where it stopped and drive forward,” Albakri said.