Aviation bailout and Senate’s strange oversight

Alarm raised the other day by the Senate Committee on Aviation on the plight of local air travel industry and its airlines are unduly dramatic and does little to address the real problem of that sector.

To imply that plane crashes might be imminent should the Federal Government continue to ignore heavy stimulus packages for the private operators is itself injurious than helpful to the aviation industry. Beyond the controversial alarm, the lawmakers need to be forthright in addressing financial concerns of the critical sector. The right approach is a comprehensive forensic audit and making both regulators and operators play strictly by the rules. 

Good enough, operators under the aegis of Airline Operators of Nigeria (AON) have disowned the allegation. The Nigerian Civil Aviation Authority (NCAA) that should have been made answerable to such matters, has also said that no operator was in breach of its extant rules, buttressing that, contrary to the warning, airlines were not ‘‘cutting corners.’’
 
Flying the kite of airline entrepreneurs angling for more cash flow, or simply throwing more money at the local aviation problem has never worked for the industry. In 2011, the Central Bank of Nigeria (CBN) released N120 billion aviation intervention largesse at operators at six per cent interest rate. A flamboyant entrepreneur got a huge chunk of the loan at just two per cent interest rate, to acquire a promising airline, renamed it, and soon shut down its operations. The airline didn’t fly and the debt that emanated in the process remains a public burden.
  
Ideally, the Senate should demand more financial discipline as well as transparency from the operators and hands-on regulatory functions from the aviation agencies. It is unacceptable that local airlines owe regulatory agencies N22 billion from unremitted Passengers Service Charges (PSC), as recently disclosed by Aviation Minister, Hadi Sirika. It appears that the operators are just as guilty as the regulatory framework that allowed such debts to accumulate. The Senate should be concerned with the quality of regulatory oversight from the NCAA and the supervising Ministry of Aviation.

Part IX, Section 30, Subsections 4(b) & (c) of CAA, 2006 mandates the Airline Financial Health Unit to carry out periodic evaluation and analysis of the operations of all Nigerian registered airlines in order to determine their financial capability to carry out safe flight operations. Therefore, if the local airlines are in financial difficulties, incur heavy losses, or are in distress, then NCAA should know, have a credible explanation and be in a better position to proffer sustainable solutions. 
   
Additionally, the Senate Committee can discharge its oversight function by engaging the NCAA and Ministry of Aviation on why the sector has remained moribund without any effort to improve on the toxic business environment that has been inhibiting investments and making it hard for airlines to survive beyond five years. How come multiple taxations of 37 sundry charges and decrepit infrastructure is still hurting operators without respite? With the majority of the local airports operating only daytime and aircraft more on the ground than in the air, it is impossible for operators to break even.

Bailout without a forensic audit or airlines opening up for audit is preposterous and suggestive of the fixated mind of the political class. In the interest of public good and financial prudence, especially at a time of economic recession, the National Assembly can do more to sustain the industry by demanding strict accounting procedures, understanding guiding rules, and seeking reforms where necessary.