Iyayi: Owning a national carrier no longer fashionable
• Govt Not Being Transparent
• National Carrier A Misplaced Priority For Aviation Industry
Former Managing Director of Nigerian Airspace Management Agency (NAMA) and the Chief Executive Officer of Topbrass Aviation Services, Capt. Roland Iyayi, in this interview with WOLE OYEBADE, explains why Nigerians are skeptical about the proposed Nigeria Air, high mortality of domestic airlines, and why national airlines are becoming less fancied.
Since the name and logo of the proposed national carrier, Nigeria Air were unfolded in London, by the Federal Government, there has been a flurry of reactions. What do you make of them?
Well, the reactions are not because the idea is not laudable, but stems from the fact that the government is seen as not being entirely transparent. If you intend to set up a national carrier and you have not really sit down to address the pathological problems within the industry, obviously you are not going to do anything different from what current players are doing. In which case, it is assumed or a given that all these airlines are doomed, then whatever thing you are putting in place, given the same circumstances and context, is assumed to be doomed as well.
What I am saying essentially is that we should have some transparency and understand the process; we should also see where the entire thing becomes mutually beneficial to all parties, in other words, a win-win situation. But where the government is going with the approach it has adopted, that is, not giving everything to everybody fairly, then the resistance would be there, and I think that is what we are seeing at this time.
We are not unaware of several stakeholders’ meeting that have been called since the aviation roadmap was launched, to keep industry players abreast of happenings. How engaging has this been?
I’m a stakeholder and I can tell you how many times the government has had stakeholders’ meetings. But those meetings are not necessarily consultative. There is a difference between having a consultative meeting and having a meeting where you are asking for ideas. When you come to a stakeholders’ meeting with what you consider to be your road map without any consultation, you are essentially telling us this is what you would do; it doesn’t matter what we think. If that is the approach, then it doesn’t say there won’t be resistance and that is exactly what has happened.
At the two stakeholders’ fora that we have had so far, the minister came to tell us what the government had done and what it is doing, not necessarily to ask what it can do. These are two different things entirely. So, that scenario needs to be played out in such a way that the stakeholders would see that there has been some sort of engagement by government before they start talking about ‘this is what we have agreed in principle,’ but that has not been the case.
Should a national carrier be such a priority at this time?
Absolutely not. I don’t think the national carrier is a priority that we need in the industry right now. We need to have an industry that can self-sustain as a first step. When the industry begins to grow, then anything you add to it will grow with it. When the industry at this point is been stifled by all sorts of unaddressed fundamental issues and you now want to bring in a national carrier, it is not going to change anything much, but create more distortions in the market because I can see a situation where the government is forced to subsidise the national carrier so that it does not fail. When you are using good money to drive bad business, then obviously you are not helping the taxpayers.
So, the government needs to address fundamental problems in the industry, which is basically all of these polices that negate growth in the sector. When this is done, it would be easier to do, or add other things that would further enhance the sustainability of the industry, but right now, we haven’t done that.
For the purposes of clarity, what are these fundamental issues?
Let me take the policy issues for instance. Everybody is shouting that the airlines are dying, but have we looked at why the airlines are dying? We had a Presidential Task Force on Aviation set up by Vice President Yemi Osinbajo, when he was acting in 2017 and we came up with issues. These are the same that we addressed in 2005 under the Paul Dike Presidential Task Force. Now, there were reports written in 2005 and recommendations made. The government actually had a whitepaper on that report and he agreed to address all those fundamental issues but as we speak, nothing has changed.
So, if you are saying that all we have done since 2005 is just to blow hot air without actually addressing anything, then it is not going to solve anything. When you go back to the fundamental issues raised in that report, then you can start talking about the next steps to take.If you are increasing taxes on the airlines because you want to increase Internally Generated Revenue (IGR) of agencies that are supposed to be for cost recovery and not-for-profit organisations, then there is a problem. I’m talking of the Nigerian Civil Aviation Authority (NCAA), Federal Airports Authority of Nigeria (FAAN), Nigerian Airspace Management Agency (NAMA), Accident Investigation Bureau (AIB), Nigerian Meteorological Agency (NiMET) and the Nigerian College of Aviation Technology (NCAT). All these are cost recovery agencies, but the government is driving a policy to increase their IGR.
Now, when you do that, the result is that all the cost falls back on the airlines and when it does, the airlines have to find a way to pay for them. When they do, even before talking about profitability, sooner or later they will die. The margins of the airlines are very thin. You are adding a five per cent Value Added Tax (VAT) on the airlines, you have a five per cent Ticket Sales Charge (TSC) by NCAA, you levy a one per cent Fuel Sales Tax on airlines. Now, the fuel component of a direct operating airline is about 40 – 45 per cent. So, what percentage is already taxed? At the end of the day, you now add statutory taxes, corporate taxes among others. So, how do you expect the airlines to be viable?
In the past when the TSC was introduced to cater for the agencies, the travelling public in Nigeria was barely two million at the time. Today, we are talking about 15 million passengers. Where is that surplus money going to? You cannot tell me that the enormity of the obligations of the agencies has increased as much as the monies they have generated. That is a lie. What we are saying is that it is not correct to say that all the monies they are collecting are going to the running of these agencies. It is the surplus money in all of these agencies that have fueled the corruption that you find there, as well as, the unabated embezzlement that is ongoing.
It is only when these and some other issues have been addressed that the possibility of having a new lease of life would emerge and airlines begin to navigate towards the point of viability. Until that is done, it would be a waste of time. This new airline that we are talking about, will it be exposed to the same taxes as all the existing airlines or will it be given some privileges? If it is going to be given privileges, then you are saying that you are introducing into the system further distortions beyond what already exists. That is why we are saying that the government needs to address these fundamental issues before it starts talking about any national carrier.
It appears that the idea of setting up national carriers is becoming less fancied. Is it?
Absolutely. It is no longer fashionable because the idea of having a national carrier for national pride costs you money. Just recently, the South African government had to inject $2m into the South African Airways. But how many times will a government be bailing out a national airline? There was a time Alitalia was bailed out by the Italian government, and when it found out that it was no longer tenable, it turned to privatisation.
America owns no national airline as all the big airlines there are all private airlines. So, when you look at it from the global perspective, it is no longer fashionable to own a national carrier. However, for the sake of those talking about national pride, yes, you can have it, but it comes at a cost. Can we afford it?
With the apparent disincentives to owning a national carrier, and the length the country has gone to, is it too late to back out?
I am a businessman. If I have already lost $5m and I see that my continued exposure to the same enterprise would amount to $100m loss, I would choose which of the two options is cheaper for me. And that will be $5m. Meaning that no matter how much the government has expended now, it will be pittance to what it will lose in the long term. For me, I would stop now instead of doing something that is not sustainable.
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