Why Nige­rian air­lines die

Weekly Trust - - Front Page - Ab­dul­la­teef Aliyu, La­gos

FirstNa­tion Air­ways, one of the eight sur­viv­ing do­mes­tic car­ri­ers in the coun­try, is no doubt on the verge of ex­tinc­tion with its op­er­a­tions down­graded from sched­uled ser­vices to char­ter after op­er­at­ing with just one air­craft for nine months con­trary to civil avi­a­tion reg­u­la­tions which stip­u­late a min­i­mum of two air­craft for would-be do­mes­tic car­ri­ers.

This down­grade came after the reg­u­la­tory agency, Nige­ria Civil Avi­a­tion Au­thor­ity (NCAA), im­posed a fine of N35.5m on the air­line for vi­o­lat­ing safety. The air­line ap­pealed the fine but the ap­peal failed as the panel set up to in­ves­ti­gate it up­held the ap­peal im­ply­ing the air­line would have to pay the fine de­spite its cur­rent fi­nan­cial straits.

The cur­rent or­deal of FirstNa­tion has fu­elled fear and ap­pre­hen­sion that the air­line may be head­ing for ex­tinc­tion in no dis­tant time. Though the air­line has vowed to stage a come­back in Oc­to­ber, ob­servers say it would be a mir­a­cle for the air­line to bounce back. Will FirstNa­tion Air­ways go the way of oth­ers be­fore it? Only time will def­i­nitely tell.

But does this im­ply that the age-long af­flic­tions that killed many air­lines in the past re­main very po­tent and is on the verge of con­sum­ing an­other ca­su­alty? This thus raises a fun­da­men­tal ques­tion about the ‘af­flic­tions’ which the gov­ern­ment has failed to tame.

Chair­man of Resort Group, Dr. Wale Ba­bal­akin, who op­er­ates the Mur­tala Muhammed Air­port 2 (MMA2) un­der the Bi­court­ney Avi­a­tion Ser­vices Lim­ited (BASL), is of the view that there is a fun­da­men­tal prob­lem re­spon­si­ble for the high mor­tal­ity rate of air­lines which the gov­ern­ment and stake­hold­ers have not been able to un­ravel.

Pres­i­dent of Avi­a­tion Round­table (ART), an in­dus­try think-tank group, said Nige­ria has eight do­mes­tic car­ri­ers - Arik Air, Aero Con­trac­tors, Air Peace, Med-View, Dana Air, Over­land, Az­man Air and First Na­tion. All the car­ri­ers put to­gether have 44 air­craft with valid in­sur­ance cover.

He said, “Air Peace has 13; Arik 10; Over­land seven; Dana, five; Az­man, four; Med-View, four and First Na­tion one. That’s a to­tal of 44 and I said to my­self, 44 air­craft for all the op­er­a­tors in Nige­ria, that is less than one air­line. Can they be­come one air­line with 44 air­planes with­out los­ing their iden­tity? My an­swer is yes.”

After over 50 years of air­line op­er­a­tions in Nige­ria, over 150 air­lines have gone into ex­tinc­tion and the few ones in op­er­a­tion are on the verge of ex­tinc­tion. Mean­while other African coun­tries, which are far be­hind Nige­ria in terms of avi­a­tion de­vel­op­ment, have evolved and con­tin­ued to do bet­ter in terms of run­ning a prof­itable avi­a­tion in­dus­try.

For in­stance, checks by our cor­re­spon­dent show that South African Air­ways has 54 air­craft; Kenya has 36, Rwand Air 12 and Ethiopia ad­judged the num­ber one in Africa has 92 air­craft. Legacy air­lines like the Bri­tish Air­ways, Delta Air­lines, Emi­rates and other Euro­pean car­ri­ers have more than 200 air­craft each in their fleet.

Will Nige­ria ever com­pete with th­ese air­lines and raise its Gross Do­mes­tic Prod­uct (GDP) from avi­a­tion after years of missed op­por­tu­ni­ties?

Air­line op­er­a­tors have con­tin­ued to blame the de­vel­op­ment on op­er­at­ing en­vi­ron­ment, cou­pled with mul­ti­ple tax­a­tion, which has crip­pled the op­er­a­tions of air­lines and ul­ti­mately led to the pre­ma­ture death of some of them.

Fol­low­ing the lib­er­al­iza­tion of air trans­port mar­ket in Nige­ria in the 90s, many air­lines came on stream to of­fer Nige­ria seam­less in­tra-con­nec­tiv­ity tak­ing pas­sen­gers from one state to an­other. Among them were Okada, Kabo, ADC, Bel­lview, Chachangi, Sosoliso, Richard Bran­son’s Vir­gin Nige­ria, which later be­came Air Nige­ria, Afri­jet, Dis­cov­ery Air, among oth­ers.

This de­vel­op­ment ac­cord­ing to ex­perts is trace­able to hos­tile op­er­at­ing en­vi­ron­ment and gov­ern­ment’s poli­cies, which they opine do not en­cour­age the growth of air­lines.

Olowo said, “Busi­ness and gov­ern­ment are per­ma­nently at vari­ance. Cost is per­ma­nently higher than in­come. Tax over­bur­den and in­fras­truc­tural deficit erodes rev­enue steadily. Gazetted poli­cies that will en­hance per­for­mance are not im­ple­mented. Credit is not in the Nige­ria busi­ness dic­tionary. Yet avi­a­tion is prone to the most minute sit­u­a­tion in the econ­omy, rang­ing from weather to pol­i­tics, reck­less hol­i­days, etc.”

Just in Fe­bru­ary, the Fed­eral Gov­ern­ment through the As­sets Man­age­ment Cor­po­ra­tion of Nige­ria (AMCON) took over the man­age­ment of Arik Air, the largest car­rier in Nige­ria and West and Cen­tral Africa fol­low­ing al­leged in­debt­ed­ness. Many in­dus­try ex­perts sym­pa­thized with the air­line for be­com­ing a vic­tim of the hos­tile op­er­at­ing en­vi­ron­ment in which air­lines op­er­ate in Nige­ria. It was learnt that Arik op­er­a­tions dipped at a time many of its air­craft were due for main­te­nance and they are un­able to raise the re­quired for­eign ex­change to carry out the due main­te­nance pro­gramme.

Stake­hold­ers said a bailout for the air­line would have given it some level of life­line.

Air­line Op­er­a­tors of Nige­ria (AON), an um­brella body of air­line own­ers and op­er­a­tors in the coun­try, say they pay about 35 charges to avi­a­tion agen­cies and th­ese charges are eat­ing deep into their profit mar­gin.

Chair­man of Air Peace, Barr. Allen Onyema, says gov­ern­ment must sup­port do­mes­tic car­ri­ers which he said are the cat­a­lysts for eco­nomic de­vel­op­ment. He said with the sub­sist­ing op­er­at­ing en­vi­ron­ment, it would be quite dif­fi­cult for any air­line to break even.

He re­called that twice he al­most shut down the air­line over what he called the “moun­tain­ous” chal­lenges he faced. Ac­cord­ing to him, air­lines in Nige­ria were de­signed to fail ab-ini­tio with the kind of harsh en­vi­ron­ment they are op­er­at­ing in.

He re­it­er­ated that he de­cided to in­vest in air­line busi­ness to em­power Nige­ri­ans hav­ing re­al­ized that one Boe­ing Air­craft could pro­vide over 400 di­rect jobs and 1000 in­di­rect jobs.

He iden­ti­fied dou­ble tax­a­tion, in­fra­struc­ture de­cay and other is­sues both­er­ing on the gov­ern­ment pol­icy, while call­ing on the Na­tional As­sem­bly to im­me­di­ately be­gin the process for a re­view of leg­is­la­tion af­fect­ing avi­a­tion.

He ex­plained that avi­a­tion does not give the kinds of profit mar­gin peo­ple think, say­ing the legacy car­ri­ers like Bri­tish Air­ways, Lufthansa and the rest make a mar­ginal three to five per cent gain but in Nige­ria due to the harsh en­vi­ron­ment, air­lines con­tinue to count their losses.

He said, “Why should 150 air­lines get it wrong at the same time? It means there is some­thing fun­da­men­tally wrong and this is trace­able to gov­ern­ment pol­icy. You can­not talk about safe air­line op­er­a­tions with­out talk­ing about the pol­icy. You talk about bureau­cracy; I call it sheer wicked­ness. With­out con­ducive en­vi­ron­ment, there is no safe air­line op­er­a­tion.

“I have tried to shut down Air Peace on a num­ber of oc­ca­sions but when I saw the faces of or­phans... I have wept at times. This is a coun­try where clue­less peo­ple sit down and try to trun­cate good ideas.

“I went into this busi­ness to cre­ate jobs for the in­di­gent. If I had done it to make money for my­self and fam­ily, I would have shut down even be­fore I started.

“Avi­a­tion should be used as a cat­a­lyst for the de­vel­op­ment of any coun­try. Look at Dubai, they used Emi­rates to en­er­gize other sec­tors.”

Ba­bal­akin re­gret­ted that since he started in­vest­ing in the avi­a­tion sec­tor over one decade ago, 11 min­is­ters had presided over the af­fairs of the sec­tor with dif­fer­ent poli­cies, “which if sub­jected to crit­i­cal anal­y­sis were at best short­sighted.”

He said avi­a­tion can be a cat­a­lyst for eco­nomic growth but he ex­pressed con­cern on whether the coun­try is keen in achiev­ing this. He won­dered if the avi­a­tion man­agers in Nige­ria had taken time to re­search on the fac­tors re­spon­si­ble for the fre­quent col­lapse of air­lines in Nige­ria. He said there must be a tem­plate to grow the in­dus­try. Avi­a­tion ex­pert, Mr. Chris Aligbe, told

Daily Trust that gov­ern­ment must de­clare the air­line sec­tor an in­fant in­dus­try and give them tax mora­to­rium in or­der to grow. Ac­cord­ing to him, while the op­er­at­ing en­vi­ron­ment is very harsh, there is also the prob­lem of owner-man­ager syn­drome, which man­i­fests in air­line op­er­a­tors fail­ing to re­cruit rel­e­vant pro­fes­sion­als to man­age crit­i­cal ar­eas of op­er­a­tions.

For the air­line in­dus­try in Nige­ria to com­pete with its for­eign coun­ter­parts, ex­perts stress that it is im­per­a­tive for gov­ern­ment to come up with favourable poli­cies to as­sist them, say­ing the cur­rent harsh op­er­at­ing en­vi­ron­ment can­not guar­an­tee their sur­vival.

For the air­line in­dus­try in Nige­ria to com­pete with its for­eign coun­ter­parts, ex­perts stress that it is im­per­a­tive for gov­ern­ment to come up with favourable poli­cies to as­sist them, say­ing the cur­rent harsh op­er­at­ing en­vi­ron­ment can­not guar­an­tee their sur­vival

Bar­ris­ter Allen Onyema, Chair­man Air Peace

Dr Wale Ba­bal­akin, Chair­man Resort Group

Chris Aligbe

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