Why Nigerian airlines die
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