Impact of Frequency Allotment to Foreign Airlines

The federal government’s decision to allocate more frequencies to foreign airlines without commensurate participation of local carriers, will lead to capital flight, writes Chinedu Eze

Report making the rounds last week was that South African Airways (SAA) has started operating from Abuja, Nigeria’s Federal Capital Territory. Abuja is the second city after Lagos the airline would be operating from in Nigeria.

By that development, SAA has joined airlines like British Airways, Lufthansa, Air France, Emirates, KLM, Egypt Air, Ethiopian Airlines, Kenya Airways and others that operate multiple entry points in Nigeria.

The advantage of these multiple entry points is that Nigerian passengers do not have to travel far to connect international flights. But the disadvantage is that it kills domestic carriers because it takes away the market for the indigenous airlines.

Nigerian passengers could still be travelling from the airport closest to them to international destinations if the federal government introduces a policy that makes it compulsory for international airlines to partner domestic carriers, which will airlift passengers from other airports in the country to the operating airport of the foreign carrier.

The foreign carriers will then give their standards, which the domestic airline with the support of the Nigerian Civil Aviation Authority (NCAA) will meet. So the mechanism is that the code-share domestic airline will sell the tickets of the foreign carrier and take the passengers from the various airports to the airport where the foreign carrier operates from in Nigeria. This way, it will become a win-win situation as both the domestic and foreign airlines will benefit, as well as the Nigerian passengers.

The local airline would be assisted by its foreign partner to meet the standard of the later and also helps it develop its technical areas in terms of maintenance, training and scheduling. On the other hand, the money the domestic airline will earn will boost its operations, create opportunity for expansion and more Nigerians would be employed. So Nigeria will benefit more.

Presently, the government is giving away these opportunities through lope-sided Bilateral Air Service Agreement (BASA) and what is stated above is not idealistic; it is what other countries do to support and protect their airlines. Besides, as the Ministry of Aviation has realised that Nigerian airlines have not developed high capacity, it would have developed a BASA arrangement tailored to suit prevailing circumstances of Nigeria’s air transport industry. Instead, it is giving away frequencies, thus making it difficult for Nigerian airlines to reach code-share arrangement with international carriers.

Also, because of the easy way foreign carriers secure operating approval and increase in frequency, countries Nigerian airlines wish to operate from do not show similar generosity because they have also realised that Nigeria does not care about the fortunes of its airlines. The Ministry of Aviation does not operate from the principle of reciprocity and there has been protracted allegation that money always passes under the table between these foreign carriers

and top officials of the Ministry.

Compromised Officials

In 2013, Arik Air made firm effort to operate from Sao Paul, the mega business city of Brazil. The government of Brazil put hindrances on the way. Arik Air did not secure any approval from the Brazilian government, but when Gol, Brazilian airline requested for approval to operate into Lagos, it secured that approval within one week from Nigeria’s Ministry of Aviation.

During the celebration of its 7th year of operation in 2013, the Chairman of Arik Air, Joseph Arumemi-Ikhide recounted how efforts by the airline to secure approval to fly into Brazil had been frustrated

He said: “About two weeks ago we went to Brazil asking for permission to fly into the country, we made some request and up till now they have not answered us but they (Gol Airline) came to Abuja to make their own request and within one week they were granted and they have not done international flight before like us, so where are we?

“We have employed a lot of Nigerian engineers and we are going to train them in Germany and they will get the Germany certificate. There is a lot of plan we have and we invite you to join us in our journey. But these foreign airlines do not have any plan to contribute to the development of Nigeria or create employment for our citizens,” the Arik Chairman said.

BASA Review

The Executive Chairman of Airline Operators of Nigeria (AON), Captain Nogie Meggison said that what is important about the aviation industry now is how to correct these lope-sided BASA regimes and not the national carrier. According to him, if Nigeria establishes a national airline and it operates under the same environment, it would not record the expected leap and realise its set objectives.

He said although a national carrier has greater clout than flag carriers but prevailing government policies should be to its advantage rather than against it, which is presently the case. He therefore urged government to revisit these inimical policies in order to strengthen the way for indigenous carriers.

“Having national carrier is not the issue because if you setup a national carrier to compete against the foreign carriers that you believe are eroding your economy, eroding your routes or dominating our market today, why are they dominating our market? Let me give you a very clear scenario that will paint a clear picture.

“From where I come from there is a proverb that says, you don’t blame the goat that crosses the wall, you look at the wall that has fallen which made the goat cross the wall. The World Bank and ADB (African Development Bank) today put capital flight out of Africa at $12 billion as of last year. Nigeria accounts for about $7 billion out of that money from capital flight.

As a capitalist myself and an entrepreneur; I do not blame and I do not believe and I don’t want to call it capital flight. I will look at from the point of view that it is a policy issue, because if you put the policy that makes them do business here, as an open country that we allow friendly investors to come in and go out, if your policy is wrong and a man does business in your country, you cannot restrict him from taking the money out.

“So capital flight is not the issue, the issue is the policy that makes them generate that much fund without giving the local carriers or the local players an opportunity to take part in the game.

“Till you correct that policy, you cannot continue to chase the wrong end of the stick, you have to treat the fire and not the smoke. So capital flight is not our issue, foreign carriers coming to dominate our markets and weakening the local players is not the issue. The issue really should be the policy that is on ground. That is why I want the present government, and I encourage them to look at the policy governing aviation today,” Meggison said.

The AON Chairman who is also the CEO of Jed Air said the first step towards correcting the anomaly is to start with the review of BASA that governs the nation’s air transport policy.

Meggison added that BASA is a trade treaty that should be taken seriously.

“Today, even the United States of America signed a BASA, open sky agreement with the Emirates giants, the three Emirates giants, but today they are going back to revisit the issue,” he said.

Fly Nigeria Act

Aviators and lawyers with interest in air transport have for some time suggested that government should introduce Fly Nigeria Act as a policy whereby every Nigerian travelling on government expense should fly Nigerian airline but if Nigerian airline does not fly to such destination, the traveller should patronise the airline that has partnership with Nigerian airline.

That way, they said Nigerian airlines will benefit from international travel even if the airlines do not fly directly to such destination.

Travel expert, Ikechi Uko in a recent interview with THISDAY reasoned that such Fly Nigeria Act must come with code-share clause because Nigerian airlines do not have the capacity. With such clause Nigerian airlines would have to partner with foreign carriers, which would airlift passengers to the destinations they fly. If this is done it means that Nigerian carriers can sell the ticket of their partners and these foreign carriers will assist the indigenous airlines to grow and develop technically.

Uko said: “I think the biggest solution to all of that will be the introduction of Fly Nigeria Act. The Fly Nigeria Act should come with a code-share agreement. This will be similar to the bilateral agreement that involved Nigeria Airways in the past. So if I can fly the same frequency I pay royalty, so that way you collect money in lieu of providing service. It wasn’t an efficient thing, it was rent collection but at least there was a benefit. But in the absence of a national carrier; in the absence of a Fly Nigeria Act that forces people to do code-share, what is the alternative?

“We don’t have an alternative in place because our laws are not against multi destination as the major challenge now is how to serve the passenger. You ask yourself who is the most important person in the whole scheme of things? It is the passenger. Without the passenger there is no airline, there is no airport, there is no aviation; so, if government’s role is to provide for the passenger and care for the passenger, then government has to do things that benefit the passenger. Now, what benefits the passenger most is multiple destination because it provides transport service everywhere in the country. Secondary to airlifting the passenger you will think about the indigenous economy like the airlines and the aviation parastatals. Government now needed to have created a vehicle that will help these local airlines benefit,” Uko said.

Royalties

To show that government acquiesces to the whims of these international carriers, immediately the International Air Transport Association (IATA) issued a policy that countries should stop collecting royalties from airlines, Nigeria became one of the first countries to adopt the policy. This is at a time when other countries were still weighing the implications and by banishing the payment of royalties by foreign airlines, the country lost about N50.4 billion in over a year.

The Ministry of Aviation did not adopt alternative means to earn revenues from the operations of these international airlines, like introducing slot allocation system in which airlines are made to pay for operational slot as it is done in most advanced and other countries.

It is hoped that as the new government settles down to bring the expected changes in various areas of the country, it should look at the policies guiding air transport service in Nigeria with the aim of making it generate revenue and provide jobs for teeming Nigerians.