Meggison: Nigeria Should Urgently Review Her BASA Policy
The Executive Chairman, Airline Operators of Nigeria, Captain Nogie Meggison, in this interview with Chinedu Eze, said Nigeria should urgently review all its Bilateral Air Service Agreements, contending that they are tilted against the interest of the cou
What is your overview of the industry?
We are all Nigerians, we know what is happening in the oil sector, oil today is at $26 per barrel; our budget was almost set at $48. Today we even crippling down, we are hearing that the government is already having the idea, and recently the Minister of State for Petroleum, IbeKachikwu said at $20 per barrel of crude oil, Nigeria will survive. So we are already putting $20 in view, the future prospect buyers in the world are hedging at $15 a barrel, so we know we are in for a rough ride.
So there is really no need to do the ostrich system and put your head in the sand and your body outside. We need to look at the reality. There is a meltdown on foreign exchange and there is a meltdown in the economy. Whichever way we need to look at it we need to tackle the problems in aviation, without being political about it, we need to tackle our future as a country seriously. And this is the time we need all hands on deck, be you on the mining sector, be you in the oil sector, transportation or aviation or agriculture all hands need to be on deck in Nigeria at this time. And from my own point of view, from my own small position as the Chairman of AON, we in the aviation sector are trying to come on stream and to put our own contribution in getting Nigeria ahead.
As I said, the success of Nigeria is paramount to us, we have sat down and we have agreed to also sacrifice at this time. We have agreed to be a team player and put Nigeria fort in whatever decision we take and to move the country forward. If you noticed from one of the few things that has happened even with the exchange rate on the parallel market going high as far as N305 and even higher, the air fares have still not changed on the domestic market because we are trying to feel the pulse of the people and also bend backwards as much as possible to provide a safe, comfortable and international standard transportation airline service system and logistics for the Nigerian market and the Nigerian populace.
It is not that easy as you all know, the foreign exchange we know is pretty difficult to access right now. We have met the Central Bank last year November and the Central Bank Governor promised to give priority to this. And as you say and as I tell people, about 80 per cent of the cost of aviation is directly affected by the foreign exchange. From the fuel that we buy although in Naira but it is hedge against the dollar because they have to import it in dollars. And it goes with whatever the rate is, the international rates per day, to the spare parts to our insurance, to as minimum as even the simulator training by the pilots.
We are asking the government for support. I don’t want to go into the nitty-gritty but it’s very, very high for us. So we have met the government to see how it can come in because really the catalyst for any economy is aviation. As they say, if you conquer the sky you have conquered the ground, so we are looking at where the government will come in with us, not to really subsidise but to partner with us the airlines at this time and cushion the effects of the devaluation. Because really as you say, to land one tyre for an aircraft today, a tyre is about $4000 and if you take $4000 if we have to go to the parallel market to go and access fund, $4000 for one tyre at best. Because the tyre now we are paying duty as you know, we are the only transportation in Nigeria that is paying VAT, we are the only airline industry that I know in the world that is paying VAT, even the British Airways and the international carriers that are flying into Nigeria do not pay VAT.
That is why we are going to meet the government to see how we can rob minds and reduce the pressure on us. As I said, a main tyre today cost about $4000, if you take $4000 and we take the exchange rate roughly as N300, four multiply by three will give you N1.2 million. The average airfare in Nigeria today is about N23, 000 to N24, 000. By the time you take the taxes out and the multiple charges and the levies and everything what finally get to the airline will about N15, 000 to 16,000. Out of the N24,000 at best. So if you even take N15, 000 today and you divide N15, 000 that comes to the airline divide by 1.2 million which is the cost of one tyre, you need 80 passengers to by one tyre.
And weekly you are changing roughly six tyres a week. Most airlines are doing five days before changing tyres; it depends on the number of landings you are doing. So it is not magical if you find out that you have to pay 80 passengers fare to buy one tyre, then you need to know how many you need to buy six tyres every week. So if you take that 80 times six, you are going to be talking a 480 passengers airfare to buy six tyres. This means you are talking of almost a load factor for one day just to buy the tyres. So going to the parallel market to go and buy funds at that rate is obviously a no, no; that is why we are dialoguing with the government to create that window for aviation because, really if we are going to be charging that same rate that we are charging it will eventually be an insolvent case that we are going to be facing. And we are negotiating with the government, we have opened fronts, the government is listening, so we are romancing them and we are talking with the government to see how we can make this thing come forth. We are not asking for rebates, we are not asking for intervention but we are just asking for removal of unnecessary taxation and multiple billings so that we can face the real charges.
Because in trying to pay all these five per cent, two per cent, this levy and that one, it ends up being bulky on the passengers, and we all need to think about Nigeria right now and that is why we the airlines are thinking more for Nigeria. The charges include VAT, customs duties, Federal Airports Authority of Nigeria (FAAN) charges, landing, parking, navigation; terminal service charge (TSA). We need to really look at them. For example, I pay you TSA; meanwhile, you are not even providing any service to the passenger, and I need to still pay the service to transport my passengers on the airside to the aircraft and I am paying you for that service or I am paying you 2.50k to pass fuel through the hydro system and the hydro system is not in use. And we know there is no hydro system in this airport for the past 10 years. So all those things need to be taking out. If you are not providing the services then don’t bill for it because right now everybody needs to tighten his belt.
We all need to tighten our belts, we need to sit and stay focused to be able to keep the whole system afloat. We cannot afford to ground the system; we are feeling with government, we are sacrificing with Nigeria at this time. As I said, most of us, whatever decision we are taking, we are taking the decision as Nigerians.
You have not hiked fares?
No airline has hiked fares so far; although the Naira has devalued, as we know, 70 per cent; yet, no airline has hikes fares because we are feeling for Nigerians. And it is a free market, there is no cap, there is no law that restricts us from increasing fares but because we feel for Nigerians we are sacrificing. So there is no caveat or there is no decree that says, you cannot charge N50, 000 or N30, 000 but we are feeling for Nigerians. So hiking fare is not the issue right now but looking at it from how to maximize whatever we have and to give the best service is what we are looking at now.
The Bilateral Air Service Agreement (BASA) signed by the federal government is most often tilted against Nigeria’s interest. Do you agree with that view?
The BASA as we always say, at this time of our national economic situation it is obvious that we as Nigerians need to sit down and start to look inwards. You cannot continue to feed other people’s children at the expense of your own children in-house. Your children are suffering from kwashiorkor; you are giving food to somebody else that is being subsidized by another government food. So it is only clear at this time that Nigerian government needs to review all BASAs. BASA is a bilateral trade agreement. Our government must review them.
Signing BASA the trend, I am the big brother; I want to help you. We need to help ourselves right now. As they say, if the canoe is leaking, you concentrate on the canoe to block the leakages; otherwise if you put people in the canoe without blocking the leakage everybody will sink.
So the BASAs must be reviewed to put it in a place where it is mutually benefiting. I don’t want to go down the road where we begin to raise issues up again, where we said people have come to this country to come and discuss BASA agreements and they come with aviation technocrats with 20, 30 years’ experience on the other side of the table and on the Nigerian side does not have even one aviator sitting down at the other side. Many instances can be mentioned. There are instances where people have tried to sign the sixth freedom right; there is nobody that has the sixth freedom. There is not even fifth freedom between the two closest allies in the world, the British government and the American government do not even have the fifth freedom rights.
With our geographical position today, given by God and the human resources that we have, there is really no reason, which I keep on saying and I have said it many times that Nigerian aviation should contribute 12 per
The success of Nigeria is paramount to us, we have sat down and we have agreed to also sacrifice at this time. We have agreed to be a team player and put Nigeria fort in whatever decision we take and to move the country forward
cent to our GDP in the first two years of this administration with a target of contributing 20 per cent in the long run. Aviation, for example, contributes 27 per cent to the GDP of United Arab Emirates. But when I say aviation I am not talking about airlines, I am talking about aviation. There are many services in aviation, we should look at aviation and try and harness our potentials in aviation. This is not the time to play big brother and say come and do five landings at the expense of your local airlines. We have airlines here today coming into our country and doing five landings inter-city hubs; those same airlines do not allow commercial operation in their own countries above 19 passengers. These do not happen in their own countries.
So I am not talking about you as a foreigner to come in, their own country they don’t even allow such because they are protecting the market to grow their own potential and their local airlines. Nigeria needs to start to look at aviation as something that would contribute to our basket. It is shameful that 50 years after independence, 60 years after West African Airlines Association our aviation industry is still in a teething, crawling age. This is the time and the time is now for Nigerian aviation to wakeup and contribute to the nation’s development. We have all the opportunities here. Nigerians are travelling, an airline did a turnover of over $2million profit, their most profitable route is Nigeria. Nigeria has the highest seat per mile rates anywhere in the world, but what is the mutual benefit of the BASAs that has been signed back to the economy of the Nigerian government?
Financially, skills, employment of our teaming youths, is zero. You don’t have to be a space astronaut to know that. An airline has come in here for the past 40, 50 years using the same type of airplane, not one Nigerian has been trained in it. Where is the transfer of technology? I don’t need to talk about that 80 per cent of the same airlines that are all coming here that we signed BASA with, without looking at the BASA conditions and they are coming into this country with flying spanners in their business class seats to come and check their tyre gauges and check their oil before the aircraft goes back.
We are 170 million Nigerians, the World Bank and statistics put it that 60 per cent of the 170 million people are below 27 years. We have teeming youths looking for jobs; this is the time for Nigeria to come to reality and get aviation to contribute to its development. I keep on saying that, I have said that many times, we have said it around the world. The world knows the potential; I have gone to conferences with some of you sitting down here, where they have announced they know the potential of Nigeria. But what is Nigeria’s problem? Put it in perspective. Is it the regulator? Is it the government or is it the airline? If you put your things right the investments will come, the government does not need to spend one dollar to get things running. Because Nigeria is matured enough, it is ripe; it is just looking for the plucking. With the devaluation now and the cost of oil dwindling, I think Nigeria will need to start to focus critically, seriously, honestly with sincerity into different economic areas.
Aviation is a goldmine that can be tapped the same way the oil was tapped when we went into Joint Ventures with the oil companies through tapping and Nigeria had a controlling share, 40 to 60 per cent. We should now start to take aviation the same way, if you are making a turnover of N2 billion from us and 60 per cent of your passenger load is coming out of Nigeria, government should have a policy that will make the country harness from such huge passenger traffic. We have numbers to show. Early last year I gave the figures to the Minister, what people will call capital flight, I don’t call it capital flight. I will call it financial flow from two countries. The figure was $1.7 billion a year from ticket sales. I don’t call it capital flight because capital flight is if there is a law restricting it from going out.
Where I come from they say you don’t blame the goat that crosses the wall, you blame the wall that comes down. If you open the door and tell foreign airlines come and take and chop and go and you sign the BASA, why blame the airlines? So you may need to go back to the BASA that opened the door and collapsed the fence. And a lot of BASAs have been signed. I don’t want to go into what has been happening. Aviation does not stand alone, it is part of the Nigeria system where corruption has taken the order of the day, where people have signed out birthrights for our future generation and for the aviation industry for a pot of porridge, for peanuts, for wristwatches, for free tickets, for hotel accommodation at the expense of 70 to 80 million Nigerian youths who are unemployed. Enough is enough, God has done it that He has reversed the situation, the oil is drying, we need to look inwards. Are we going to continue to sit down and let our children die of Kwashiorkor while the other people on the other side are coming to feed free? I think it is a matter of time it will stop. I have also told my colleagues on the foreign carriers, please try to now renegotiate, try and reposition yourselves because it is only a matter of time a government will come and our eyes will be opened. It is going to be a light switch, we are going to say, Oga what have you been doing? What have you done so far? You have operated for so, so and so, you have made so much money what have you brought back into the system?
And with the dollar now, the oil at $25, $26 per barrel, it is a matter of time, you can’t take $1.7 billion out of this country or fly six flights into this country a day. I mean three flights a day, full load; no Nigerian cabin crew, no Nigerian meal, no Nigerian pilots, no transfer of technology and you sell this tickets in Naira and you still want to take it through foreign exchange to take out. How? I dare say aviation 60 years since West African Airlines, no foreign carrier, I repeat no foreign carrier, for the millions and billions taking of dollars being taken out of this country owns one block, cement block, I am not talking about a room, owned one cement block that is invested into this country. No foreign airline owns a block anywhere in Nigeria. I am not talking about a building, I am not talking about a hotel, I am not talking about a skyscraper, I am talking one block on the ground. And we are talking about what people call capital flight. I call it flow of US dollars in billions yearly. It is time for us to look into it and start to restrict it so that those flows can stay. If we can even keep 30 per cent the first year and renegotiate, there is nothing that cannot be renegotiated or relooked into with experts looking into it, we can start to reposition ourselves gradually.
But do you think what is happening now is threatening the existence of Nigerian airlines?
There is no Nigerian airline that is collapsing now; there is a tough terrain worldwide, it has nothing to do with Nigeria alone. Nigeria is not standing alone at this time. You all know, if you go and take a look at what the Euro is today, it is taking a bash, the Pounds Sterling is about 1.4 per cent down in value, compared to 1.7 per cent. The South African Rand is about 17 from 11, so the Nigerian government or Nigerian aviation is not standing in isolation. What is happening in America, America is pulling up funds, if you read more into it you will find that America is taking back. And America is growing; there is a boom in America occasioned by the collapse of oil prices. Nigeria is not standing alone; everybody is adjusting. The unemployment as I told you, we need to look at our BASAs, we need to look at our regulations, we need to look at how we can transfer technology. I was talking to an economist today, whichever way you look at it; it is a long-term project for Nigeria. If we had started 10 years ago, five years ago or three years ago, there is nothing that I am saying here today that is new that I have not said. If you go through your records three years ago, if we had started three years ago by now the correction would have been in place and we would have taken this beaten. But to get it now we are saying another one year or two years.
We do not have a choice as a country than to look at those BASAs again, we do not have a choice. You cannot sit down and let $4 billion or $6 billion dollars leave your country daily when your total income as a country is maybe at $25 a barrel, we will be looking at maybe 15 billion dollars. So it is only paramount, it is only just for sure that the government is going to look at it. But the problem now is we have let it the late. We would have started correcting this issue when we identified it. I have been chairman for like two years and from the beginning we have been saying and repeating and repeating like a broken record. At times I want to say it is the same thing I said before is the same thing I am saying again and the same thing I will say tomorrow.
Maybe, local airlines are the major victims of what we are losing from the many lope-sided BASA signed with many countries which airlines operate into Nigeria?
The Nigerian Civil Aviation Authority (NCAA) is very straight and able; you know our NCAA is Category one rated by the US Federal Aviation Administration (FAA). The NCAA is very up to speed. The only thing I will say is that things are going to get tougher, disposable income and the excess luxuries for the airlines are going to go. And that is why we also want to go to the government, instead of charging us double taxation, charging us for things that are not being used, don’t let me pay for service you are not providing for. Let’s give back that money to the passenger. If it is N2 of your ticket or N10 or N500 that is going towards fuel surcharge or that is going towards VAT, please release it back so that people can travel. This is because if people don’t travel and don’t move or cannot travel it will ground the economy eventually, indirectly. You may say yes the man is going on a holiday, we know now for the past two weeks the flights have all been delayed, there is a skeleton of flights going around. And I said to one of the guys that asked me, Nigerian problem is not weather, weather is not the problem. What is weather?
The problem in the industry today is not weather. There have been a lot of cancellations of flights for the past two weeks. Less than 50 per cent of the flights have gone on time. Less than 50 per cent have been canceled. I was in Benin and Warri, trying to get out of Warri, I couldn’t get out of Warri, I went to Benin, spent three days I had to drive by road to Lagos by myself. It is not that the weather is bad, there is nothing new about the weather, the problem is that the navigation aids are not working. We do not have navigation aids.
With our geographical position today, given by God and the human resources that we have, there is really no reason, which I keep on saying and I have said it many times that Nigerian aviation should contribute 12 per cent to our GDP in the first two years of this administration with a target of contributing 20 per cent in the long run
We are talking about way back in the 70s and European people are landing on zero, zero visibility.
There is no airplane that is flying today in Nigeria that does not have category three weather system; they are modern airplanes or category two. Enugu the other day had 2000 visibility, 2000 meters visibility and the airfield was close for three days. Calabar was closed with 2,000 meters visibility for three days. Do we need to see the moon before we acquire and install the necessary equipment so that we can fly at zero visibility? People are flying zero, zero already in the world, so zero, zero visibility, you don’t complain to say the man could not read at night because the sun went down. It is obvious, it is natural that the sun will go down and the moon will come up. It is obvious and natural in this situation where we are geographically positioned in the world that we would have Hamattan and we will have raining seasons. The rain will fall, the Hamattan will come but how do you prepare for the Hamattan if you don’t have navigation aids that can guide you down to zero, zero visibility? Anywhere in Europe pilots can also fly for zero, zero visibility. You don’t cancel flight for 500 meters but today we are closing airport for 2000 meters. Why? This is because navigation equipment is not there. It is not rocket science. But people will look at the airlines as not performing, an airline that has a staff overheads that have not flown to a station for three days, he has to pay the pilot, he has to pay the over heads in that station, you have to refund the passengers their money, you have to comfort the passengers because the law says after two hours you have to feed them, you have to house them, at whose expense? And what is the cost? We need to start to face the reality and this is why we are there to encourage this new government, which we believe will hear us and we believe in them.
The re-introduction of customs duties by the federal government, don’t you think it is a policy summersault?
It is not government really because that summersault was done based on a caveat and it wasn’t made a policy and was not put into the constitution and stamped. As we say everybody is looking for money in the government, the Customs and Excise have looked at it and say, okay the waiver given you by the past government has expired so please come and pay. It expired and for the government to renew it, Customs say they don’t want to hear that they should come and pay. And we have been trying to get to the government to say there is no need at this time. For example, for the past one week less than 50 per cent or 20 per cent of the flights are flown in Nigeria because you cannot fly at night, no runway lights, no markings on the runway, you cannot fly during the day, no navigation aids, so you park the aircraft. Let’s forget the airlines being suffering financially on these issues, let’s look at the businessmen that have business to do in these different region. It is also crippling the industry and crippling the economy of the country indirectly because people that would have gone to go and do business they have cancelled and postponed businesses and appointments. So if you take the loss of manpower and capital, sitting down, managing directors, accountants sitting down at the airport for day and hours on end and people like me that ended up travelling after three days by road to come to Lagos, I have not even gone by road in five years, just to get to Lagos. Just imagine the loss of revenue during this time. And what is the cost of the navigation aids? It is not the weather as I keep on saying; weather will come, rain will come Harmattan will come it happens every year before we were born it came, after we will die it will still come, so it is nothing new; it is just that you are not prepared for it. Don’t wait on the day the woman wants to deliver, after nine months you start to run to the bank manager, telling him that your ATM is not working and your wife is about delivering, you’ve had nine months to plan.