Why airlines fail, by NCAA DG

Majority of airlines in Nigeria fail because they lack good corporate governance and are ‘one man business venture’.

The Director-General of the Nigerian Civil Aviation Authority (NCAA), Capt. Muhtar Usman, disclosed this when the House of Representatives Committee on Aviation visited the agency.

Muhtar, however, stated that the situation was changing, as Nigeria is not experiencing frequency of airline collapse compared to the past, adding that the aviation regulatory body would stop any carrier that does not have the financial strength to operate safely.

His words, “It is true that we have had many airlines that have failed. Most of them lack corporate governance because individuals own them. We do not have many airlines disappearing like before. If we notice that they do not demonstrate to us that they have the financial muscle to operate, we will not allow them.”

The NCAA had formulated and implemented sufficient policies aimed at improving safety and efficiency of airlines but this can only be achieved if there is good corporate governance on the part of the airline operators.

In a related development, The President of Sabre Network West Africa and current President of Aviation Round Table (ART), a think-tank body in the industry, Gbenga Olowo, said the fortunes of air transport sector was declining with reduction in fleet and poor service of some domestic routes.

Olowo attributed Nigerian airlines’ problem to government’s lack of policy focus and hostile operating environment, which include high charges indiscriminately leveled on the airlines.

He noted: “Airline user charges, for example, are as high as 15 per cent. User charges are revenue collected for other organisations factored into the fare (without commission), whereas airlines are not revenue collectors. Hence, the International Air Transport Association (IATA) described airlines as cash cows.

“High cost of fuel, high cost of funds, exorbitant airport rent, airspace movement charges require government’s attention. On the other hand, poor management decisions and corporate governance by the airlines owners have resulted into high mortality rate in the industry.”

He recalled that in 2010, Nigerian airlines had 60 commercial operating aircraft, but by 2016, the fleet had reduced to 39, noting that with the declining fleet size, route expansion would be limited and robust schedule very difficult and down time for maintenance would impact negatively on schedule.

However, Olowo observed that airline mortality rate in Africa especially Nigeria was relatively high usually 10- 15 years but often less for so many reasons and attributed it to very difficult operating environment from government policy inconsistency and lack of direction or focus to absolute lack of support “from what the Bible describe as dull hearing.”

Besides, he noted: “The airlines are faced with so many operational issues without government attention. That is not all. There is no corporate governance in most of the airlines. One-man owner calls all the shots and takes a lot of unwholesome decisions.

The airlines are relatively small, weak and vulnerable to competition.

The ART President said Nigerian airlines could not cope with the charges, the harsh operational environment and still thrive unless the government takes actions to re-position the domestic carriers, which are critical to the economic development of the country.

This unfavourable situation, he noted, had put airlines in huge debts and they have become insolvent.