AMCON: Why Nigerian airlines are weak

• Cautions against jamboree bailout for carriers

The Assets Management Corporation of Nigeria (AMCON) has attributed the weakness of Nigerian airlines to poor capital structure, difficulty in accessing cost effective leases, high insurance costs, access to foreign exchange and very marginal share of the lucrative regional flights, among others.

AMCON’s Executive Director, Operation, Aminu Ismail in a paper he presented at an online forum, titled, “Reviving Nigerian Aviation”, made available to Woleshadarenews disclosed that aviation in Nigeria has historically being fraught with many challenges that have led to quick demise of airlines.

Nigerian carriers have an average fleet of between five and eight aircraft, a number not enough to compete with British Airways that has over 400 aircraft.

Delta Airlines have over 500 aircraft. Ethiopian Airlines has over 100 aircraft and this makes it difficult for them to compete. Competition is not realistic for the country’s airlines.

The aviation industry in Nigeria and elsewhere is cut throat, meaning if they don’t have a critical mass in terms of size, in term of good management, in terms of fleet, in terms of good network, it is very hard for them to succeed.

Not a few think the industry needs a re-organisation, needing a kind of jolt to get the sector working.

In the last couple of years, many airlines have drastically reduced their fleet to cope with the small operations they do. Some have their airplanes ferried out for maintenance without finances to bring them back.

Ismail however stated that the corporation is very much in support of the survival of the aviation industry and is committed to protecting jobs within the sector and across its supply chain.

Notwithstanding the low income levels of the government occasioned by a huge fall in crude oil prices, he urged the Federal Government to provide bailout packages to airlines who are currently threatening to reduce staff number by up to 60 per cent .

He recalled that bailouts were given to domestic airlines between 2009 and 2012 by Bank of Industry (BoI) and PAIF, lamenting that the airlines either failed to meet repayment obligations or diverted the funds to other areas.

He cautioned that any intervention in the aviation industry must be directed at core areas of need and should not become a jamboree.

He advised that such grants should be channeled to fund operational losses which would help to save jobs and reimbursed for operational losses induced by the COVID-19 pandemic.

His words, “Intervention should focus on reducing dependence on foreign companies for pilot training and aircraft maintenance. Development of Nigerian based simulator capacity and C Check for various Boeing aircraft types should see government support.”

“On loan, this can be inform of low interest loans (with FX support) granted to strengthen the airlines in equipment overhaul, lease and purchase.”.

The AMCON chief further counseled that in principle, any governmental intervention should not be used to resuscitate airlines that had stopped operations before COVID 19 broke out and not for loan restructuring but directed at the airlines to grow the economy.

In recent years, particularly in 2011, the Federal Government released N120 billion intervention fund. The money had since vanished. The money was released by the Central Bank of Nigeria (CBN) as part of a N500 billion intervention fund.

Air Nigeria, re-christened from Virgin Nigeria, was the highest beneficiary, receiving N35.5 billion, which was supposed to be monitored by the Central Bank of Nigeria (CBN), as well as the Bank of Industry (BoI).

Other airlines that benefited included Aero, which received N20 billion, Arik Air got N15 billion, Kabo Air got N6.66 billion, IRS and Chanchangi Airlines got N3.4 billion each.

Some of the least beneficiaries included Dana Air, which accessed N618 million, Caverton Helicopters got N1.348 billion, Overland Airways got N805 million and First Nation Airways got N271.7 million.

Ten airlines benefitted from the fund through loans with a tenure of 10 to 15 years. The beneficiaries were Arik, Aero, Air Nigeria, Chanchangi Airline, Odengene, Dana, Overland, IRS, Kabo among others.

Chanchangi,Odengene, Air Nigeria and IRS have folded up with tax payers’ money gone down the drain. The loans were not collateralized. Arik, Dana, Aero, Kabo, Overland are ones still in operation.

Wole Shadare