BASAs: Undulated playing field

Nigeria is generally viewed as having one of the most liberalised air transport industries in Africa.  Although still competitive within Africa, it has a significantly weaker bargaining power as regards the BASAs with non-African countries, thereby leading to an imbalance with results spanning from increased dominance of foreign airlines to capital flight. WOLE SHADARE reports

Business of freedom

Nothing should stand in the way of aviation. Aviation has been described as business of freedom. Aviation is globalisation at its very best. But to deliver aviation’s many benefits needs borders that are open to people and trade.

Over the years, countries Bilateral Air Services Agreements (BASAs) had been modified to guarantee more flights between nations having air pacts with one another. These agreements have become uneven with one party seeking to take advantage of the weaker side to have more flights than their counterparts. Not a few have given it different terms ranging from ‘skewed’ to ‘imbalance and one-sided’ among others.

The lobby

Negotiations to enter into BASAs are usually spearheaded by the Ministry of Aviation after extensive consultation with aviation regulatory authorities and concerned institutions, for example, the immigration authorities.

However, it is quite common to see airline operators, desirous of expanding their routes to target destination, lobby the Ministry of Aviation through diplomatic channels, to engage in formal talks, which usually lead to the commencement of negotiations between countries.

In general, BASAs are negotiated based on the five freedoms prescribed under the International Air Transport Agreement (IATA), which are stated as privilege to fly across a state’s territory without landing;  privilege to land for non-traffic purposes, for refuelling, repairs and maintenance; privilege of an airline from one country to carry traffic from its own country to another country; the privilege of an airline from one country to carry traffic from another country to its own country and the privilege of an airline from one country to carry traffic between two other countries, provided that the flight originates and terminates in its own country.

Out of the five freedoms mentioned, the first two freedoms are considered technical rights while the last three are considered economic and commercial traffic rights.

Unutilised pacts

Never has BASA been talked about than in Nigeria where everybody has become an expert in the subject. Government has been taken to the cleaners because of what they describe as its lackadaisical attitude and lack of policy foresight to protect Nigerian carriers that are not only weak to compete but offer little in terms of financial might to compete with the smallest airlines in Europe.

Nigeria presently has 90 BASA pacts with only about 39 of it active. Many of these have been reviewed to create opportunities for domestic carriers, but are largely not utilised. Specifically, domestic carriers are yet to utilise 10 per cent of the air pact due to their limited capacity.

Currently, 33 foreign carriers operate in and out of Nigeria almost on a daily basis. Among them are nine African carriers. Air Peace recently opened Lagos-Dubai operations.

Agreements without reciprocity

Nigeria is into commercial agreements with many countries that operate to the country without reciprocity. The country rakes in millions of dollars from the deal, which clearly shows that the country is not losing on all fronts.

Many of the foreign airlines have also been accused of mopping up the domestic market with designations handed them to operate to Kano, Lagos, Abuja, Port-Harcourt and other cities.

Until recently, and due to the terrible state of Enugu airport, Ethiopian operated to Enugu and Kaduna airports. The airline relies on the Single Air Transport Market (SAATM) to which Nigeria and 28 other countries including Ethiopia are signatories.

SAATM is a project of the African Union to create a single market for air transport in Africa. Once completely in force, the single market is supposed to allow significant freedom of air transport in Africa, advancing the AU’s Agenda 2063.

Some aviation experts have passed some jokes on Nigerian carriers that despite the over 80 international routes given to them, they lack the capacity, discipline to operate profitably.

Expert’s view

Nigerian-born international expert and Chief Operating Officer (CEO), African Aviation Services Limited, Mr Nick Fadugba, says the country’s small fleet of aircraft will make it practically impossible for it to compete with foreign counterparts.

The former Secretary-General of African Airlines Association (AFRAA) put the average fleet size in Nigeria at a maximum of 10 aircraft, a number not enough to compete with British Airways that has over 400 aircraft.

His words: “Delta Airlines have over 500 aircraft. Even Ethiopian Airlines has 110 aircraft. So how can small airlines compete? And I am not being disrespectful by the way, the airlines I am not talking about is fleet size, I am not talking about commitment to the industry but I want to be realistic, because this industry is cut throat. If you 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 to succeed.”

However, since Nigeria Airways was liquidated there was no airline to reciprocate on bilateral air service agreements, so foreign airlines gained a huge advantage over Nigerian airlines.

Although Nigeria currently lacks a national carrier, a number of foreign airlines operate to and from the country at varying levels of frequencies to multiple destinations from Nigeria’s international airports located in Lagos, Abuja, Port-Harcourt and Kano.

The reality of operating a national carrier is not as clear cut. A national carrier, unlike other government owned institutions, must be run as a business.

National carrier question

In arguing for a national carrier, a lot of confidence is inadvertently placed in the Ministry of Aviation’s ability to operate the national carrier as a profitable business. The ministry would be expected to take pains to ensure that costing, pricing, advertising, marketing and other business fundamentals are effectively and efficiently carried out to a professional standard.

It is apparent that certain BASAs have been negotiated or renegotiated without extensive consideration of the commercial elements required for the industry to experience the proposed targeted benefits of BASAs neither has there been much emphasis on the economic realities under which the country is operating.

Most agreements provide for royalties to be paid to the Nigerian government where the nominated Nigerian air carriers are unable to reciprocate under the agreement. This measure may be a sound way of boosting government revenue under the agreement but it does nothing commercially for the industry. In some cases, agreements have been signed to stop the payment of these royalties altogether.

Contrast

In stark contrast, in 2014, Emirates entered into an agreement with South African authorities for additional frequencies from South Africa to Dubai. It was reported that the additional frequencies were granted on the condition that the airline pay 40 per cent of the cost of each ticket to South Africa Airways.

As such, there is a commercial benefit to the national carrier and the nation, by extension. It is recommended that the government consider similar options or other commercial options so as to give an incentive for indigenous carriers to continue operations and possibly expand their operations internationally. The idea is not to reduce the frequencies or entry points of foreign carriers but to increase the indigenous air transport industry to a level of competitiveness that would rival that of any foreign country.

Last line

However, as attractive as the concept of reciprocity of rights is in BASAs negotiation, Nigeria as an economy is not primed to take full advantage of the concept. This is because the concept of reciprocity of rights must be exploited within the body of the existing regulatory framework of each participant country. Consequently, whereas the United Kingdom’s extant laws on commerce, immigration and registration of companies are robust enough to streamline foreign entry into their domestic market; Nigerian extant laws are not yet that robust. This results in a huge gap between Nigerian airlines and their foreign counterparts.

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Wole Shadare