• Existential Threat of COVID-19

This pandemic has literally upended the commercial aviation world, with unnerving consequences that are yet unfolding.

According to International Air Transport Association (IATA), the world aviation industry’s revenues are forecast to drop by more than half, with possible recovery return to 2019 pre-COVID-19 levels anticipated sometime by Q4 2021.

In mid-April 2020, IATA released a further updated forecast indicating that the Covid-19 pandemic will see airline passenger revenues drop by as much as $314 billion in 2020 — a 55% decline compared to 2019, an indication that its severity is yet a matter of conjecture.

Meanwhile in an irony of sorts, a 2015 U.S. National Security Strategy report, cited airlines as the major dispersal source in the spread of diseases globally, mainly attributed to the phenomenal growth in intercontinental air travel as a factor in the carriage and spread of dangerous pathogens.

This irrefutable fact therefore compelled several governments to impose immediate bans on international air travel within days of the epidemic being declared a pandemic, as a way of containing the spread of the virus within their territories.

The immediate implications of the closure of international borders for the airlines are an instant liquidity crisis and swarming overcapacity, with affected destinations discontinued, aircraft being parked, staff and crew members furloughed, but operating fixed costs remaining due.

Bearing in mind the airline industry’s susceptibility to exogenous shocks, its cyclicality, highly leveraged and capital-intensive nature, cash conservation has become its primary objective.

The inevitable outcome for the industry given its very high fixed costs and non-utilization of assets during any crisis or pandemic is a string of major airline failures and bankruptcies as already demonstrated in the case of Flybe in the UK as at March 2020.

The Nigerian industry has not been immune to the vagaries of this pandemic as well. With the announcement of the closure of international borders by the Federal government and limiting air operations to essential rescue missions only.

ALL domestic airlines ceased operations and have remained so ever since. This development has shown up several overarching burning issues, which the domestic airline operators, under the aegis of the Airline Operators of Nigeria (AON), had hitherto highlighted, as inimical to their interests in particular, and the industry in general and has finally come to the fore.

Most prominent of these issues is that of the inappropriate multiplicity of taxes, fees and charges (TFC’s) imposed by the various industry service agencies and the regulator on the airlines in their bids for sustenance and viability.

All of a sudden, with all domestic airline operations grounded and international border closures still in force, this long enduring industry distortion has predictably been ultimately exposed.

Ideally, all the service agencies in the industry including FAAN, NAMA, NIMET, NCAT and AIB and the regulator NCAA have originally been structured and established as cost recovery entities in line with the dictates of the International Civil Aviation Organization (ICAO) Convention.

Unfortunately over the years, subsequent governments have used these entities as sources of political patronage thereby unduly swelling their ranks and populating these agencies with sometimes unqualified personnel.

This development over time has introduced gross inefficiencies and unsustainable astronomical wage bills into their operations, necessitating the indiscriminate increases of tariffs for sustenance and viability by way of TFCs.

This long enduring practice, which has inadvertently created a vicious cycle in the industry, was made even more apparent when the government recently declared that seventeen (17) domestic airports are unviable.

The Federal Airports Authority of Nigeria (FAAN) under whose ambit the management of these airports fall has been faced with and still faces catastrophic declines in passenger traffic volumes and hence starved of its earnings from the major international airports hitherto used in subsidizing these airports, following the airport closures and air travel ban in place.

The seeming unviability of these airports is premised on the fact that their “lifelines” had been severed by the COVID-19 pandemic, which has helped to expose the unsustainability of the airport business model in Nigeria, not to mention the compounding effects of the obnoxious policies in effect.

Incidentally, at the onset of this pandemic, the Management of FAAN proactively set up a committee comprising key industry stakeholders for a coordinated and concerted effort at dealing with the possible scourge.

An outcome of this laudable initiative is a WhatsApp platform for committee members to share information. One of the major issues raised on the platform was the possible existence of any strategic response of the various industry agencies to the imminent shutdown of airline operations in the wake of the pandemic and hence the complete erosion of earnings, considering that 100% of all their earnings save FAAN come from the airlines.

Unfortunately, these recent developments have clearly shown that indeed ALL our industry agencies including the regulator are not proactive or strategic in their planning to deal with any unforeseen emergencies.

This is so primarily because they are wholly reliant on government largesse by way of budgetary allocations and or grants and as such not incentivized to think outside the box, and that should be a major source of concern for every well meaning industry stakeholder and citizen. Aviation agencies are struggling to pay staff salaries – that is an industry first!