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The aviation industry in Nigeria, like many other sectors, is going through crises. WOLE SHADARE looks at events that shaped the sector in the third quarter of 2016.
The aviation sector in the last quarter was one that was characterised by crises. The segment has never seen the type of troubles it witnessed in the last quarter than any other period.
At a point, it was as if the aviation sector in Nigeria had reached its end. Recession has taken a toll on the economy and the aviation sector is not immuned from the problem faced in the third quarter of the year.
Hard times hit airlines
For Nigerian airlines, they are very much faced with hard times, leading to the cutting down of routes, especially on the lucrative Lagos-Accra route due to scarcity of foreign exchange. Before now, four Nigerian carriers dominated the route.
They were Aero Contractors, Arik, Dana and Medview. The suspension of operations of Aero, the withdrawal of Medview and Dana leaves only Arik on the route.
This has equally affected connectivity within the West African region, thereby making air travel very cumbersome. Even foreign airlines are also not spared following excruciating pain of sourcing foreign exchange coupled with tough operating environment that led to loss making by Spanish carrier-Iberia and American airline, United.
Both airlines pulled out of the country, as the Nigerian government was urged to release more than $599 million in air ticket sales blocked by the West African nation’s chronic foreign currency shortage. Just last week, the Federal Government released $300 million out of the airlines’ $599 million funds.
Perennial JET A1 scarcity
For over three months, Nigerian domestic airlines grappled with scarcity of Jet A1, also known as aviation fuel. The situation led to disruption of flight operations, as flight delays and cancellations became the order of the day at most domestic airports. Aside the scarcity of the commodity, aviation fuel price hit an all-time high of N230 per litre.
The consistent nonavailability of the product while the scarcity lasted, led to inability of airlines to conduct their operations, which led to almost 50 per cent cancellation of flights.
Aero shuts operations
Like a tale in moonlight, Nigeria’s oldest airline, Aero Contractors announced the shutting down of its operations.
The announcement, which came on September 1, 2016, shook the entire aviation industry. They were shocked because of the long history of the carrier and having lasted for close to 60 years, they felt it would be difficult for the carrier to be shaken to its very foundation. But for many who have followed the high-level graft and maladministration in the company, it came to them as no shock, as they had predicted the ‘end’ for the once prosperous airline.
Chief Executive Officer of the airline, Captain Fola Akinkuotu had in a statement announcing the shut-down of the airline said, “The impact of the external environment has been very harsh on its operational performance, hence management’s decision to suspend scheduled services indefinitely effective September 1, 2016 pending when the external opportunities and a robust, sustainable and viable plan is in place for Aero Contractors to recommence its scheduled services.
The implication of the suspension of scheduled services extends to all staff directly and indirectly involved in providing services as they are effectively to proceed on indefinite leave of absence during the period of non-services.”
The airline, in recent years, had been under the Assets Management Corporation of Nigeria (AMCON) receivership following its inability to repay some of its debts to creditor banks in the country.
It was learnt that Aero Contractors’ exposure to the AMCON and other creditor financial institutions in Nigeria is in excess of N30 billion. It was also learnt that from a fleet of over nine aircraft, which serviced both domestic and regional routes, Aero’s aircraft fleet had shrunk to just one, an indication that the airline was drifting towards insolvency.
Shortly before then, the airline pulled out of the Accra route owing to its inability to muster the requisite finances to undertake mandatory maintenance checks on its aircraft on that route. It was also learnt that a foreign carrier, which had leased one of its aircraft to Aero had recently cancelled the lease deal and ordered the airline to return the aircraft.
Arik’s insurance crisis
The insurance crisis of Nigeria’s biggest carrier brought panic to an industry that is on life support. Arik Airline controls about 50 per cent of air traffic because of its size and number of routes it operates.
The inability of the airline to fly for almost two days led to stranding of passengers in many parts of the world and a further delay in resuming operations would have been catastrophic. The airline however, said that documentation issues relating to the renewal of its insurance policy caused the development. It said the delay in renewing the insurance policy was caused by the two-day holiday, which was declared by the Federal Government to celebrate the Eidel- Kabir.
Arik swiftly moved to resolve the problem and it came back to service strongly. The situation was scary for many while it lasted considering that FirstNation Airways was fixing its two aircraft that had snags. They have since returned to service.
Contentious airports concession
One issue that has remained very controversial in the aviation industry is the plan by the Federal Government to concession four of the juiciest aerodromes in Nigeria. The four are the Murtala Muhammed Airport, Lagos, the Nnamdi Azikiwe Airport, Abuja, the Mallam Aminu Kano International Airport, Abuja and the Port-Harcourt Airport. Opinions are divided over concessioning of these airports.
At a forum held recently, experts were divided over the issue. While some supported the idea, others condemned it. To show its seriousness, the Minister of State for Aviation, Hadi Sirika had already set up two committees to midwife the process.
He had assured that the process would be transparently carried to the satisfaction of stakeholder. That remains to be seen as the committees are yet to submit their reports, which are expected to show a clear roadmap for the deal Sirika said would boost revenue and help to enhance facilities at these airports.
Airlines’ appeal for rescue
Nigerian carriers are in financial dire straits and if help does not come, the few surviving ones might go the way of others before them. They have however, pleaded with the government to come to their rescue.
Not a few have suggested that for domestic airlines to survive, the government must put in place the right policies. Carriers will continue to have problem if the policies are wrong. There is the need to refine jet fuel locally.
Currently, a lot of the supplies are imported. There are import problems, which are causing foreign exchange scarcity. Policies on maintenance should be such that airlines could get spare parts and equipment, in and out of the country. Nothing stops an airline from taking a piece of land in Lagos and building a hangar. If maintenance were done in Nigeria, carriers would not waste money abroad.
But because the policies do not work, it is not viable.
Anywhere in the world, the profit margin at best for airline is between seven and 10 per cent. Between this time last year and today, the naira has officially lost almost 130 per cent of its value.
Officially, it lost over 50 per cent of its value, but it is not available at the official N308 rate to a dollar anyway. With that, it becomes difficult for airlines to plan. So, how do you plan? Government needs to take a more proactive step to save the sector