The issue of airport unviability speaks to the problem of air connectivity in Nigeria. ICAO defines air connectivity as an indicator of a network’s concentration and its ability to move passengers from their origin to their destination seamlessly.

It is key to unlocking a country’s economic growth potential, in part because it enables the country to attract business investments (FDI’s) and human capital. Increased air connectivity also accelerates tourism, which is vital to many countries’ economic prosperity and key to the country’s accelerated economic diversification efforts.

Therefore, the key to unlocking the potentials of the supposed unviability of the seventeen (17) domestic airports requires key industry stakeholders – airlines, airports and government, to have cooperative engagements on how to evolve strategic policy decisions to enable asset optimization.

If the air connectivity problem were holistically addressed, it would have touched on several other important issues key to the sustenance of major industry stakeholders.

For example, with increased utilization of these airports, all the government service agencies especially FAAN, would earn increased revenues; FDI’s would be facilitated and enhanced; airlines would increase the commensurate utilization of their aircraft assets and revenues as well.

But all of these benefits would only arise by simply tweaking the existing industry policy or formulating a new one to empower stakeholders to take the initiative and by government through the policy document providing the conducive operating environment for all.

In recognition of the pivotal role aviation plays in the socioeconomic and political integration of any country, several countries since the COVID-19 pandemic have made major pronouncements in support of the sector with various bailout packages, structured as a combination of grants and low interest, unsecured long term loans.

The United States announced a US$58 billion bailout package split into two (2) tranches of US$25 and US$33 billion. The US$25 billion tranche was structured as payroll grants, to guarantee that airline personnel are paid and retained all through the pandemic.

The other tranche is structured as a 10-year low interest unsecured loan, to help reboot and inject liquidity into the otherwise cash-strapped airlines. The bailout however, has strings attached.

Beneficiary airlines are prohibited from furloughing or laying off workers before September 30. They are also banned from buying back their stocks or paying dividends to shareholders until September 30, 2021.

Additionally, the US Treasury Department secures the right to a certain number of (non-voting) shares that it could eventually sell at a higher price once the airlines recover, as part of the deal. In the UK, the government extended low interest loan facilities to major airlines as bailout.

In continental Europe where the impact is worse, different countries have adopted varying approaches. The Italian government has re-nationalized struggling Alitalia, forming a new state-owned entity with an investment of US$650 million.

The French government on the other hand has indicated that it will do all necessary to bailout Air France-KLM in which it has a 15% stake to the Dutch’s 13%, with as much as US$6.5 billion.

The Australian government opted for the loan approach, with a US$660 million cash injection into Qantas its flag carrier, while Singapore Airlines secured a massive US$13.27 billion funding through its State investor Temasek Holdings as a combination equity, loan and convertible notes.

This huge outlay underscores the depth of the crisis for the global airline industry. The structure and conditions of the different bailouts extended by the various governments in securing their respective aviation industries, has long lasting and defining consequences on the outlook of the future industry.

In the case of governments in some countries that opted for the nationalization route as opposed to just temporary bailouts, e.g. Italy, Portugal, France, Finland, and South Africa, an inefficient industry will likely emerge.

The political management of inefficient national carriers impedes the recovery of a robust airline industry. With the above prologue on the structure, quantum and content of the different bailouts by various governments globally, in recognition of the importance of their aviation sector and against the backdrop of the state of affairs of the Nigerian economy, what should be the most appropriate structure and content of any possible bailout for the domestic airlines in Nigeria?

As already enunciated previously, the issue of the taxation of Nigerian domestic airlines needs to be holistically reviewed.

Also, the TFCs imposed by the various service agencies and the regulator need to be critically appraised for their continued relevance, equity and conformity with international standards and best practices.

To be continued…

Wole Shadare