Recession: Airlines, agencies, others prune costs
AS foreign exchange crisis bites harder, many businesses in the aviation sector are cutting costs to remain afloat.
With forecasts not showing a path to quick recovery, airlines, aviation agencies and many service providers are pruning their cost of doing business.
Aside the Nigerian Civil Aviation Authority (NCAA) that disclosed that it has saved over N2 billion to train workers locally, other service providers are equally reducing cost and cutting down on operations.
The nation’s apex aviation regulatory body, like its counterparts across the world, is not particularly great on innovation, but strict enforcement of standards and recommended practices.
But NCAA is thinking its way out of the forex quagmire, it is leading the way.
Long before the recession set in, NCAA was spending the bulk of it forex on foreign training for its staff, both technical and administrative.
It was a matter of policy that all middle and senior cadre staff attend one form of foreign training programme or the other, at least once in two years. It was an entitlement, something staff really looked forward to.
But it was a drain on the authority’s purse; its workforce has climbed steadily from just over 400 at its founding in 2001 to around 1,400 today. And this is without commensurate rise in its earnings.
In fact, its main source of income, the five per cent ticket and cargo sales tax, has remained almost static.
Worse, airlines and other service providers owe NCAA over N12 billion and are defaulting in rescheduled payments.
Business analyst, Mr. Jimoh Jinaud, said with the recent forecasts not holding out much hope of an early exit from the recession, barely staying afloat is no guarantee of survival. Not even government agencies are spared.
He noted that in the air transport sector, airlines, which could not withstand the excruciating pain of recession, have had to beat a tactical retreat.
He cited example of Nigeria’s oldest airline, Aero Contractor, which has been thrown out of service, while many other airlines have reduced capacity on their Lagos and Abuja operations.
A former Assistant Secretary General of Airline Operators of Nigeria (AON), Alhaji Mohammed Tukur, said the tough operating climate created by recession demands that airlines should deploy more fuel-efficient aircraft on some routes.
Tukur noted that the use of ‘jumbo’ aircraft, ideally meant for flights lasting six to 12 hours by most domestic carriers on sayless than an hour flight on Nigeria’s domestic route, if allowed or practiced in the past, was uneconomical in a recession period.
“There is need for airlines to change their aircraft types,” said Tukur.
“They should get light aircraft, not these Boeing 737s. If they have these less fuel consumption aircraft, it will reduce their burdens,” he added.
Tukur, a former Director of Operations at Chanchangi Airline, said the B737 aircraft were costly to maintain and gulp so much fuel, adding that there was no way an airline operator could survive under the present economic situation with such aircraft constituting the bulk of aircraft in its fleet.
Staff salaries and other remuneration constitute a huge chunk of the overhead that airlines bear.
While pilots and aeronautical engineers naturally earn what is perceived as fat salaries, the top management and executives of airlines also earn more than the rest of the workers.
“The management of various airlines live expensive lives with monies meant for operations of airlines and management staff of some airlines received too much as salaries,” noted Tukur.
With recession comes a reduction in passenger traffic, which means airlines earn less than they usually do. And in Nigeria, aside low passenger patronage, there has also been a reduction in aircraft fleet plying some routes.
The high cost or the scarcity of forex has made it rather difficult to carry out routine maintenance of some aircraft abroad, with stories being circulated about of how some airlines are postponing or not able to do C-checks and D-checks on some aircraft.
He noted that the outcome has been a great reduction in the earnings of airlines, adding that airlines should therefore consider cutting down on staff salaries, especially those considered to be the “highest income earners” under a recession if they must survive it.
“The affected staff must be made to realise that such pay cut is a better alternative to an outright loss of job.” Spokesman for NCAA, Sam Adurogboye, told New Telegraph that what the agency did was a delicate balancing act: find funds to train staff or risk losing the much cherished Category 1, which had just been renewed.
His words: “One of the first steps we have taken is to domesticate some of the courses, bring in certified instructors to run the programmes in our classrooms at our training facility in Lagos. This has helped us to save scarce forex without compromising the quality of the courses or safety.”
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