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Recession: Keeping tab on airlines

Airlines have faced worse situations but this time around, they are finding it extremely hard to cope. Consequently, the Nigerian Civil Aviation Authority (NCAA) has been asked to economically regulate to prevent corner cutting. WOLE SHADARE reports
Deregulation policy
Many years ago, precisely in the 1980s and 1990, the aviation industry in Nigeria was deregulated. This led to the birth of Okada Air and ADC, among others. The two were very prominent because of the great competition they gave Nigeria’s national carrier then, Nigeria Airways. If deregulation taught us anything, it is that industry insiders have a vested interest in being regulated.
In the years since deregulation took effect, we have seen numerous airlines unable to manage the resources at their disposal well enough to continue in business. As a result, a competitive environment has forced them from the industry.
Managers in this industry must have had a much easier life when they were not allowed to compete against one another. Even now, those who had competed successfully must long for the days when life was easier.
Opening up the space
Okada and ADC helped to compliment the air transport services.
The decision helped to open up the economy and expanded the scope of airline business in Nigeria. Years after, other airlines such as Medview, Chanchangi, Triax, Oriental Airlines, Harco, Harka, Sahara, Sosoliso, Chrome, EasyLink, Fresh Air, EAS, among others, joined the fray, offering passengers great choices.
Virtually all these airlines are extinct, but it provided people with deep pockets to invest in the sector many described as elite business, but with marginal profit. While many carriers have died, there are others who have replaced the extinct carriers but which are not doing very well. The airline industry boomed then but the economic recession has hit virtually all businesses and has threatened to lead to many others closing shops.
Their balance sheet does not suggest that they are healthy. An airline chief once confessed that he is into the business because he does not know how to do any other business. To be fair to this operator, he has operated with the highest safety standards and has ensured that his exposure to banks are very minimal, trying to grow his business gradually and professionally.
Carriers in dire straits
Almost all the airlines are in red. They are not helped by the skyrocketing price of aviation fuel, high cost of operations, depreciating naira against the dollar, which has done incalculable damage to their operations, high cost of airplane maintenance and alleged heavy charges by various aviation agencies.
They owe the Nigerian Airspace Management Agency (NAMA), the Federal Airports Authority of Nigeria (FAAN) and the Nigerian Airspace Management Agency (NAMA) over N38 billion. They also owe banks, aviation fuel marketers’ humungous amount of money in the region of over $800 million. Government also has a large chunk of the blame that has perpetually made the airlines not to be profitable.
For instance, in its bid to make Accra a hub for aviation in the world, the Ghanaian government recently announced a cut in the price of aviation fuel by 20 per cent selling today at N110 equivalent.
Even if both countries are importing aviation fuel, it is inconceivable Nigeria is selling at N240 per litre as against Ghana at N110. Rather than assist domestic airlines to bring down the price of Jet A1 and make it more available, the price has skyrocketed consistently from N105 in March to over N200 today, thereby significantly raising the cost of operations to unbearable proportions in spite of constant calls over the years for action in this regard. Everyone knows that fuel alone accounts for about 40 per cent of the operational cost of most airlines.
With the continuous increase in the price of Jet A1 amidst the scarcity and epileptic supply of the product, the operational costs of domestic airlines have further grown astronomically thereby leading to about 50 per cent flight delays and cancellations of scheduled flights for a day.
Temptation to cut corners
To remain afloat, the airlines might be tempted to cut corners, a situation that could put passengers’ lives in danger. This is more disheartening considering that some carriers are yet to pay their workers over three months salaries.
In desperation, the carriers under the aegis of Airline Operators of Nigeria (AON) are disputing debts they owe, describing it as phantom. The reality dawned on them when the Federal Government set up a debt recovery committee to recover all debts owed the agencies in view of government’s dwindling revenue.
To underscore how difficult the situation has become for the carriers, chairman, AON, Capt Noggie Meggison called on the government to help the airlines to remain in business, saying only carriers that are still in operation can pay debt. He added that if there are no airlines, the agencies won’t have revenue to collect, adding that some debts should be overlooked.
NCAA alert to responsibility
The aviation regulatory body seems to be on top of its game, as the NCAA wrapped up plans to review the economic and safety regulations of Nigerian airlines to ensure safety and to ensure airlines have the financial resources to effectively sustain their operations.
The Director-General of NCAA, Usman Muhktar, recently disclosed that the good record and approvals received from international regulatory agencies, must be sustained through strict measures.
He also said that the agency would embark on ramp inspection of every flight before it takes off to both local and international destination, noting that this has become imperative for improved safety and security in air operation. Muhktar said the NCAA wants to ensure that airlines are up to date with the payment of their salaries to staff without, which safety could be impaired, adding that any airline that delays the payment of salary to staff would promptly be grounded.
Conclusion
The recession has seriously affected not only airlines but also many businesses. It has seriously depleted government’s revenue but the NCAA needs to brace up to make sure airlines do not cut corners to survive, thereby putting in jeopardy thousands of lives that depend on air transport business to take them to their destinations and a great source of livelihood for many others.
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