Saving Nigerian airlines from extinction

Nigerian airlines are faced with so many barriers that have stunted their growth. To get out of these problems, the carriers need to be given a breather. WOLE SHADARE writes

 

Barriers

 

One of the biggest impediments to sustainable airline operations in Nigeria is the humongous debt profile of the carriers. Nobody knows the exact debts the carriers owe different aviation agencies.

The Federal Airports Authority of Nigeria (FAAN), the Nigerian Airspace Management Agency (NAMA) and the Nigerian Civil Aviation Authority (NCAA) have continued to give conflicting figures, but many are of the view that collectively, these debts are in the region of N40 billion.

That is huge and the insistence that these carriers pay these debts under coercion or negotiation would only add to their burden. Nigerian carriers are among the highly taxed. These taxes, they said are suffocating, but that is not an excuse to make them irresponsible by evading even the smallest of all the taxes.

 

NCAA talks tough

 

Just recently, the aviation regulatory body, the NCAA alleged that airlines plying the country’s domestic routes were evading the payment of statutory taxes to the industry. The Director General of NCAA, Capt. Muhtar Usman, lamented that the non-remittances of taxes by both scheduled commercial airlines and those on charter operations had stifled the various parastatals in the industry whose operations are tied to the taxes.

Usman alleged that some of the airlines were not just remitting but also making use of the five per cent ticket, cargo and charter sales taxes, which they collect from passenger tickets and which they ought to remit to the NCAA.

He therefore asked the operators to reconcile all outstanding debts to the NCAA within 60 days. “It is imperative that all unremitted funds must be forwarded in full to the NCAA immediately.

These sales charges are to enable all aviation agencies carry out their responsibilities of providing safe, secure and efficient regulatory services for the overall benefits of all aviation stakeholders,” Usman said. “The five per cent ticket/ cargo/sales charges must be on gross ticket excluding VAT and passenger sales charge only.

The airlines must desist from using these funds,” Usman had said in a statement. He also said all airlines must provide to the NCAA the breakdown of its recently introduced ‘taxes + fees’ component on all passenger tickets, which included the amount due to the Federal Airports Authority of Nigeria (FAAN), Federal Inland Revenue Services (FIRS), and five per cent VAT to the NCAA. Rather than the threats to ground debtor airlines, the situation the airlines have found themselves calls for concern. Even with their inability to remit what they were supposed to remit to the various agencies, they are already down.

 

Suspension of services

 

For close to one month, First- Nation Airways grounded its operations in order to fix two of its airplanes over some snags. The airline is expected to be back in operations this week. Two weeks after FirstNation shut operations to fix its aircraft, Nigeria’s oldest airline, Aero Contractors predictably also shut operations after the airline was left with just one airplane with five others unserviceable and on the Lagos airport tarmac.

As if that was not enough, Nigeria’s biggest airline by aircraft size, Arik was also caught in insurance renewal imbroglio, forcing the airline to be off the sky for 24 hours. The airline had since resumed operations. It is, however, not uhuru for the airline and many others that are seriously hemorrhaging and on life support,

 

Plea

 

Just last week, the operators cried out to the Federal Government to assist them. They painted a gloomy picture that shows that they are in dire straits, as they struggle daily to carry out their operations. The airlines are hit by perennial scarcity of aviation fuel. Aside scarcity of the commodity, Jet A1 price has almost doubled from what it used to be last year. The selling price in Lagos is N240 per litre from N150 it was last year. The airlines are not also helped by scarcity of foreign exchange.

Aviation business is highly dollarised. While airlines make their revenue in dollars, they spend dollars to service their airplanes and to buy equipment. Aviation is a pivot of the national economy that not only facilitates the movement of people and goods than any other mode of transportation but also ensures the ease of doing business by making it possible to transact different businesses in several locations in a single day.

 

Experts fret

 

Chairman, Airline Operators of Nigeria (AON), Capt. Noggie Meggison, disclosed that it was no longer news that airlines in Nigeria charge very competitive fares in local currency but have to carry out numerous operational activities including maintenance and purchase of spare parts in foreign currency (dollars) thereby adding to the already unbearable burden the airlines have to carry on a regular basis.

He disclosed that the current forex constraint being faced by airlines has further exacerbated the situation and threatening to cripple airline operations in the country. His words: “Aviation is an international business and irrespective of the environment an airline operates in we are all faced with the same challenges; but more so for Nigerian operators who have to also deal with many infrastructure challenges and inefficiencies in the system.”

An aviation safety advocate, Capt. Dung Rwang Pam was actually concerned with the rate at which the airlines were temporarily suspending operations. He stressed that the airlines suspended operations because they are unable to send their aircraft for scheduled heavy maintenance normally called the C-Check.

“There is possibly no need for D-check, which is the heavier check because the operators and manufacturer is to fuse that D-check into C-Check. Historically, C-check should be carried every 18 months. Every airline owner knows that. Every airline owner is expected to submit a comprehensive business plan that does not only show how he or she will run the operation but run it profitably before they start,” he added.

 

FG, airlines to blame

 

He blamed both the airlines and the government for the problems affecting aviation in the country. Pam stated that if the government and airlines don’t start thinking, airlines would cease to exist. He lamented that the nation’s economy should not be in this current state, adding that Nigeria have had almost no single airline that has had longevity without huge support from the oil and gas sector.

To him, Aero Contractors has endured this long, warning that if care is not taken, this would be the last quarter Aero will exist. “Despite government’s intervention years ago with the Asset Management Corporation of Nigeria (AMCON) administrating, that airline is hugely indebted with unsustainable debts, tax payers’ money, part of BASA funds was also used to make up the airlines’ intervention funds.”

“How many of those airlines that have received these funds survived? Some of them are almost currently extinct – Chanchangi, IRS, Skypower etc, he stressed? He said some of the airlines have benefitted and are not operating, wondering what would happen to over N120 billion they got as intervention fund, which seemed to have gone down the drain.

“That is tax payers’ money. That money should have gone into building schools and hospitals. The airlines that were rescued were not even operating. How many losses should we continue with? We need to change our method. Let us think of what we have done. If we have done this consistently, then we need to change our approach.”

 

Conclusion

 

At this stage where airlines are finding it very difficult to do business, it is hoped that the Federal Government would explore the idea of coming to the aid of Nigerian airlines because of the huge employment they generate by offering start-up airlines three to four years tax holiday. They should also grant them those in operations waivers in order to ameliorate the problems that had hindered their smooth operations.

 

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