Nigerian airlines operating within harsh economic realities
Nigerian airlines are in dire financial straits and this is as a reflection of the difficult economy under which they find themselves operating.
Director General Nigeria Civil Aviation Authority, Captain Musa Nuhu who made this known in an interview at the sidelines of the just concluded 7th Aviation Summit in Abuja while responding to whether indigenous carriers are making profit, explained in clear terms how difficult it is for the airline where all their costs are dollar denominated and their interest rates are double digits.
The DG-CA who gave a breakdown on the cutthroat environment for airlines said Nigeria carriers are paying humongous amounts for cost of financing at 25 percent averagely and paying quarterly for insurance to defray the huge burden of doing so annually especially for airlines with many aircraft.
Nuhu said,”Nigerian airlines are operating in a very difficult environment. An airline cannot operate in isolation of the economy it is operating in and the Nigerian economy is in very difficult times. The cost of financing is 25 percent. That is killing to start with. You take a loan and you are paying 25 per cent of whatever you make to the bank.
“You are not talking of your expenses, your cost, your current and long-term liabilities. Quite a few of them are in financial strait and some are okay. So, that is the way it is. It is a very difficult environment for the airlines and we also sincerely sympathise with them and we will try and see where we have flexibility to make life easy for them.”
On how the CAA is trying to mitigate some of the airlines’. challenges Captain Nuhu said, “Like the issue of insurance, the insurance is from Lloyds of London, from another country, and it requires a huge amount of foreign exchange. Normally, insurance they pay is for one year, but we know an airline that has 20, 30 aircraft like Air Peace for it to pay insurance is a huge task, that is why we say pay quarterly, at least to reduce the financial burden, especially on the requirement of getting foreign exchange at a time.
“So, we try to assist the airlines in that area, and those who have debts, we reach an agreement with them. If I have N1 billion with you, I am not asking you to pay that N1 billion to me, because if I do that, I am going to kill your business. So, we reach a Memorandum of Understanding (MoU) and they pay an amount that will not cripple their operation.
“But also, they have to pay a reasonable amount to clear those outstanding debts. Those are the areas where we have flexibility with the industry.”
On recent declaration by the International Air Transport Association (IATA) that Abuja and Lagos airports are the most expensive airports in the world with about 27 revenue charges imposed on airlines he said most of those charges came from other organisation within the airport.
He said,”What we need to understand is that a lot of these charges are not from the aviation agencies, but are more in the cargo area. All sorts of people, some are illegally making these charges. So, aviation will start, at least we will consolidate and see where we can streamline and merge those charges and see what can be done. But there are a lot of people and lots of charges have nothing to do with aviation aeronautical charges. It is other organisations that are in the airport that put these charges. But, sometimes as Nigerians, we need to all sit down as a team and see the damage we are doing to our country.
He continued,” Like in Lagos, there are so many charges, you want to export your cargo, there are so many charges. By the time you pay those charges, your products are not even competitive anymore. That is why you see a lot of planes bringing in cargo, and they leave empty out of Nigeria, because exports are not viable and lots of these are charged by plethora of these agencies. It is really hurting us.”
He however said the Ministry of Aviation and Aerospace Development has established a committee to look at the multitude of charges to see how they can be streamlined.
