Nigerian Airlines and unending challenges
The Nigerian aviation industry is challenging for the country’s airlines. While the investors in the sub-sector are struggling to remain in the air, the sector challenges are weighing them down.
The operating environment in the Nigerian aviation industry is toxic and skewed against the country’s airline operators. Many of the nation’s airlines are faced with myriads of challenges and their woes remain high and seemingly unsurmountable.
The operational costs are climbing, airport owners are increasing their charges and levies, Jet A1 prices remain high despite the commencement of operations of Dangote Refinery, foreign exchange’s crisis is still unresolved and their aircraft fleet is declining gradually to about 45 among 12 airlines at present.
Apart from the Murtala Muhammed Airport (MMA), Lagos, Nnamdi Azikiwe International Airport (NAIA), Abuja and Mal. Aminu Kano International Airport (MAKIA), Kano that are sunrise to sunset airports, other 23 airports under the management of the Federal Airports Authority of Nigeria (FAAN) and state-owned are sunset airports.
The inability of most of the airports to operate 24 hours, keep the aircraft on ground for more than 12 hours, thereby reducing their operational capacities. There are fears that if these challenges are not resolved, the present crises may consume some of the scheduled operators and some aviation workers may return to the streets in search of jobs.
For instance, Asaba Airport Company (AAC), the concessionaire responsible for managing Asaba International Airport (AIA), Delta State, had earlier in the month increased charges for airlines seeking extension of open hours by 133 per cent to N350,000 from N150,000 per hour.
Also, while FAAN charges N2,000 as Passenger Service Charge (PSC), AAC charges N8,000 for the same purpose.
The airlines also pay N150,000 per hour for extension to FAAN and the Nigerian Airspace Management Agency (NAMA) for sunset airports.
Also, the airlines remit 5 per cent as Ticket Sales Charge (TSC) to the Nigeria Civil Aviation Authority (NCAA) from airfares paid by passengers, pay en route charges to NAMA, while FAAN also collects parking and landing charges from the same carriers.
Industry experts said that with the escalating operational costs and charges, any airline selling air tickets at less than N200,000 one-way was doing so at a loss and may go higher.
Mr. Hazmat Bukar, United Nigeria, General Managers, Operations, United Nigeria, confirmed the recent rise in cost of operations on the airlines.
Bukar in an interview with Daily Independent, lamented that the airlines were bleeding and struggling to remain in the air.
Bukar, dismissed the notion, which limited the problem of the operators to only inadequate capacity, maintaining that with increased aircraft fleet and the failure of the government to address the current challenges, the problems would continue to climb.
For instance, he explained that the price of Jet A1 has continued to increase in the domestic market despite the launch of Dangote Refinery.
According to him, Jet A1 costs N1,200 per litre in Lagos from MRS Oil and Gas, while the product is sold at N1,500 per litre at Sokoto and Maiduguri airports. The product is sold at N1,550 per litre at Bayelsa International Airport.
Apart from this, he confirmed that airlines pay N8,000 as PSC at Murtala Muhammed Airport Two (MMA2) and Asaba International Airport, while they also pay N2,000 as PSC at FAAN-owned airports.
He also told our correspondent that handling rates for airlines by the ground handling companies had increased by 700 per cent in recent months.
Bukar, also mentioned foreign exchange instability as another challenge facing the airlines, stressing that the airlines could not plan with the current situation.
He said: “The problem of domestic scheduled airlines is more than that capacity deficiency as claimed by some people. You can have one million aircraft, but will that change the operation costs?
“The cheapest fuel out of Lagos is from MRS and it goes for N1,200 per litre in Lagos. Outside Lagos, the price varies and oscillates from N1,350 and N1,500 in places like Maiduguri and Sokoto; Bayelsa is N1,550. Even if you check that price of N1,200 per litre and you take 6,000 litres, that is about N7.2 million million. So, you will need 66 passengers for a 130-seater aircraft for you to just fly for an hour.
“That is apart from landing and parking fees, en route charges, 5 per cent TSC, PSC; FAAN charges N2,000 per passenger and MMA2 and Bayelsa charge N8,000 for the same PSC.
“All scheduled operators are bleeding. The airlines are still there because the debts are already on their neck. For instance, the aircraft are taken on debts, including the brand-new ones that are on dry lease. So, the debts are already there and you cannot just discontinue operations.
“All these things are incorporated in the tickets. So, if these things don’t reduce, how will the airlines survive? The operational costs have to be reduced before you get cheap fares. If you like, get one million aircraft and the operations remain the same, the fares will not reduce.”
Bukar also added that an average airfare on any domestic route would not be cheaper than N200,000 one-way ticket.
Besides, Mr. Simon Tumba, aviation analyst, in a recent interview with our correspondent, attributed the major challenges confronting the airlines to the forex crisis and the continuous rise on importation levy by the Central Bank of Nigeria (CBN).
According to Tumba, the current sordid situation had made fleet retainer by airlines impossible, while depletion had continued non-stop.
Tumba also lamented that the forex scarcity and the unstable economy had virtually collapsed every business organisation in the country, while the government seemed helpless in addressing the challenges.
He said: “The forex issue has affected the airlines not only in fleet expansion, but fleet retainer. Most of the airlines can no longer retain their fleets. This is difficult and I am not sure if anyone can maintain his or her current fleets, not to talk of fleet expansion.
“It is a macro issue and not just a sectorial challenge. Every sector of the country is affected and the only people probably smiling to the banks are the banks themselves. Whether you are talking about the petroleum and gas sector, manufacturing, agriculture and others, everyone is bleeding. Unfortunately, for agriculture, the security challenge has further compounded it. The government is helpless, the airlines are helpless.
“Government cannot do much for the aviation sector, even the public sector players are crying because the value of naira is decreasing every day. You can look at the value of the dollar yesterday and see the value again today. It changes daily.”
Capt. Ado Sanusi, the Chief Executive Officer (CEO) of Aero Contractors, said that the Nigerian aviation industry capacity had been on the decline in recent months due to various challenges.
Sanusi, observed that some of the aircraft taken out for maintenance checks out of the country in the past two to five months were yet to return because of the naira exchange rate to a dollar. As of today, a dollar is about N1,560 in the market.
He regretted that the exchange rate had increased probably by 30 per cent in recement months, while the costs of spare parts had also increased by about 20 per cent within the same period.
To address the challenges, Sanusi proposed domestication of leasing companies, stable currency and economy.
He said: “We are facing the greatest economic challenge in my lifetime. The naira is still falling. Inflation is still high and food security is still there and the disposable income is dwindling. It is going really low. The airlines are looking for business and leisure travels. Companies need to be prosperous to travel for meetings, but that is being reduced because of the economic activities in the country.
“One of the things we should be looking at as an industry is how we can domesticate leasing companies. What are the hindrances stopping leasing companies from coming in? How can we give them the leeway to flourish? Whatever it is, we must identify it. We must get the leasing companies to come in.
“Why are the Nigerian airlines finding it difficult to do dry lease of aircraft, instead of wet-lease? Wet-lease is supposed to be a stopgap and we can’t develop the aviation industry and human capital and the economy with that. We are just a dumping ground. We are just getting some small commissions and giving the rest to the companies that we leased the aircraft from.”
