Nigeria: Policy Summersaults and Growth of Nigeria's Aviation Industry

23 July 2021

Aviation industry stakeholders attribute stunted growth of the sector to policy summersaults and have called on government to review some policies that are antithetical to the development of the sector and its subsequent impact on the profitability of airlines and other businesses in the country.

Airline operators and other private investors in the Nigerian aviation industry have consistently made the claim that government policies and interventions are often misdirected, especially when operators in the sector are excluded from making input into such policies. The consequence is that Nigerian airlines are not profitable, which explains the short life span of domestic carriers that survive for an average age of 10 years.

They noted that while foreign airlines make huge profits on their Nigerian routes, local carriers struggle in their domestic services despite the potential of the sector to yield more dividends to them because of the growing number of air travellers in the country.

A travel agent and industry analyst gave example with the decision of the federal government to ban direct flights to South Africa in order to stop the Delta variant of the Covid-19 virus from spreading to Nigeria.

He said that that policy stopped Air Peace flights to Johannesburg, which means that the airline lost huge revenue, but it did not stop movement of passengers from Nigeria to South Africa and from South Africa to Nigeria.

"What it did was that Nigerian airlines were denied avenue to make money but passengers took other airlines to South Africa. They can take Rwanda Air, stop at Kigali and from there go to South Africa. They can take Ethiopia Airlines and from Addis Ababa go to Johannesburg. It was less than two weeks after the flight ban; the federal government announced that the Delta variant of the pandemic is here with us. So government stopped a Nigerian airline from generating revenue and made Nigerian travellers pay more money to travel to South Africa but it did not stop the Coronavirus from spreading to Nigeria. So, whichever way, Nigeria and Nigerians lost, "the analyst said.

Regulation and Policy

Industry analyst and the publicity secretary of Aviation Round Table (ART), Olu Ohunayo told THISDAY that government should limit its activities to regulating the industry and making policies that would guide activities in the industry, mindful that private operators aim to make profits, which is the major reason they invested in the sector.

"Government has always been advised to stay on the line of regulation and policymaking and leave other parts of the industry to the private sector. Airlines are struggling. They are not making profits in their business, but how long will they remain unprofitable? They are not profitable not because they don't have the ability to be profitable but because some of the policies are inimical to their growth.

"We have the Airline Operators of Nigeria (AON) that should lead and speak for the airlines, but the association is weak and that is why individual airlines are speaking for themselves in the absence of a strong body. Maybe the airlines can one day declare a one-day national strike to make government listen to them and know their grievances.

"Then, we have the issue of the Nigerian Customs Services (NCS) negating the rule of engagement as contained in the constitution and introduces arbitrary charges to tax the airlines more. Government designates airlines to operate international routes but leaves them in the lurch instead of following them up with support and they become victims of aero politics.

"The Federal Airports Authority of Nigeria (FAAN) charges airlines extra if they wish to operate to some airports after 6:00 pm. For example, the Akanu Ibiam International Airport, Enugu, which has airfield lighting on its runway but any airline that wishes to operate there after 6:00 pm must pay money to FAAN. This is a clear case of disincentive to air travel. Nigerians like to travel. They should be encouraged to travel, "Ohunayo said.

However, travel expert and organiser of Akwaaba African Travel Market, Ambassador Ikechi Uko told THISDAY that he does not completely agree that government policies are the only factor inhibiting the growth of the aviation industry and the profitability of airlines.

He acknowledged that in the past many investors who owned airlines that had today gone under attributed their failure to government policies but he has a different view because as businessmen, before they decide to go into the business they should have studied the operational environment and what it would take to survive in doing business in that environment.

"In the past a lot of the people who operated airlines that have run out of business feel that government policies were not fair to their enterprise, but before they get into the business they ought to know what will make them succeed or what will hinder their success. So, I don't completely agree with that.

"How did Medview Airline succeed when it was operating hajj service and did not succeed when it started scheduled operations? So, I expect a businessman to put into consideration the operating environment. People need to understand the terrain; so I have never believed that government policies are inimical to business growth in the industry but I agree that such policies should encourage business in the sector," he said.

Public private partnership

In his opinion, the Managing Director of Flight Logistics Solutions, Amos Akpan told THISDAY that the public private partnership is not working because existing experience shows discouraging signs. Many of the companies already under PPP in the industry are racked by controversies due to the terms of agreement or policies introduced after the agreements have been signed.

"Developing infrastructure for maintenance facilities in the airport has issues of clear cut agreement between FAAN/MOA (Ministry of Aviation) and the private investor. Is the land available for lease at the airport? What are the lease payment terms? If build, operate and transfer, how much is due to government as annual royalties? And what is the tenure? What will be the ease of bringing in equipment; considering impediments like limited forex, bogus import duty charges, and scarcity of skilled manpower?

"We have to know the gap between existing aircraft technicians/engineers and the technical personnel required in the industry so that NCAT (the Nigerian College of Aviation Technology) can work on filling the gap. What are the finance lease structures on ground to enable access to finance in terms that would mitigate default and create integrity? Our policies should address above issues first before going to set up maintenance hangars because these issues will act like ambush against the success of the maintenance policy, "Akpan said.

Survival of Airlines

He said that the purpose behind the establishment of any airline is to make money,"so after investing in such capital-intensive business; there would be no guarantee of its profitability.I have consistently maintained that nobody sets up airline with the intention to fail or fold up in months or in three to five years. Also, all the investors in those airlines were not daft in strategies. I think the entire management of the aviation sector should accept responsibility for past failures. They should honestly research into reasons for past failures.

"They should outline what must be done to prosper the industry and they must have the courage to implement them. Since we cannot eliminate politics from all we do, let us set up a framework that trims politics into the goals we have set for our industry. Governments have made pronouncements on the issues that hinder profitable operations by the airlines. But there still exist gaps between what the operators experience in field of operations and those government pronouncements.

"For instance, multiple taxes on airlines, inadequate/lopsided provision of services by the government agencies, insertion of customs duties waver in gazettes and customs tariff schedule, special allocation of forex for importation of spares. I have not heard that Nigerian pilots have started undergoing simulation training on the simulator bought and delivered to NCAT one year ago. There are lots of good intentioned policies, which are just sound bites that never translate into enhancing profits and sustainability for the airlines. The economic audit-monitoring unit of civil aviation authority needs to devise more suitable measurement tools for gauging economic performance of the airlines. The regulators have to come to table with the airlines management and work on achieving profitable operations while in compliance with regulations. The image of a big monitor wielding big stick behind the operator must be replaced with partnership for progress, "Akpan said.

Training

He observed that NCAT was set up to meet manpower needs of the industry.

The body he added, was also set up to equip personnel with skills relevant for the industry's operational needs, noting that this was the primary purpose for the set up of NCAT.

"NCAT is not an academic institute that graduates people that would search for jobs and be recruited for training, "he pointed out.

Akpan said there are institutions offering management, production, and business development courses.

"What we need now in the aviation industry are flight operations dispatchers, aircraft technicians, ground operations personnel with certificates on dangerous goods regulations and skills on computerized passenger handling, aircraft engineers, air traffic controllers and air traffic equipment technicians, ramp/apron traffic managers. We need skilled personnel to handle evolving new equipment and techniques coming into use in our industry. This is what we should prompt NCAT to do because they are in short supply. How many operations managers can use the current computerized flight planning tools? Does this have any impact on the current wave of flight delays? Are you aware that many pilots do not have jobs because it costs a lot for the airlines to put a fresh pilot on the flight line to train?

"Fresh engineers pay airlines to allow them work to gain logged duty hours. The government policy should address this gap by sitting with the airlines to mitigate these costs. Getting degree programs from NCAT is good but let us not widen the gap of the manpower needs for the industry's field operators. Airlines, FAAN, AIB (Accident Investigation Bureau), NCAA (the Nigerian Civil Aviation Authority), aviation handling companies, NAMA (the Nigerian Airspace Management Agency), cargo /passenger agencies, maintenance companies need skilled manpower now," he said.

Akpan also added the industry should bridge the gap between the intentions of the aviation policies and what is obtained in the field of operations, adding that what the industry said it wants to achieve "is usually different from what we practice and experience in the field of operations."

Duty Waivers

On his part, Chief Executive Officer of Mainstream Cargo Limited, Seyi Adewale said that airlines used to enjoy duty waivers with only payment of ECOWAS Trade Liberation scheme (ETLS) and Comprehensive Import Supervision Scheme (CISS) on aircraft and its spares.

"But with the enactment of the new financial act as spearheaded by the Federal Ministry of Finance, Budget and Planning, airlines now have an additional charge called Surcharge which they were not paying prior and described it as unintended consequence.

"So, the Nigerian Customs Service (NCS) and the Ministry of Finance need to address this issue because airlines will now pay more to clear their aircraft and spares. The Ministry in my opinion confused the general application for Duty Waivers with that affecting the airlines specifically. This needs to be addressed quickly.

"Another softer issue is the application of FAAN Car Park Permits/ Stickers at the Airport This is discretionary applied especially with access to the Toll Gate Access and Access to the Cargo Area/ Hajj Camp. FAAN changed the management of Toll Gate Fee Collection and there appears to be so much confusion regarding the application of the airport access stickers duly paid by eligible partners There are different types of stickers whereas it ought to be one and FAAN Toll collectors apply their own interpretation on its access stickers especially at the Hajj Camp/ Handling Areas," he said.

Other stakeholders also shared the view that for investors in the industry to survive, government must give consideration to the impact any policy would have in the industry before introducing it.

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