FOR an industry that has been subsisting on generous handouts from the public till, the fresh call for a bailout by domestic airlines is dubious. Claiming that they cannot offset their operational debts, the airlines recently pleaded with the Asset Management Corporation of Nigeria for another round of loans. The airlines have been over-indulged; therefore, they should not be obliged. The role of the Government in the aviation industry should be largely confined to facilitating a competitive aviation market within a proportionate international and domestic regulatory framework to ensure a level playing field and the maintenance of high standards of safety and security.
Already, six of the domestic carriers owe AMCON – the bad debt bank – the sum of N130 billion for the past bailout exercise in 2009. And, now, they are hamstrung again, begging for another round of funds to service their inefficiency. In 2013, the Central Bank of Nigeria ordered AMCON to stop further loans to Aero Contractors Airline because it could not service its $200 million debt.
AMCON should not accede to the request of the airlines, but take the necessary steps to recover what they owe the taxpayer. The debt profile of the airlines is mind-boggling. Apart from owing AMCON, the airlines have not been paying their employees and the regulatory government agencies. Recent media reports stated that some of the entities could not afford to procure aviation fuel to put their planes in the sky.
In an industry that used to witness serial crashes, and where exactitude, technology, safety and regulation are paramount, this is dangerous for the flying public. “For the airlines to be asking AMCON to come and assist them to pay fuel marketers their aviation fuel bills is bad,” says Mohammed Tukur, a former general-secretary of the Airline Operators of Nigeria. “Such airlines will start cutting corners in the areas of aircraft maintenance and other critical safety areas.” The indebtedness got to a head last February when the Federal Airports Authority of Nigeria threatened the operations of the airlines. Some of the N22 billion the airlines and concessionaires owe FAAN dates back to 2012.
To head off another round of tragedy, the aviation authorities need to conduct a thorough assessment of our airlines with the aim of making them operate on global standards. Aviation is a big, but delicate business, and it demands firm regulation. In several climes, like the United States and the United Kingdom, the private sector is in charge. Their national authorities only regulate and provide the security setup. British Airways, originally owned by the government, strengthened its operations by forming a merger of four airlines in 1974. By 1987, it was privatised. Subsequently, it merged with Iberia in 2011, grossing £11.42 billion in revenues in 2013. It is now the third largest airline in the world by revenue, employing 38,592 workers in 2013, with a fleet of 298 aircraft.
It is a similar story for Air France, after its 2004 merger with KLM, the Dutch airline. By 2008, the company had become the largest airline in the world with annual revenues in 2012 hitting €25.63 billion, a staff of 100,744 and a fleet of 582 aircraft. The French government, which held 54.4 per cent shares in Air France before the merger, now has just 18.6 per cent.
Nigerian airlines should look critically at their operations and find ways of merging and consolidating to overcome the financial and technical wherewithal needed to survive. The inefficiency and corruption that attended the death of Nigeria Airways is a pointer to the fact that any airline, whether public or private, could enter into distress. At a time, the country boasted over a dozen private airlines, but most are now defunct.
But now, even in Africa, our airlines are lagging behind. Their business model is not working. Past afflictions like flight delays and outright cancellations, discourteous employees and the inability to replace their ageing fleets point to another round of distress. According to CAPA Fleet, a UK-based outfit that monitors commercial airlines, no Nigerian airline is in the top eight in Africa. The Nigerian airline in the ninth position, Arik, has 26 aircraft, compared to top-ranked Ethiopian Airlines, with 79 planes, EgyptAir (68) and South Africa Airways (64).
The Federal Government is largely to blame for the ills of the industry. It has not resolved the age-long problem of infrastructure, although FAAN manages 22 ill-equipped airports with some state governments adding to the number. To rid the industry of gross underperformance fuelled by poor funding and lack of expertise, the new government should not hesitate to look elsewhere for guidance.
According to the Airports Council International (a global aviation monitor), 22 per cent of Europe’s 404 principal airports had been privatised by 2014. Former British Prime Minister, Margaret Thatcher, took the lead in 1989 by privatising the former British Airports Authority. Privatising our airports in a transparent way is a sensible option for the ailing industry. Not only will it help the facilities to be well run and equipped, government would have freed up some funds and deployed them in other areas.
The aviation sector should be fully privatised and allowed to operate in a competitive international market. The regulatory authorities should set new minimum standards for airlines, both in operation and in capitalisation, something akin to the bank consolidation scheme of 2005 in which banks merged and some other smaller ones were acquired by the bigger outfits.
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