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How Nigerian Airlines Can Benefit From Operating International Routes

How Nigerian Airlines Can Benefit From Operating International Routes

Nigeria loses a lot by having its airspace dominated by foreign carriers, which operate over 95 per cent of international flights.

Specifically, the country losses huge forex, its training intuitions are under patronised and as a result the country does not have major maintenance facility.

Therefore, if Nigerian airlines were enabled to reciprocate majority of the routes operated by foreign carriers they would obviously grow stronger, employ more Nigerians and support the development of large, strong maintenance organisations through patronage.

What this means is that Nigerian pilots and engineers would not be travelling overseas for simulator and other trainings. Airlines would no more be ferrying their aircraft overseas for maintenance and they will attract huge amount of money in foreign exchange.

Industry experts projected that the country loses about $3.5 billion annually to the aforementioned, which include repatriated funds by international carriers, cost of overseas maintenance and training.

Repatriation of Funds

For Nigeria to reduce the huge amount of forex repatriated from the aviation industry by airlines, which was put at about $1 billion in 2019, it must do everything possible to support Nigerian airlines, modernise the infrastructure at the airports and review its bilateral air service agreement (BASA) with countries, which airlines operate into the country.

Industry experts posited that one of the reasons why Nigeria was yet to have major maintenance facility was because Nigerian carriers have not become very strong, noting that if Nigeria has very strong carriers, one of the critical things they would do to survive would be to have major aircraft maintenance facility locally.

This is because it cost so much to conduct checks overseas, which is one of the reasons why Nigerian carriers suffer undue financial burden.

The Accountable Manager of 7 Star Global Hangar Limited, a start-up MRO facility in Nigeria, Chief Isaac Balami, said recently that the total cost of aircraft maintenance in West Africa was over $1 billion annually.

He said Nigeria had the highest number of aircraft ferried overseas for maintenance and therefore expended about 75 per cent of the said amount.

“When you talk about Nigerian airlines you are talking about West Africa because Nigeria is actually West Africa, whether you like it or not; and across the sub-region, over $1 billion is spent annually on aircraft maintenance and that is a fact. Nigeria contributes about 75 per cent of this expenditure.

“That is a huge capital flight. Those of us that are in the sector and in MRO business we feel frustrated about it.

“This is obviously a serious blow to Nigeria’s economy because I think that if the Aviation Ministry has $1 billion, you can imagine what they will do with it. So the point is that we must stop that leakage. It is not a matter of let’s try; we have to stop it. The private sector has to be involved because government cannot do it alone.

“Yes, there is 100 per cent interrelationship between cost of airline failure and cost of maintenance overseas. Aside aviation fuel, maintenance is the second biggest cost for Nigerian airlines and it is affecting our airlines badly.

“The issue is when you put Boeing 737 on the ground and it is not flying, you will be losing over $100,000 every day. This is because your fixed cost and your variable cost are known.

“You cannot change it because whether you fly or you don’t fly you will still do maintenance; whether it is after 500 hours, 1,000 hours or 18 months, whether it is D-check, whether it is C-check; that you are not flying does not mean that you won’t conduct checks on the aircraft,” he stated.

So if Nigerian carriers are supported to operate international routes, they will reduce the amount of money taken out of the country from the aviation sector, they will also generate dollars, which they will plough back into Nigeria’s economy, which would help to strengthen the value of the naira.

For example, Ethiopia Airlines is the highest foreign exchange earner for Ethiopia. So if government supports Nigerian carriers to successfully operate regional and international routes, they will as well generate enormous foreign exchange for the country.

Manpower

When an airline begins to operate international destinations it boosts ancillary services like ground handling, catering, training school, maintenance and cargo management. All these ancillary services create jobs in addition to the jobs created by the airline. For example, Air Peace has created over 3, 400 jobs. If it adds more international routes to its operation, it would create more jobs. When the airline’s new aircraft order will begin to arrive it will need more pilots, more engineers, more cabin crew personnel and more ground staff.

For example, as at 2017, Ethiopian Airlines had almost 14, 000 personnel and the airline projects that this may rise to 20, 000 in the next few years. In the same vein, if Air Peace adds more international routes, it is likely going to grow its personnel to over 6000 in the next five years. The implication is that more youths will be pulled out of the streets. That would be a big gain for Nigeria.

As the Chairman and Chief Executive Officer of Air Peace, Allen Onyema noted, the easiest way to create jobs, as an entrepreneur is to establish an airline.

Its profitability is very low margin, three per cent when operating in the best climate, but it creates jobs for the citizens and as noted by industry insiders, the reason why governments support airlines is because they create jobs and help government create opportunities for the citizens who in turn pay taxes to government.

Support

At most aviation fora in the continent, experts harp on over taxation of airlines by governments in Africa, which see air transport as luxury enterprise. The Director General of the International Air Transport Association (IATA), Alexandre de Juniac has urged African government to review downwards the taxes leveled on airlines and airports and to concentrate in developing infrastructure for air travel. He noted that Middle East and Africa are the new frontiers of air transport growth in the world, regretting, however, that African nations do not currently have developed airport infrastructure that would cop with the growing passengers.

In many countries of the world, domestic airlines enjoy certain levels of tax holidays, even when the airlines are fully privately owned. This is to encourage them because they serve as catalyst to economic development of any nation.

But in Nigeria sundry charges and levies at airports nationwide, account for at least 65 per cent of airlines’ earnings.  Besides the five per cent charge on every ticket bought by passengers, which goes to the Nigerian Civil Aviation Authority (NCAA) and other agencies, there are other charges on the operators.

These include the second popular five per cent Cargo Sales Charge, Passenger Service Charge of N1000 per ticket on local route, Charter Sales Charge, Aircraft Inspection Fees, Simulator Inspection Fees, Landing Charges, Parking Charges and Terminal Navigational Charge.

Government can help local carriers by wiping off some of these charges and also reviewing some of them as a way to support the local operators.

Air Fares

Nigerians pay exorbitant fares to travel overseas because foreign airlines enjoy a level of monopoly and have always fix airfares that are relatively outrageously high. But it has been noted that foreign carriers crash their fares on routes where local airlines operate.

For example, when Arik Air operated to Heathrow London, it checked the fares charged by BA and Virgin Atlantic Airways. It was the same when Medview Airline operated to Gatwick, London. This is also perceivable when analysing the Dubai fares since Air Peace started operation to Dubai via Sharjah in July last year. Emirates and other airlines that target passengers on the route reviewed their fares. So it is the passenger that gains when domestic carriers operate international destinations.

Government Backing

Industry stakeholder and lead consultant on aviation desk at ETIMFRI International Limited, Amos Akpan, said the government must make it obvious to the countries Nigerian airlines are designated, that it supports the airlines and gives them the full backing they need.

 “It is very important that the aviation authorities of the countries our airlines operate into be aware that our airlines have the backing of our own aviation authorities. They must know our government will reciprocate the treatment they give our airlines.

“When you demonstrate you are strict with regulations and disciplined in compliance, others will respect what you do and what comes out of is dignified.

 “The Ministry of Aviation should work with the Ministry of External Affairs to secure designations for our airlines. Our embassies must have a desk that handles aviation matters. International flight operations is economic and technological diplomacy,” he said.

 Also industry consultant and CEO of Belujane Konsult, Chris Aligbe, said that government should support Nigerian airlines that wish to and have met the requirements to operate international destinations. He said that considering the population of Nigeria and the predilection of the citizens to travel overseas, the country needs about three to four strong airlines for international service.

“These airlines are expected to dominate the African regional market. So even if we have a national carrier, government should extend all the rights and privileges given to the national carrier to these airlines because you cannot give certain privileges to national carrier and deny other airlines such privileges,” he said.

Aligbe, however, suggested that the Nigerian aviation sector should be declared infant industry and in the next 10 years, government would give it support under which the airlines are expected to grow into strong, big carriers. After that 10 years, airlines that do not meet the set target will no more enjoy government’s support, so government should support all Nigerian airlines, especially the ones operating international service.

Funding

Akpan, told press that Nigerian airlines would literally walk with clay feet if they were not getting adequate funding; so one major way of supporting them is for government to facilitate single digit, long-term loans for the airlines with stringent measures attached to the loans.

“Nigerian airlines need financial institutions to lend them money on single digit rates for a minimum of 10-year payback period. This is what will give them muscle to compete internationally.

“The government needs to solve this problem otherwise they will be sending out airlines with weak financial strength. It is easier to do things properly if you have the capacity,” he said.

So the Nigerian aviation industry and the country itself will have a lot to gain when domestic carriers are supported by government to operate international routes. Besides, the creation of jobs, it will deepen the development of the aviation industry in Nigeria.

Culled from ThisDay

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