This article brings together a variety of thoughts on how to stem or reduce capital flight to the barest minimum as investors crave government to support them by protecting them and reduce the numerous taxation in the industry to enable them make enough to plough back and grow their businesses, while some experts talk about government providing policies that can enable indigenous carriers have market through passing Bills into Laws, like the ‘Fly Nigeria Act’ some feel going the way of a national carrier like the present administration is, may provide the basis to use Nigeria’s Bi-lateral Air Services Agreement (BASA) which is largely unreciprocated effectively…
There have been numerous cries in the aviation sub-sector on how much is being lost to capital flight and how it is affecting the country’s economy but the truth has always been that there is capital flight in virtually every sphere of the national economy however, aviation is made worse with the fact that almost every expenditure in the sector is forex transacted.
In one of our most recent analysis, experts bore their minds on how the imbalance of market share lifting between the foreign airlines and Nigeria’s domestic carriers is putting them at opposite divides with the indigenous carriers scrambling for the scraps left behind by the foreign carriers.
Just yesterday however, the Federal Government again signed another Bi-lateral Air Services Agreement (BASA) with the State of Qatar and this has come despite the country’s inability to reciprocate flights to half of the over 70 countries which she signed agreements with.
Stakeholders over the years have continuously called for a review of the BASAs entered into by Nigeria with other countries, which the country has failed to reciprocate arguing that the agreements Nigeria entered were lop-sided and as a result deals were against the country.
They were also quick to point out the effect of granting multiple entry to these airlines, as they claim that these airlines are not giving domestic carriers the opportunity to grow, all this and many more led to some staggering revelation on the figures carted away by some of these airlines.
Records available from the country’s Central Bank shows that all the foreign airlines operate more than 200 weekly flights into the country with Nigerian registered international carriers playing a nominal role. The report also shows that foreign airlines like BA, Emirates, Virgin Atlantic, Air France, Delta Air, Qatar Airways, South African Airways, Egypt Air, Kenya Airways and Turkish Airways repatriated over N200 billion in one year (2011) while the only indigenous airline with appreciable share of the ticket sales was Arik Air.
Airlines like Emirates earned N21,522,232,269.60 on tickets, Virgin Atlantic (N11,832,010,763.40), Air France (N10,859, 450,927.40), KLM, (N10,507,299,275), Delta Air (N7,001,304,508), Qatar Airways (N6,799,302,758), South African Airways (N5,775,448,204), Egypt Air (N4,831,799,154.60), Kenya Airways (N2,807,340,905) and Turkish Airlines (N1,825,406,905.40).
Alitalia (N931,339,519); Iberia (N769,187,923), Saudi Arabian Airlines, which only flies into to Kano from Jeddah, grossed N846,133,401; China Southern Airlines (N769,187,932), Afriqiyah (N302,496,743), Royal Air Maroc, which began operations in 2010 made N266,627,990 in less than a year.
The only Nigerian carrier among the big players; Arik Air recouped a paltry N4,343,492,015 from ticket sales in a market it and other Nigerian carriers, if positioned; can dominate as the market can be bent to favour them if they all do what they need to.
Former Director General of the Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren while talking about capital flight once said that foreign airlines flying into the country and causing a lot of capital flight will soon be at an end given that the country provides airlines strong enough to fly into viable routes.
So far, in the last couple of years, some airlines are coming on stream and are trying to get their share of the market. Airlines like Arik that have been there a while now can reposition and establish itself further while airlines like Medview Airlines have commenced international operations with London, Gatwick and Jeddah respectively with plans for others.
These airlines and Dana Air have also ventured into the West Coast routes, taking their operations into countries like Accra, Banjul, Freetown, Libreville and other West African countries turning them into lucrative and competitive routes but despite this, Nigerian carriers are yet to master what it takes for Nigerians to truly embrace them and fly them no matter the odds.
Experts have often expressed the need for government to review the Bi lateral Air Services Agreement (BASA) with some countries, however, Dr. Demuren is of the opinion that if the indigenous carriers are empowered they will compete adequately with the mega carriers that fly into the country.
He said in an interview,” Foreign airlines in Nigeria are having a field day. I came back to this country in 1979. Then, Nigeria Airways could match British Caledonia. They operated the same aircraft. They trained the same crew. The market share difference was minimal. There was that balance. Now, we have lost all that. “
“Foreign airlines in Nigeria are having a field day. Right now, we are almost carrying the leftover. That’s why we need to support our own airlines and make sure they are strong. We must strengthen our institutions to make sure they can provide the services. Yes, there is competition. I like sustaining competition because with it, you have good services. Today, you can see the plane Arik Air is flying on international operations. Good competition is coming in and we will remove all obstacles to make sure they can compete effectively. That’s the way to get there. “
“Unfortunately, because the foreign airlines have been having a field day, the whole thing has been in their favour. Emirates came in few years ago doing daily flights. Before we knew it, it was two flights daily. You can hardly get a seat. Of course, I am jealous. I like to have a Nigerian airline that can do that. But how can this happen? I must have a strong Nigerian airline that can compete and can sell those seats.”
“We want our airlines to go to Paris, London, and Dubai. How can they do that? The airline must be a member of IATA. If they can sell your ticket for you, you will be able to interline. That is what we are asking our airlines to do. We want them to get good technical partners and be able to partner. That is why we said we would like them to be IOSA compliant. “
“I remember several years ago when they asked if it was compulsory. I said we would like to make it compulsory. They said they would like to make it voluntary. We settled that it was going to be voluntarily compulsory. We are working with them to make sure we improve and get them to compete. “
He went on to canvass for certain things to be done differently by Nigerian Airlines, if they are to stand the test of time, chief among which was changing their corporate image, improving passenger confidence in them especially with regards to flight cancellation and treatment of passengers.
Demuren said, “Firstly, they need to improve their corporate image. Nigerian travellers are very sophisticated. When they know you are going to have a safe operation and that you are regular and punctual; and they have confidence in the system, they will travel with your airline. Nigerian airlines need to get the confidence of the flying public. It is very important. We have lost it over the years but it is coming back. “
He also called on government to support the indigenous carriers to win back the confidence of the flying public and giving the airlines an edge.
His words, “ If we cannot support our own airlines, who will support them. “
“Go to Europe. In England, they support British Airways. In France, they support Air France, in the US, they support American Airlines. In Holland, they support KLM. So you must support your own. In Nigeria, we are already supporting our own by making them strong. They are bringing in good aircraft now. They have Boeing 777s, A340s and A330s. They can do it well. We also need to improve our cabin and in – flights services.”
Chief Executive of Medview Airlines, Alhaji Muneer Bankole just recently at the 21st League of Airports and Aviation Correspondents (LAAC) Annual seminar titled Achieving a Win-Win situation in the Aviation sector called for the empowerment of Nigerian carriers to enable them to have a huge market share and fairly compete with global airlines by reduction on charges, providing friendly policies for airlines and looking into the high interest rates of domestic banks among others.
Bankole highlighted some of the challenges to the local airlines some of which are over charges by government agencies of which some were PSC, TSC, Navigation, Landing, Parking, FIRS, VAT and for this he called for Government agencies’ charges to be reduced by between 50 to 65% to local carriers as these charges were bearing the airline’s down
He also said that spare parts and the cost of maintenance were high and in foreign currency while ticket sales were in local currency making it difficult for airlines to actually break even.
Stating the challenges and proffering solution, Bankole said,” Unfavourable government policies: the local airlines are not favoured by the granting of foreign airlines multiple entry ports into the country. One airline lands at Lagos, Abuja, Enugu and Kano for example. This does not leave any passenger for the airlift of such passengers to the local destinations by local carriers. The policy of multiple entry policy has to be reviewed. Any foreign airline seeking multiple entry ports must partner with a local airline before permission is granted”
“Spare parts are purchased in foreign currencies while tickets are sold in local currency. This makes the cost of aircraft maintenance in Nigeria very high hence it’s a major challenge to local airlines. The cost of importation of spare parts is gradually increasing. The solution to this is simple, there should be 100% waiver on importation of aircraft spare parts for all local airlines.”
Chairman of Arik Air, Sir Arumemi Ikhide while proffering his own solutions to the issue recalled an experience using that to call for an establishment of a fly Nigeria act, that would ensure that domestic airlines have patronage so long as it flies to any route government functionaries or contractors are flying, that individual is obliged to take the indigenous carrier.
“I remember when I was in US, I had a meeting with an international institution and they said they wanted to come visit us in Lagos, I said okay; we will give you a ticket to fly from New York to Lagos. They said no, they prefer to fly in a US carrier. And I said but our aircraft is brand new; they said they know but that they are not allowed to fly a non-US carrier as long as a US carrier goes to that country; except there is no US carrier going there,” stated Arumemi-Ikhide.
Senior Advocate of Nigeria (SAN), Olisa Agbakoba, a few years back initiated a bill which, if passed by the National Assembly, will make it mandatory for public officials travelling on government expense to patronise Nigerian airlines.
The Bill initiated by the former president of the Nigerian Bar Association, NBA, which is titled: ‘Fly Nigeria Act,’ seeks to make it mandatory for public officials and Nigerians travelling outside the country on government expense to fly Nigerian airlines. Another provision of the Act is that Nigerians travelling on international routes not covered by Nigerian airlines must use foreign airlines that have code-share agreements with a Nigerian carrier.
Agbakoba believes that if the necessary framework that would bring about the implementation of the Fly Nigeria Act is put in place by the federal government, it would boost the profitability of Nigerian airlines, stimulate the development of Lagos airport as a hub and cut down the huge sum of money that is repatriated yearly by foreign airlines.
“If this bill is passed, the Nigerian market will benefit but right now, if there is no Fly Nigeria Act; everything goes abroad in capital flight. And the problem is that this country cannot grow if virtually all our industries are dominated by foreigners. For example, MTN makes more money in Nigeria, than all the banks put together. And when they make the money, they send it to South Africa,” Olisa Agbakoba said.
He likened the bill to the “Fly America Act” already in place in the United States of America where the citizens who travel on government expense are made to travel by American airlines, except to destinations where American airlines do not travel to and in such cases they travel with their code share airlines.
He said the implementation of the aviation act compelling public officers and top businessmen and contractors to patronise Nigerian carriers would boost the finances of the domestic airlines, generate employment and help to curb huge capital flight taken out of the country by foreign airlines, which is put at more than N200 billion annually.
The renowned lawyer stressed that the aviation act which is also known as aviation cabotage law would assist government to consider ways and means of streamlining flight frequency and multi designation of international airlines in the country.
Head of Research, Zenith Travel, Olumide Ohunayo, who supported the proposed aviation cabotage law. He urged the National Assembly and other relevant authorities to fast-track its passage.
“The government needs to keep the critical public travel expenditure with our carriers by passing ‘The Fly Nigeria Act.”
The concept of the proposed bill aimed at protecting our Nigerian airlines is not entirely new in the country. Although there was no legislation to back it then like what Agbakoba is now canvassing, there was an unwritten rule in practice during the active days of the defunct Nigeria Airways which had Bilateral Air Services Agreement, BASA, with more than 40 countries. All public officials and Nigerians travelling abroad were expected to use the Nigeria Airways.
Ever since the collapse of the former national carrier, indigenous operators have been playing a second fiddle in the global airline business. That notwithstanding, Nigeria remains one of the strongest and biggest markets for
aviation in Africa and top airlines.
The British Airways, Lufthansa, Emirates,Delta Airline, Virgin Atlantic, KLM and Air France operate the Lagos, Abuja, Kano and Port Harcourt routes.
Also there was call for government to concretize the clamour for the Fly Nigeria Act by setting up of a national carrier to stem the lopsidedness of the existing BASA agreements between Nigeria and other countries which are tilted in favour of the foreign carriers. Some of the countries that Nigeria has BASA agreement include the USA, the United Kingdom, Switzerland, France, the Netherlands, Germany, South Africa, Brazil, Ethiopia,
Dubai, Kenya, Uganda, Egypt, Belgium, Saudi Arabia and the West Coast.
Sadly, most of these routes are unutilised by Nigerian carriers because of lack of capable airlines to service them.
Peter Ogaba, a former staff of Nigeria Airways, explains that the only way for the aviation industry to move forward was for the government to consider setting up another national carrier that would help to give direction to the sector in the areas of manpower development, fleet expansion and a reposition for the industry.
He explained that the current gap in manpower development in the aviation sector could be traceable to the absence of a viable national carrier as the existing private airlines do not have the financial wherewithal to train their personnel.
Chris Aligbe, former spokesman of the defunct Nigeria Airways, now an aviation consultant, wants government to engage the foreign carriers in negotiations in order to improve market share for indigenous operators. He also canvassed for the strengthening of domestic carriers to enable them compete with the mega carriers.
Aligbe stressed that the monopoly enjoyed by foreign airlines was due to the non-existence of a national carrier after the demise of Nigeria Airways.