Even the nation’s banks, despite not being able to totally finance a capital intensive business like running an airline, have also refused to advance any form of credit facility to airlines because of the level of indebtedness they have to these banks.
It is no news that domestic airlines are cash strapped and gradually closing shop; of recent, the Nigerian domestic carriers have reduced in number with, Afrijet, Bellview and Capital Airline going under while others including Virgin Nigeria, Aero, Dana, IRS and Chanchangi are struggling to stay in business.
The question now arises, what is the problem? ‘Is it bad management? Or is it government’s insensitivity to these airlines? It could probably be the very unstable foundation for the creation of these airlines? How did these airlines come to be this way and what implication will this have on the country?’
Either way, the airlines have now found themselves in a mess that needs cleaning or by the year 20:20, according to experts, there might be no domestic airlines flying the Nigerian airspace thus leading to capital flight after multiple entries must have been approved to foreign airlines.
Then President of the Aviation Round Table (ART), Captain Dele Ore, said airlines were dying due to bad management and had no right to be asking for bailouts because they had mismanaged funds and are wrong in asking government to use tax payers’ money to bailout private businesses.
He also said that other reasons domestic carriers are dying include: Bad Civil Aviation policies made by the government some of which allow double designation and multiple entry points into Nigeria by foreign carriers, exorbitant operating costs and other charges, cost of fuel and spare parts too high, refusal of the domestic carriers to consolidate, merge, cooperate or code-share as well as low capital base.
He also stated that if the domestic carriers refuse to merge, they will all die off one by one.
“If the domestic carriers fail, neglect or refuse to merge into only about four carriers, they will all die off one by one until the most terrible thing that will happen and that is the dreaded private monopoly which is most undesirable.”
“The implication is that the government will be tempted to exploit the provision of the open skies agreement with the USA by allowing cabotage which will definitely have adverse security implication as well as terrible capital flight. “
He also said instead of bailout, government should reverse their policy of not putting money into the aviation industry and pump huge capitals into the industry to revamp it.
He said,” Airlines today are dying, and if they all die what will the Federal Airports Authority of Nigeria (FAAN), Nigerian Airspace Management Agency (NAMA) do to stay alive due to paucity of funds that they already face and what will the Nigeria Civil Aviation Authority (NCAA) regulate.”
President/CEO, Sabre Network Inc. Nigeria, Gabriel Olowo, summarized the situation by blaming the deaths of various thriving airlines in Nigeria on six major factors including organisation, funding, poor infrastructure and the likes.
He said, “What killed Nigeria Airways, killed first generation private airlines like Okada, kabo, Harka, Harko, Oriental, second generation airlines like ADC, EAS, Bellview, Sosoliso and now killing the new generation ones like Aero, Arik, Virgin can be summarized under six major plagues.”
“Organization/Ownership; Nigerian airlines with owner managers are generally not leaders but at best good managers. Rule of the thumb, tradition and ‘too- know‘ syndrome (where one man calls the shots all the time ) rather than a critical analysis of issues dominate decision making and every wrong decision in aviation business over the shortest term talk less of long term do have severe consequences.”
“There is also lack and or high cost of funds. Since most businesses are start ups facing challenge of growth, lack and or high cost of funds remain a very big challenge.”
“Poor infrastructure and high cost of services are also reasons for the demise of most carriers. Above undoubtedly will increase cost of production and reduce if not totally wipe out profit. Nigeria airport charges and Fuel remain one of the highest in the world despite very poor services.”
“Market liberalization came far too late in Nigerian Aviation. Liberalization leads to competition with its attending merits and demerits. This is our current experience in Nigeria when the rest of the world have gone global and are either cooperating and or merging.”
“Unstable government and inconsistent policies, the travail of Virgin Nigeria is a case study of inconsistent government policy and one will only hope the new owner will rise to the challenge and put the airline on the right track.”
“Then there is acute shortage of skilled manpower. The industry is loaded with ageing skilled manpower with challenges of complacency. Foreign airlines no longer invest in manpower development unlike in the past. Nigeria Airways that had the largest pool of manpower has gone into extinction.”
He said that the consequence of all this to the national economy is that while demand for air travel continues to grow in the continent particularly in Nigeria, the wealth goes to the countries who own the airlines that provide the services outside Nigeria airlines.
“Capital flight continues, unemployment grows, the nation’s currency weakened and National Income deteriorates.”
Experts opine that most of these airlines were in their present predicament because the airlines were not founded on the platform of a business venture but was done so to boost the ego of certain individuals in the public eye.
According to him, the ideology that most airline CEO’s have is the ideology of ‘I am CEO of this airline’ and not that of a man who wants to keep his business afloat because most of them made enough money to keep themselves going only to squander it.
Due to the financial constraints on these carriers, many experts have continuously called for consolidation to build up the industry and create stronger and more competitive airlines in the industry like it was done in the banking sector in 2006 and the Insurance sub sector in 2007 with mergers and acquisitions.
However, the same cannot be said for the aviation industry as most airline owners kick furiously against the idea and instead insist on government coming to the aid of their private businesses without government having to own substantial shares in their company.
Olumide Ohunayo, a former President of the National Cabin Crew Association (NACCA) who took the reason from a different twist said that government has not done enough to keep the domestic airlines in business by granting foreign airlines multiple entries into the country and not protecting their own.
“In Nigeria, we give away more frequencies and capacities and collect royalties otherwise known as BASA funds. It is no secret that our economy is heavily dependent on the government which is the biggest spender at all levels.”
“Government policy tilts towards multiple entries for foreign airlines. One of the Middle Eastern airlines that benefited recently from the government largesse and operates to Johannesburg in South Africa had to interline with five South African based airlines. “
“The following is a statement from the airline’s website ‘the interline agreement is offering passengers easy access to other South African destinations following arrival in Johannesburg.’ Would those SA carriers have benefited from that revenue stream if that airline had multiple entries into South Africa?”