- Experts differ over six aircraft entry rule
Various attempts at force legislating airline businesses in Nigeria have fallen short over the years, according to a founding member of Smile Airline, Dr. Alex Nwuba
The intent to use legislation to achieve an enduring airline business in Nigeria have only ended up as capital base increases which have not improved the airlines’ lot.
Existing data states that Nigeria has an appalling airline failure rate one of the highest in the world with survival range put at 5-10 years. READ ALSO: How legislation can aid forex accessibility, low interest rates for Nigerian airlines
Dr. Nwuba acknowledged this while speaking at a webinar: Repositioning the Aviation Sector in Nigeria for Revenue Generation and Growth: Role of Legislation.
The Second Vice President, Aviation Safety and Round Table Initiative ( ART) who spoke on the State of Nigeria Aviation pointed out flaws in previous attempts to force create sustainable airlines
Attempts to legislate enduring airlines:
Providing five examples he cited the Corporate Affairs Commission (CAC) move to increase the capital required to establish an airline business in Nigeria.
According to him, the effort simply required the payment of additional charges and that did not impact the sustainability of airlines.
Six Aircraft minimum entry:
He pointed out the Nigeria Civil Aviation Authority (NCAA) plans to introduce a six aircraft minimum entry rule to ensure adequate capital for the business.
He said the DG CA calls it an attempt to deal with the lack of capacity but questioned if increasing capital expenditure ensures an enduring airline business or if the cost has superseded the opportunity for success?
Counter:
However, on the six aircraft minimum entry, another speaker, Director of Zenith Travels, Mr. Olumide Ohunayo disagreed with his position.
Ohunayo who spoke on consumer experience at the Webinar said the idea was welcome and a form of recapitalisation that would bring benefits.
He said, ” Instead of monetary recapitalisation, investment on equipment is also a great way to show seriousness.
Drawing a comparison with Nigeria he said,” Mexico has just eight(8) domestic airlines and offer about 1.5million seats every week but Nigeria with 12 domestic airlines do not have 800 seats ”
Proposed Mergers:
Dr. Nwuba further spoke on proposals for mergers as it occurred in the banking industry in 2004 stressing that it was yet another capital move.
Solutions:
Dr. Nwuba stated that in most cases, aviation in Nigeria are private businesses, hence those in charge of policy must be careful on how much legislation to introduce.
He however emphasised some of the prudential guidelines in the financial industry as corporate governance, financial governance, capital requirement and reserves.
He continued,” We cannot force partnerships, mergers and the likes but can throw up issues that can be surmounted by entrepreneurs.
“We may however raise the bar to force appropriate structures which may or may not be beneficial to the airline business.
Nwuba added, “A key item that is often proposed and validly so, is the Governance structure where airlines fail due to family members, friends and cronies making decisions they are not equipped to.
He said one major solution to the problem is about building better airline businesses stressing that if a well run and well capitalised airline enters the fray, it would take out 90% of the current operators today.
