Addressing Challenges to Aviation Survival: Government’s Action Plan

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Transforming Nigerian Aviation: Keyamo's Action Plan to Overcome Industry Challenges
Inside the Nnamdi Azikiwe International Airport terminal

The government plays a critical role in enabling business survival, not just funding. However, the Nigerian aviation industry has long struggled due to unfavorable conditions, with over 100 airlines failing in 50 years.

Minister Festus Keyamo noted past neglect by government, allowing competitors to exploit Nigeria’s market, stifling its carriers.

  • Reasons Nigeria cannot compete globally:

Key factors hindering Nigeria’s global competitiveness include high-interest loans and limited access to vital operational equipment.

Keyamo advocates dry leasing over current Aircraft Crew Maintenance and Insurance (ACMI) practices, citing the success of global peers.

He said recent studies show that 70% of airline fleets around the world are on dry leases and for Nigeria to compete on aircraft acquisition, it should be able to do the same.

However, Nigeria’s non-compliance with the Cape Town Convention has led to its red listing. The Aviation Working Group lamented Nigeria’s courts granting of injunctions to hinder removal of dry leased assets during a default.

According to Keyamo, talks are underway to draft a practice direction, aiming to discourage injunctions hindering aircraft access.

Dry Leasing Aircraft:

Keyamo said, “The group monitoring the Cape Town Convention co-chaired by Airbus and Boeing told us we were on the deny list because we do not comply with dictates of the Cape Town Convention.

“They said ‘until You have amended your laws and practices in court to outlaw the granting of injunctions for the removal of dry leases, we will not bring aircraft into the country.”  Keyamo said.

For a solution however, he said talks are already ongoing with the President and Vice, attorney general, chief justice and they have come up with something.

Keyamo said the government is in the process of drafting a practice direction which will tell judges not to grant injunctions that would deny lessors access to their dry lease aircraft in Nigeria.

This he said would go a long way to help Nigerian airlines get dry lease aircraft the same way their contemporaries get.

  • Addressing High-Interest Rates:

The cost and duration of payback of capital in Nigeria by far trumps a lot of other countries and this has not helped in growing the business.

Currently, countries around the world borrow funds at single digit interest rates between 2-7% sometimes. In the United States it stands at 5.25%-5.50%. In the United Kingdom interest rate is 5.25%, in France it is 2.86% while Germany has a 2.23% interest rate.
Nigeria’s high 25% interest rate poses challenges for businesses, especially airlines, compared to competitors with longer loan terms.

A former DGCA mused, “If my profit margin is 5 per cent, explain to me if l took a loan at 20 per cent, how I can break even and pay them and make profit. These are the micro and macro factors that affect the health of the airlines.”

  • Foreign Exchange Challenges:

Closely tied to this is the country’s fluctuating forex dilemma worsened by the fact that aviation is a dollar intensive business. A significant 80% of aviation costs are in dollars, covering aircraft acquisition, maintenance, fuel, and training. It does not help however that the unstable price of the dollar makes it difficult for these airlines to plan day to day operations.

Foreign Exchange Challenges
Air peace Embraer E195-E2

The survival of Nigerian airlines hinges on economic improvement and robust government support. Despite visible wins, more focus is needed on aviation financing to sustainably bolster the sector. Keyamo must navigate and address these issues to propel the industry forward.

Despite visible progress and promises to support local airlines, more work is needed, especially in aviation financing initiatives.

  • Airport Infrastructure Overhaul:

The impact of airport infrastructure on passenger experience and facilitation remains a critical consideration. Hence an ambitious plan to transform the airports according to authorities.

Few months back Keyamo revealed the absence of master plans for the nation’s international airports, hindering development and organization. He emphasized the urgent need to address the lack of a comprehensive plan for the airports.

Keyamo said the absence of master plans for five international airports leads to chaotic conditions, especially at Murtala Muhammed Airport.

He emphasized the critical need for infrastructure planning, highlighting the absence of a single hub airport and outdated facilities. We plan to convert them into hubs, creating a modern airport ecosystem.”
Keyamo plans international concessions for airport transformations in MAKIA, Enugu, Port-Harcourt, Abuja, and Lagos, aiming for an interconnected hub system.

Bureaucracy:

He further decried the secret bureaucracy that has ensured infrastructure breakdowns at the airports remained so despite complaints from users.

According to him, chillers, conveniences, carousels, elevators need to work actively to improve the total customer experience.

Keyamo said,” There is a sickening bureaucracy I met on ground”. This accounts for the inability to get quick results after infrastructure breakdown at the airport.

“Airport issues undergo a lengthy process before repairs, affecting facilities like toilets, carousels, and air conditioning during breakdowns. Staff raise memos, which then move from Director to Director for signing, eventually reaching the ministry. All this takes weeks; meanwhile, customers are screaming. Furthermore, service providers responsible for repairs are not paid while the bureaucracy persists.

He however said the out of the box solution for infrastructure maintenance with Access Bank is once again under consideration. This will cut out the bureaucracy and get repairs done for a barter of branding.

Keyamo must navigate these challenges to propel the aviation industry forward, focusing on financing, compliance, and infrastructure transformation.

 

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