in Air Transport / Features

The battle for survival

Posted 19 June 2018 · Add Comment

More than 50 local airlines have emerged and collapsed since Nigeria’s independence in 1960 and, as Chukwu Emeke reports, the cycle looks set to continue.

There are eight scheduled passenger airlines currently operating domestic flights in Nigeria –Arik Air, Air Peace, Overland Airways, Aero, Azman Air, Medview Airlines, Dana Air and First Nation Airways.
Now 15 years old, Overland Airways has been the most consistent airline in terms of passenger operations. It runs a fleet of nine aircraft, featuring three ATR72s, three ATR42s and three Beechcraft1900Ds.
Azman Air operates two B737-300s and two B757-500s, while First Nation Airways has two A319s and Dana Air four MD-83s.
Arik Air operates only domestic and regional flights. Its 10 aircraft include B737-800s, B737-700s, a CRJ and Q400s.
Aero’s fleet recently dropped from three to two Dash 800 aircraft, following the grounding of its only Boeing 737-500 Classic aircraft.
Air Peace, the fastest growing airline in Nigeria, has received its 13th aircraft after three years of operations and has placed orders for additional B777 and six Embraers. It currently operates both regional and domestic flights and has been designated for international operations.
Medview, meanwhile, operates four Boeings on both domestic, regional and international routes, including B767-300 and B777-200.
Although the Nigerian Civil Aviation Authority (NCAA) says it still has applications for air operator’s certification (AOC) under consideration, it is on record that more than 50 local airlines have emerged and collapsed since Nigeria’s independence in 1960 due to issues ranging from poor business plan, political interference, lack of good corporate governance and harsh operating environments, among others.
For instance, two of the airlines – Arik Air and Aero – have been taken over by the Asset Management Corporation of Nigeria (AMCON) within the last few months due to some of these issues.
AMCON had, in 2016, taken over the running of Aero Contractors, Nigeria’s oldest aviation company, which commenced business in 1959. It appointed new managers to run the operation and cited the need to protect the brand heritage of the airline and public interest as reasons for the takeover.
This was after AMCON had, in 2010, invested N15 billion ($41.5 million) in Aero and later injected another N5 billion. The government agency currently owns 60% of the company with the remaining 40% held by the Ibru family
Arik Air had, equally, been taken over by AMCON following a very high level of debt to government agencies and several other customers.
Medview recently suspended an international operation due to alleged debt to its ground-handling partner in London.
According to Captain Nogie Megisson, chairman, Airline Operators of Nigeria (AON), the operating environment and government policies constitute a challenge to domestic airlines’ survival in Nigeria.
“Nigerian airlines are subjected to multiple charges, taxes, levies and fees,” he said. “On the average, we pay about 37 different charges that come under the guise of statutory levies and taxes to sustain a staff strength of about 18,000 people from the various government agencies. This compares to most African carriers, who pay a fraction of this cost in their countries to support a staff strength of less than 500.”
He identified other challenges as 28% bank interest rates, payment of Value Added Tax (VAT) by airlines, difficulty in accessing foreign exchange (forex) and high prices for JetA1 fuel due to high taxes.
Over the years, local airline operators have complained of overburdening high maintenance costs resulting from the absence of a major MRO centre in the country. Many airlines have abandoned their aircraft at maintenance facilities in Europe due to an inability to pay.
Gbenga Olowo, president of the Aviation Safety Round Table Initiative (ASRTI), recently advocated a regulation-driven recapitalisation of all airlines in Nigeria through mergers, code share arrangements and diverse forms of collaboration as a way of mustering economic strength for survival.
While the air transport market is expanding in Africa, margins remain among the lowest in the world, making it ever more important to focus on reducing costs.
In the case of Nigeria, unless high operating costs are reduced and operating environment and policy issues are addressed, profitability in airline business might remain a mere figment of the imagination.
 

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