Nigerian Airlines May Collapse, Operators Cry Out

Written by Duncan Monday, 19 October 2009

Grumbling under the weight of debilitating debt and inability to meet the rising cost of doing business, the Airlines Operators of Nigeria (AON) has resolved to meet with President Umaru Musa Yar'Adua in order to press home their demand for a bailout or other types of assistance.

The industry which might suffer from collapse if a new lease of life fails to come its way, made the resolution after an emergency meeting held at the Murtala Muhammed Airport, Ikeja, Lagos at the weekend.

Apart from the global economic meltdown that has affected airlines across the world, forcing them to adopt new measures for survival, AON said Nigerian airlines incur tremendous charges.

These charges include landing and parking charges, fuel surcharge by the Federal Airports Authority of Nigeria (FAAN) and high cost of aviation fuel.

They also complain that the airlines pay huge amounts of money in foreign exchange for the maintenance of aircraft and purchase of  aircraft spare parts, which can only be imported into the country. All these take place while they earn revenue in the country's unstable currency - the naira.

In the past, operators enjoyed duty waiver on aircraft parts importation, but it had been scrapped in the last two years, hence the reintroduction of fees. Furthermore, they complain about double taxation on aircraft parts (Customs Duties and Value Added Tax) which they said had a huge toll on airlines’ finances.

Only recently, the Nigeria Airspace Management Agency (NAMA ) introduced Terminal and Navigational charges, which is the payment for the use of navigational aids at the airports by the airlines.

All these problems have resulted in a limping sector neck-deep in debt to aviation agencies and fuel marketers. They complained that they might be unable to pay, as many of them now record losses due to low passenger movement since last year. The low passenger situation is attributed to the global economic meltdown.

About two months ago, the debts airlines owe to these agencies amounted to about N8 billion, including passenger service charges, which they collect on behalf of the agencies and Bi-Courtney Aviation Services Limited (BASL).

Secretary-General of AON, Captain Mohammed Joji and Deputy Secretary-General, Mohammed Tukur, who addressed newsmen after the meeting, called on the government to give all domestic operators waiver from paying the Terminal Navigational Charges introduced by the Nigerian Airspace Management Agency (NAMA).

They said if the charges were allowed, it would add to their burden and could lead to the grounding of more airlines. The operators also said they would meet with the Director-General of the regulatory body, Dr. Harold Demuren, to find ways to assist the industry.

AON also excoriated the charges by FAAN, describing them as exorbitant.

Demuren recently told THISDAY that the high charges levelled on airlines was undermining their ability to make profit, a situation, he said was exacerbated by the prevailing world economic meltdown that had kept passengers away from the airports.

He said revenue is down, not because of low fares charged by airlines but because of the low level of the naira in exchange with foreign currencies such as the dollar.

He noted that while the airlines earn their revenue in naira, they carry out maintenance and other services in foreign exchange.

“The major challenge is how to reduce operating cost. How can we do it? We still have import duties on aircraft, even though we have got waiver and tariffs over the years but the thing is back. They pay charges like VAT. If these charges are removed, it would help to cushion their finances," he stated.
Demuren noted that aircraft acquisition and leasing, crew training, maintenance and insurance are all paid for with the dollar and now that the value of naira is down against the dollar, the airlines are bound to lose money.

He stressed that effort should be made to help them operate profitably.

“Because we sell tickets in naira and all the expenditure for the airlines is in dollars they have lost some money. It is the same naira they have that they used to go and change to pay for ACMI — Aircraft, Crew, Maintenance and Insurance. Also because of the meltdown, many companies have cut down on their travelling and those executives that go on business class now go on economy. The yield, the money that the airline takes home everyday, is getting smaller, so we should lower the cost of other charges," Demuren added.

The Director-General expressed bitterness against the fuel marketing companies that sell aviation fuel at arbitrarily high cost to the airlines and insisted that the marketers must lower their prices so that the airlines would not spend all their earnings on fuel.

Also, a director and head of accounts of Chanchangi Airlines, Rufai Chanchangi, has said that if nothing is done, some of the airlines would collapse.

He therefore appealed to the Federal Government for assistance.

“Almost all the domestic airlines are having financial problems. Virgin Nigeria Airways (Nigerian Eagle Airlines) had to stop its international operations because it could not pay its bills. The airlines could not bear the heat which is why the airline stopped its international operations. This is the reason why government must assist airlines; there should be some level of support no matter how small it may be," he stated.

On the controversy surrounding the General Aviation Terminal (GAT) of the Murtala Muhammed International Airport, AON reiterated ITS earlier position, saying that government should not allow any airline to develop any terminal in the country so as not to confer undue monopoly to a single airline.

AON urged the government to urgently resolve the lingering concession crisis between BASL and FAAN in the interest of the airlines and the travelling public.

"We will not tolerate the stifling of our operations," said the group.