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Fixing The Rot In Aviation Sector

Posted: Sep 19, 2016 at 1:48 pm   /   by   /   comments (0)

These indeed are troubled times for the aviation industry in the country.

The industry is recently being bedevilled by series of challenges ranging from the inability of players to access forex; non-availability of aviation fuel, suspension of operations by some airlines, kick against government appointments in the sector as well as kicking against the planned concession of some airports by the government.

Some operators in the sector have also expressed divergent views on whether the government should provide bailout fund for domestic airline operators to assist them in weathering the storming cloud of recession that the country has presently found itself.

For instance, the National President of the National Association of Nigeria Travel Agencies (NANTA), Mr. Bernard Bankole, recently advocated for a well structured bailout for local airlines in the country, whose fortunes are currently on the downward trend.

He also said that tourism cannot grow without near perfect aviation industry.

Bernard, who said this at a breakfast meeting with select journalists in Lagos, added that the current state of Nigerian carriers is baffling and that something must be done to stop the trend.
He stated that NANTA would not keep quiet but would draw the attention of the Federal Government to the things happening in the aviation industry.

The NANTA boss added that its members would continue to talk about the dwindling fortunes of the Nigerian airlines because, according to him, whatever happens to airlines in particular and aviation in general affects the business of travel agencies.

He said that tourism is one area that can generate revenue for the government and that Kenya for example rakes in double digits revenue from tourism but lamented that Nigeria has not been able to maximise the potential of tourism to even rake in single digit revenue.

To further express the downward trend in the aviation industry, Bernard informed that the only runway at the Abuja Airport is in a bad state, adding that the last time South Africa Airways aircraft used the runway, its airplane was damaged.

He added that the airline had to move passengers into a hotel in Abuja.

“We cannot continue like this. We in NANTA cannot keep quiet. We would draw government attention to the things happening in the aviation sector. There is no way tourism can grow without having a near prefect aviation industry. Things are getting worse and it calls for urgent attention. Other countries are developing their aviation industry, why is Nigeria’s case different. Are we going to continue this way,” he asked.

He said that the state of domestic airlines should be looked into; saying that anytime airlines are having problem it affects NANTA members.

On the bailout given to some airlines years back by the Federal Government that was never used for the purpose for which they were taken, Bernard stated that government should have told Nigerians who took what  and where the bailout was invested.

He stated that in the banking sector, the bailout that was given to banks was properly monitored by the regulatory body; the Central Bank of Nigeria (CBN), wondering why that of aviation industry should be different.

He said that the unchallenged approach and improper monitoring by the government gave airlines the boldness not to do the right thing.
The NANTA boss said that the Federal Government should put in place a properly structured bailout for domestic airlines in the country, adding that if that is done, Nigeria would start seeing development.

Meanwhile, another group, the Aviation Round Table (ART), also called on the Federal Government to resist any pressure to offer bailout to ailing domestic airlines.

President of the group, Mr. Gbenga Olowo, who made the call recently in Lagos, admitted that though some of Nigeria’s airlines were currently facing challenging times, but urged the government to pay serious attention to the aviation sector.

He said government should get serious with the aviation sector of the economy, noting that without airlines, there are no airports.

“Airports are useless if you don’t have airlines; so, government should pay serious attention to the issue of airlines.

“It is not a bailout issue. No airline should ask for bailout and there should be no bailout for any airline in any form.

“Anyway, government does not have such money to dole out to any airline for now.”

According to him, the government should rather look into the issues of multiple taxation and scarcity of aviation fuel which are stifling the airlines.

Olowo said that those were the areas government should look into, adding that “why should there be Value Added Tax (VAT) on air transportation when there is no VAT on road, rail or sea transportation?

“The government should be aware that it is killing the airlines because after paying these taxes, the monies left with them cannot cover cost.

“We are an oil-producing nation but there is no aviation fuel for our airlines. These airlines are using all the funds they have now to buy fuel which should have been bought on credit.”

Olowo, however, commended the government for removing import duty on aircraft spares, saying that it was a demonstration that it was committed to sustaining the aviation sector.

Similarly, workers in the aviation sector have urged the Federal Government to intervene in the crisis facing the sector.

Rising from a general meeting in Ilorin, Kwara State, the workers under the aegis of National Union of Air Transport Employees (NUATE) said that though the hard times were not peculiar to aviation sector, but the government must be proactive in repositioning the sector as a potential mainstay of the economy.

To get the aviation sector back into vibrancy, the Minister of State for Aviation, Senator Hadi Sirika, said goernment would have to concession four major airports to the private sector for efficiency.

According to the Minister, the Murtala Muhammed Airport, Lagos; Nnamdi Azikiwe Airport, Abuja; Mallam Aminu Kano Airport, Kano and the Port Harcourt Airport have all become eyesores and due to the current lack of finance government can no longer invest meaningfully into these airports, thus the need to concede these airports.

According to Dr. Anne Graham, University of Westminster, London in her research, Fundamentals for Airport Privatization and Concession Policies; concessions are private company/consortium which have concession to operate all or some assets for fixed period (usually 20-30 years) in which at end of concession in theory airport is handed back to government but an annual fee is usually paid to government and there may be a guaranteed level of investment or service quality.

This is favoured by many governments as they keep ownership of the airport.

When government concedes its airports to private investors, it  means government will relinquish management to the investors who automatically become responsible for developing the airport and making sure it measures up to global standards, in the area of operational efficacy and profitability of the airports .

One fear, however, that has militated against the idea of concession in Nigeria is the secrecy behind them and the fact both concessioner and concessionaire, government and private investors, do not come to a mutually beneficial agreement like the case of the Murtala Muhammed International Airport when it gave control of the airport’s Terminal 2 to Bi-Courtney Aviation Services Limited (BASL).

So government should look at doing business with established airport operators, like Ferrovial which the United Kingdom concessioned Heathrow to in 2006, Fraport and others who have done some clean concessions without the controversies.

Sirika was quite decisive when he said that the concession must happen given the fact that government does not have the funds to invest in these airports and make them better.

He declared that it was already a foregone conclusion and that government was bent on concession the airports, he however explained that the misconception that government was selling the airports or privatising them was wrong.

According to him, the airports have dilapidated so bad that it would take a major investor to come in and turn it around stating again that the facilities were so poor and that government do not have funds to invest in them thus the plan to concession where the airports will be given out for a period with investment being put in it while government will earn from it until the period the concession elapses and then it is returned.

“We no longer have money to put in public property but we will not sell or privatize as social democrats all we can do is to concession them so as to grow them. And that we will.”

Given the present run of things, these airports have been one embarrassment or the other, and it is one of the major factors that have given rise to need to concession these airports.

From the countless power outages at the MMIA leading to many embarrassments to the country, to the inconducive environment at the MAKIA, all these airports at various times have been a source of mortification and all of this is as a result of lack of funds to invest In these facilities.

The cables at the MMIA are so old and are always burning and sending the airport into darkness for hours and sometimes days, if the funds were there, a brand new terminal would have been the best bet but as government has said, there are no funds to invest.

Airports are supposed to be the major gateways to any country and if built and maintained properly, they will be the cynosure of all eyes especially when they are able to provide comfort, seamless facilitation and adequate services delivery to the passenger who uses these facilities but our airports have lacked investments so long they are an appalling sight.

Operations at Nigerian airports have worsened so badly that users wait in suffocating check-in areas with dysfunctional air conditioners. This is a situation that is not acceptable, as it does disenchant foreign investors which the country is begging seriously for especially at this time of economic recession.

Taking all these into account, Sirika said the concession of the four major airports first, which will be followed by the concession of another six cargo-designated airports, will attract the private sector who are willing to invest in airport development, stating that there was no point in holding on tight to the facilities when government does not have the resources to develop the infrastructure

“You see government has no plans whatsoever to sell national assets but it was sheer misconception to see the unions on the street demonstrating what they thought was sales of the airport. The airports will be concessioned, the big four and then later six of the cargo designated airports and this will help us not just grow and expand the sector but put us in the right path to again be established as a hub.”

On what this planned concession will achieve, the Minister was optimistic that the yield will be far better than what the country currently enjoys especially as Nigerians and visitors to the country are hardly enjoying any benefit as it stands.

Citing examples with the airports in Dubai, the United Arab Emirates (UAE) and Doha, the Qatar airport, he said those airports were aesthetically built not as an airport but as attractions, operating at maximum capacity and always improving.

He said apart from the magnificent structure, they had Spars, shopping malls and other super markets but lamented that in Nigeria airport terminals, what passengers see are cigarette and liquor shops, adding that the present government will not allow the terminals to remain like that.

The minister added that reports had shown that 40 per cent of passengers prefer to pass through airport terminals with excellent facilities, adding that duty-free in Dubai is about $1.2 billion, a situation not obtainable in Nigeria.

“You see airports like Dubai, Doha people go there just to see the airport or shop, the magnificence of that airport is attractive on its own. People go there to use their amazing duty frees where you get spars, malls and the like but what do we have in our duty-free? Cigarettes and alcohol with concession we can change that and make our airports the cynosure of all eyes”, he said

“And concession will not only achieve aesthetics, right now our airports are in so sorry a state that they cannot handle aircraft like the Airbus A380 or the Boeing 787 dreamliner but if we get this right which we will, today we are doing 15million annually, in the next five years we will be doing 70 to 100million annually and you will see the impact once we do things right.”

He argued that a well planned and executed concession will grow the industry in leaps and bounds”, he added.

According to the Minister who said he was sad to see the unions on the street marching against the concession, he said the workers were ill-informed and that government was not privatizing the airports but concessioning them to make them better and operate better.

The issue of concession has not sat well in the aviation sub sector especially with the concession of the Murtala Muhammed Airport two (MMA2) which was shrouded with all sorts of secrecy like the official secret act, a concession that is now generating all forms of controversy and is making both industry players and keen watchers shudder at the thought of any concession. A concession viewed as a failure because of the need to be revisited to ensure a solid concession plan.

To express its seriousness about the move to concession the airports, the Federal Government recently inaugurated two committees in a move that signifies the commencement of the concession process. The committees are: Project Steering Committee, and a Project Delivery Committee.

Performing the inauguration in his office, the Minister of State for Aviation, Senator Hadi Sirika, stated that the Project Steering Committee, which he chairs, is to provide the general direction, and steer the course of Public Private Partnership project concessions in the aviation sector.

He explained that the driving force behind the resolve of the Federal Government to concession the airports was the over-riding national interest in ensuring the establishment and sustenance of world class standards in both infrastructural development and service delivery.

Sirika stated that some of the reservations being expressed by people about the exercise were born out of “misconception that concession is synonymous with privatization.”

According to a statement from the ministry, he explained that the airports remained the properties of the Federal Government and that more jobs will be generated at the end of the day.

The minister gave the terms of reference for the committee as approval of technical, financial and legal framework for the successful preparation and execution of the concession; provision of policy guidelines and general direction on all matters relating to concession of projects and programmes in the aviation sector.

Others are to consider and facilitate necessary permits, clearances and approve action plans, budgets and financial requests submitted by the Project Delivery Committee.