The grounding of Air Nigeria signals a tough regulatory stance, strict adherence to regulations and a shrivelled air transport market, writes Chinedu Eze
The domestic air travel market is currently in a precarious state. The grounding of the domestic and regional operations of Air Nigeria by the Federal Government due to alleged financial insolvency, the stoppage of operations by First Nation Airways and the withdrawal of operating licence of Dana Air after the tragic accident of June 3 indicate that the nation may lose a large chunk of the less than one per cent of Nigerians that travel by air.
The announcement of the grounding of Air Nigeria, which was established as a prime airline, shocked travellers and other Nigerians after it was forced to stop operation for one week by the industrial action of its pilots and engineers. When the airline was ready to resume operation, it was also stopped by the Nigeria Civil Aviation Authority (NCAA) for mandatory inspection. Poised to pick up from where it stopped after the hiccups, Air Nigeria was indefinitely grounded.
Effect on Air Transport
What is the implication of these uncertainties to the Nigerian air transport market? How is this going to affect the airline?
The undulating fortunes of the aviation industry have consistently held the sector down that presently it is literally in a dungeon with little glimmer of light. The major problems of the industry are man-made.
The inability of the Federal Government to devise a working plan and road map to develop a very strategic sector that to a large extend would determine the growth of the nation’s economy; the endemic corruption that like a cancer has infected all facets of the industry and the lackadaisical attitude of the agencies which largely play to the gallery instead of taking stringent measures to move the industry forward, are the conspiracies that have held the industry in consistent retrogression.
Air Nigeria few months ago had about 25 per cent of the domestic market, 65 per cent of the regional market and was looking up to compete healthily in the international routes with the kick-off of the Lagos, London route.
It was at this point that the gloomy days were being waved goodbye that the airline’s problems started anew. The strike came. the Federal Inland Revenue Service (FIRS) arrested the Chief Executive Officer, Kinfe Kayssaye a fortnight ago with all arguments about N4.86 billion tax debts. Then NCAA stopped its operations which casts a shroud of uncertainty on the airline.
‘Sins’ of Air Nigeria
It was the airline that first issued a press statement announcing that its operation was grounded by the regulatory body on alleged financial distress. THISDAY then spoke to NCAA, arguing that if it was on financial distress that the airline was grounded, why is it that other airline that are also ridden with debts are allowed to operate?
NCAA spokesman, Sam Adurogboye, explained that the suspension was occasioned by the fact that there was “internal issues that must be resolved.” These issues, he said, if not urgently attended to would jeopardise safety and so the airline would not be allowed to operate until it resolved the problems.
Of course the issues in question is the welfare of the pilots and engineers, inadequate provision of funds for day to day running of the airline; piling debts that seemed not to be attended to and low morale among the strategic workers who have been complaining to the regulatory body about the turn of events in the company.
The Director General of NCAA, Dr Harold Demuren, who seemed reluctant to discuss the issue concerning Air Nigeria, succinctly told THISDAY, “Is Air Nigeria flying? They are not flying. NCAA has requirements; if they want to fly they should meet those requirements.”
In the letter NCAA wrote to Air Nigeria on June 22, 2012, announcing the airline’s suspension, it traced the meeting the airline had with the regulatory body on June 19, 2012, report on the follow up surveillance activity on the airline, Air Nigeria financial health audit report carried out on May, 2012, the letter the CEO of Air Nigeria wrote to complaints of passengers on the airline delays and on non-payment of staff salary.
Then, there was the report of the experience from the air worthiness officials from NCAA who travelled to Cairo, Egypt for the delivery/demonstration flight on the A330 wet leased aircraft and the moves by GCAS and Shannon Engine support (both lessors) to repossess their four aircraft and four engines respectively.
The letter said that from the above incidents, it was “expedient that immediate action be taken in the interest of safety.”
It also said, “These issues are well known to you as they have been subjects of recent meetings, technical and financial audits, and correspondences.”
NCAA said that it received a text message from an official of the airline which said, “We owe virtually all our outstation hotel bills, fuel money, handling charges, facility bill etc. We did not pay smoothly for fuel at the hub here in Lagos. We never depart on time again due to finance of different sort. They find it hard to pay night stop allowances.
All our service providers are withdrawing their services because we are not paying. No tools to work with like ordinary printer/photocopier. No enough papers to work with, systems are breaking down. We sent aircraft for checks, they can’t come back due to lack of funds. Others can’t go due to lack of funds. FIRS was said to pick our MD/CEO due to tax unremitted. No salary of last month even on 19th of another month. Please help if you can.”
The letter from NCAA said that the surveillance report on the airline on June 22, 2012 showed that out of the 11 registered aircraft in Nigeria, only two were operational and these two were, 5N VNF and 5N VNM while others were aircraft on ground (AOG) in Lagos and in maintenance, repair and overhaul (MRO) facilities in Europe and the US.
The NCAA letter also said that according to the financial health audit report of the airline in May 22, 2012 by the regulatory body, “Air Nigeria’s indebtedness to various service providers is to the tune of N2, 264, 276. 12 and $ 266,116.49 as at May 2012.”
The letter quoted the report that stated that Air Nigeria did not have debt repayment plan, adding, “The observation of the report is that, by this trend, Air Nigeria does not have enough funds to meet its current obligations.”
The letter from NCAA also explained to Air Nigeria management that two of the Authority’s inspectors were made by the airline to travel to Egypt on June 10 for delivery/demonstration flight of the second A330 aircraft wet leased from Egypt Air by Air Nigeria.
“The inspectors returned on 14th June, 2012, without accomplishing the mission, as Egypt Air asked them to leave because Air Nigeria could not honour its part of the lease agreement regarding necessary/ agreed payments.”
NCAA also said that it had an emergency meeting with Air Nigeria on June 11, 2012, to discuss moves by GCAS and Shannon Engine Support (both lessors to Air Nigeria) to repossess their four B737-300 aircraft and four CFM56-3C1 engines respectively.
“The four aircraft are 5N VNC, 5N VND, 5N VNE and 5N VNJ and the four engines are fitted to 5N VNC and 5N VND. And the repossession moves were necessitated by lease payment defaults on the part of Air Nigeria.”
The letter said, “The above scenario in addition to your current cash and carry mode of fuelling your aircraft were considered by the Authority as indicative of a situation of dire financial distress, and which endanger safe operation.
“Consequently, the Authority acted promptly to suspend Air Nigeria flight operations vide its letter ref: NCAA/DAWS. 00212/VOL.1/164 of 21/06/2012. However, a subsequent letter ref: NCAA/ DAWS. 00212/VOL. 1/ 165 of 21/06/2012 was issued to NAMA (Nigeria Airspace Management Agency) attention ATC (Air Traffic Control) to permit your international operations by the wet leased A330 aircraft, which operational control (maintenance inclusive) lies with lies with Egypt Air.
“All the above are for your attention and required closure in order to facilitate the lifting of the suspension of Air Nigeria normal flight operations.”
The letter was signed by O. E Tasiobi, engineer in charge of Air Nigeria operations in NCAA on behalf of the Director, Air Worthiness Standards.
Air Nigeria reacted to the suspension, and said in a statement that it affirmed that ever since the inception of its flight operations, it operated in strict compliance with safety regulations and has at no time compromised on standards as it has consistently submitted to internationally recognised audit exercises.
“Air Nigeria is the first Nigerian airline and the only carrier in West Africa to pass three consecutive IATA Operational Safety Audit programme (IOSA) in the last five years.
“The IOSA audit programme employs internationally recognised quality audit principles and the consecutive successes recorded by Air Nigeria in the last five years have clearly showed a demonstration of commitment to safety standards by engaging internationally accepted evaluation system designed to assess the operational management and control systems of airline are at par with other global airlines.”
The airline said it presently runs a Safety Management System (SMS) under the guidance of the International Air Transport Association (IATA), “and it is the only Nigerian airline and one of the few airlines in Africa currently implementing this system.
Under this SMS scheme, pilots and engineers perform their day-to-day professionally responsibilities in line with prescribed standards without management interference.”
The takeover of Air Nigeria (formerly Virgin Nigeria Airways and later Nigerian Eagle Airlines) by its Chairman, the entrepreneur, Jimoh Ibrahim was the succour the airline needed to survive. It was already moribund when Ibrahim bought the airline. It was heavily in debt; the level of debt that almost asphyxiated it before it was handed over to Captain Dapo Olumide to manage. By the time Jimoh Ibrahim bought the airline, Olumide’s deft management style had breathed oxygen into its lungs, but it did not have enough air to survive for long. It was when it became apparent that if nothing was done the airline would head to the morgue; then United Bank for Africa to which it was heavily indebted decided to sell the airline.
When Jimoh Ibrahim bought the airline in April 2010, it owed UBA over $200 million and GTBank $8 million. GTBank took the matter to court, but it was later settled out of the court, following which Air Nigeria paid $6 million to the bank. The airline also owed suppliers huge sums of money. It had only two aircraft which forced it to prune its routes.
Trouble started for the airline when it pulled out of the international wing of the Murtala Muhammed International Airport, Lagos where it was using as operational hub, in 2007. That movement messed up the airline’s market. The then Virgin Nigeria Airways was elitist and was a preferred airline to the crème de la crème of the Nigerian society.
When it moved from the international terminal it failed to coordinate its regional operation because the domestic terminal was some kilometres away and initially it used to bus its passengers from the new domestic terminal, MMA2 to the international terminal. However, the traffic jam and poor logistics made it cumbersome.
THISDAY learnt that it was that movement that made Richard Branson of Virgin Atlantic Airways to pull out from the then Virgin Nigeria Airways. According to inside source, when the Federal Government raised eye brow about operating both domestic and international air services from the same terminal and felt that it was a threat to security, Branson was said to have promised to provide the needed security at the terminal. He was still talking with government when Virgin Nigeria was forced out of the terminal.
Also THISDAY learnt that he was to invest about $600 million into the airline before the pull out and that he personally lost $35 million to the pull out. The source explained that when Branson brought the idea of Virgin Nigeria Airways to the management of Virgin Atlantic Airways which is co-owned by Singapore Airlines, it was resisted, so he had to commit his personnel funds to the project.
But critics believe that although the parent company, Virgin Atlantic Airways gave Virgin Nigeria the best technical procedures among Nigerian airline, it was never prepared to operate international services. It was made to mop up passengers in the West and Central Africa destination and bring them to Lagos to feed Virgin Atlantic Airways’ London operations.
This explained why Air Nigeria today is still the dominating airline in the sub region and even at the trying times, it still had over 60 per cent control of the regional routes.
So, when the intervention fund came, out of the N87 billion that was made available, the Air Nigeria Chairman was able to secure N35.55 billion, which was used by UBA to service the airline’s debts.