Ijeoma Nwogwugwu, Email: ijeomanwogwugwu@thisdayonline.com
The federal government’s decision to restrict the number of British Airways flights from seven to three on the Lagos-London-Lagos route was arbitrary, ill-informed and symptomatic of the ignorance pervasive among officials appointed to manage the ministries, departments and agencies of government. Even worse, it was a throwback to the military era when rash decisions were taken by fiat without due consideration for the implications such decisions could have on the image of the country and its commercial interests.
Contrary to the impression that has been created in the last couple of days, the dispute between Arik Air and British Midland International (BMI), a UKbased airline wholly owned by Lufthansa, over landing slots at the London Heathrow Airport was purely commercial, and not a breach of the Bilateral Air Services Agreement between Nigeria and UK as specified under the Open Skies Agreement. The Open Skies Agreement seeks to liberalise the rules and regulations on civil (or commercial) aviation. It is governed by a set of freedom of the air rights that grant a country’s airline(s) the privilege to enter and land in another country’s airspace.
Furthermore, information made available by Mr. Bismark Rewane, managing director of Financial Derivatives Company, a Lagos-based economic research and financial advisory firm, shows that under the BASA between Nigeria and the UK, each nation’s carriers are allowed 21 frequencies a week. The British carriers that utilise the frequencies are British Airway and Virgin Atlantic Limited (VAL), which like Arik, it must be noted, are privatelyowned airlines, not national/government-owned carriers in the mode of the defunct Nigeria Airways
Limited, Qatar Airways or Emirates.
Of the 21 frequencies, BA uses 14 – seven on the Lagos-London route and seven on the Abuja- London route - while VAL utilises seven on the Lagos-London route. On Nigeria’s part, Arik utilises seven on the Lagos-London route and was allotted another seven on the Abuja-London route, of which five were used up till October 29 when it stopped flying out of Abuja to London Heathrow. The outstanding seven frequencies were allotted to Air Nigeria on the Lagos-London route but have not been in use since the airline wound up its international operations in 2008.
As indicated above, it is clear that Arik is not a victim of a conspiracy by BA to bar the Nigerian airline from landing at London Heathrow, but simply the inability of our own private airlines, strictly for commercial reasons, to fully utilise the 21 frequencies they were allotted under BASA. Long and short, Nigerian airlines are loss-making ventures that have been hamstrung by massive debts owed banks, aircraft manufacturers, aircraft leasing companies, other suppliers, poor funding, as well as the exorbitant cost of fuel. All these factors have limited their capacity to expand on the international routes and their franchise to far-flung destinations worldwide.
Their commercial unviability aside, a pair of landing slots at London Heathrow, which enable airlines to land and take off from one of the world’s busiest airports at predetermined times of the day including having access to the airport terminal for the passengers and crew, are extremely priced possessions. Indeed, a research report by Deloitte & Touche LLP, a leading accounting and tax advisory professional firm, described London Heathrow as the ‘crown jewels’ of landing slots in Europe, and is advocating that they be recognised as assets on airlines’ balance sheet annual results.
Deloitte estimates that in Europe the most valuable landing slots are those at London Heathrow, followed by Charles de Gaulle, Gatwick and Frankfurt. Based on a recent transaction, the implied value of a pair of peak time slots at London Heathrow is currently worth between £25 and £30 million. The value of slots could vary, primarily depending on the time of day they are for.
Whilst EU regulations are in place to ensure landing slots are allocated fairly, they have generally failed to significantly erode the presence of the big carrier airlines such as British Airways, Lufthansa and Air France at key airports. At London Heathrow, for example, during the 2011 summer schedule there were a total of 9,524 slots available. 99 percent of these were held by legacy/flag carrier airlines - those already established at the airport.
The breakdown shows that 42.4 percent of Heathrow slots were held by British Airways, BMI held a further 8.4 percent, and Lufthansa held 5.5 percent. Arik, on the other hand, with 24 slots held 0.3 percent. Deloitte’s research confirms the edge bigger airlines have over smaller airlines, stating that 1 percent of slots are available for allocation to new entrants and many of these are unusable because of their timing or other factors.
Owing to the high demand for London Heathrow slots, they are sold by Airport Coordination Limited (ACL), an independent organisation that is responsible for slot allocation, scheduling facilitation and scheduling data collection. Slot allotments and auctions are therefore not the responsibility of the British Airport Authority, British Airways or the UK Department of Transport.
The rule of thumb is that ACL sells these slots on an auction basis 12-18 months forward in the primary market. Rewane further explained that airlines that fail to buy slots at a cheaper price during auctions are forced to buy slots from other airlines in the secondary market at much more exorbitant prices and can be subjected to the whims of the selling airline in terms of landing and take off time. This, he
said, was the problem Arik was forced to contend with when it failed to secure slots from ACL and had to buy them from BMI, a distressed airline that Lufthansa is trying to dispose off from its balance sheet.
Under the circumstances, should BA have been made to pay the price for our airlines’ inability to fully utilise the 21 frequencies they were allotted under the Bilateral Air Service Agreement Nigeria has with the United Kingdom? Was it BA’s fault that Arik was unable to secure cheaper landing slots at suitable times of the day from ACL like other airlines that plan well ahead of the auctions?
Irrespective, this does not deviate from the fact that Arik as a Nigerian airline should not get the support of its home government. Arik, however, had a responsibility to present the facts of the case to the Ministry of Aviation and sought its intervention in such a manner that it does not frighten away foreign investors and project the country as one run by nincompoops.
BA, it must be restated, is a private airline that operates like any other commercial entity. Like all other airlines that land and take off from London Heathrow, it participates in the auctions held by ACL and buys slots from the primary and secondary markets, where they are available. That it is being made to lose 3,440 seats out of a possible 6,020 seats on a matter over which it has little control is bizarre and foolish.
At a time when the Murtala Muhammed International Airport is losing passengers to the Kotoka International Airport in Accra, Ghana, where premium class airfares are cheaper and the operating environment investor-friendly, the timing for cutting BA’s frequencies into Lagos could not have come at a worse time. Obviously, the Nigerian authorities failed to recognise that BA has a niche market and a customer base that is unwavering in its loyalty. By reducing its frequencies, particularly to and from Nigeria’s commercial nerve centre where there is a higher passenger count, what the federal government has effectively done is pushed more passengers to Accra.
Right now, the Ministry of Aviation has to clean up this mess and promptly. The embarrassment it has caused Nigeria by its rash and unguarded decision has made us the laughing stock of the whole world. What is required at this juncture is a market
driven resolution that is negotiated by the ministry and the UK Department of Transport. More important, the support Arik needs is one that is measured and well thought out, not one that is irrational.
Lest we forget, Nigeria is bound by several international aviation conventions and agreements. It is a signatory to the Convention on International Civil Aviation, better known as the Chicago Convention, the Open Skies Agreement, Yamoussoukro Declaration and the Banjul Accord. These agreements and accords place on us considerable responsibility and require that we resolve disputes with tact and finesse, not like a bunch of uncouth cowboys.