Support for Governments’ Investments in Aviation

Chinedu Eze

Many state governments have built cargo airports and some have established airlines to kick off aviation development in their states, a move that will boost Nigeria’s economy.

Recently, the Group Managing Director (GMD) of Finchglow Holdings, Mr. Bankole Bernard, spoke to aviation journalists and explained why such development is desirable to the industry now.

Bernard explained that state government establishing airlines was desirable because it would make more aircraft available, which means there would be more seats to sell that would meet the demands of air travellers.

He said the reason why air ticket remained high was because of the principle of demand and supply, noting that if there are more aircraft seats available the demand will be met, which will compromise the high fares.

Finchglow Group GMD dismissed insinuations that the establishment of airlines by state governments may not be successful in the long term because government is not good in business. But he said that the state government that have established airlines so far, selected the best professionals to run the businesses and they are managing the airlines very well. 

On the high fares, he advised that government, its agencies and the airlines should meet and review the fares, look at the taxes and see how government could review downwards some of the taxes imbedded in the ticket cost so that the fares can come down.

“Let’s be honest with ourselves. When you look at a ticket that is N1,000, just to be able to analyse it, I want to say to you that N45 goes to charges. So, the airline is just collecting on behalf of everybody. The N1,000 is not what goes to the airline. No. Only N550 goes to the airline, while the remaining N450 will be shared among the Nigeria Civil Aviation Authority (NCAA), Federal Airports Authority of Nigeria (FAAN), and Nigeria Safety Investigation Bureau (NSIB). So, when you really look at it, you see that those are the things putting pressure on the cost of tickets. If the Nigerian government can reduce the cost levied on airlines, or the services they provide to the airlines, I am sure that the cost of tickets will come down a bit, apart from the fact that demand and supply play their own roles.

“Our appeal, however, is for government to see how we can reduce the taxes and levies on passengers, I won’t say on the airlines, because the airlines are just consuming it on behalf of the passengers. They are not just going to absorb the cost, they are going to pass it on the goods they are selling. And part of the reason why the cost is that high is that we have some airports that they are not generating enough revenue. I am talking about federal government owned airports. We have 26. Every state now wants to have an airport. It is a capital project. I won’t say it’s a bad idea, don’t get it wrong. I think it’s a fantastic idea, if the purpose is well fulfilled; it is not a problem. They will make money. Just let it be a business venture. Government is not in the business of running any business,” he said.

Bernard commended state governments that have invested in airlines, saying that it is a good investment if the benefits will be maximised because it will create jobs for the citizens of the state, insisting that establishing such business is better than exporting such funds, which in the past, stretched the foreign exchange and weakened the naira. But investing in airline means that the money is invested to create jobs for the people.

“Let them create job opportunity for their state.  Is it sustainable?  That is a story for another day. Let us see them create something. When they cannot sustain it, maybe they will give it to a consultant that would then manage it for them.  The last time I got into Ibom Air, they had the new A220, brand new aircraft.  It was looking very clean. I said, thank God now, even if individuals can’t afford the brand-new aircraft, at least with the money coming from the state, they can do that.  Do you understand? And if they are buying new aircraft, it is still better than them buying aircraft that is 30 years old

“So, if state airlines are coming up, it means the money they are collecting from federation account is a lot, and they are trying to see what they can do with it. Let me do something tangible.  Let it be on record that it’s during my time that I established an airport or an airline, but let them do it. And if they get tired of it, people like us will buy it from them. Lagos is coming up with their own (airline). We have already approached Bayelsa. We said we will train all their staff. And they are already working. They are considering it. So, we are about to sign Memorandum of Understanding with them. They know their capacity and they know what the school can do for them. So, we will train all of them.  We are already positioning ourselves for the one in Lagos as well.  We will train them.  You must understand how to work at the airport, the protocol, the processes, and all of those things,” he said.

Bernard, who has been appointed as the Chairman of the Cargo Accounts, Settlement Systems (CASS), Nigeria Local Consultative Council (LCC), also commended the cargo business that is opening in Nigeria. He said the sub-sector will boom in the foreseeable future, and may be at par, or even surpass passenger traffic.

“We don’t have a clear data now. And that is the whole idea. You know, this was how passenger business started, when we started BSP (the International Air Transport Association (IATA) Billing and Settlement Plan (BSP) is a global system for standardizing and simplifying payments between airlines and travel agents). It was difficult for us to have records and that was why I clamoured up for a centralized data system. But to the glory of God, today, BSP enabled us to have a clear idea. Do you know that we spent over a billion dollars in travels? Why is it possible for us to have those figures? This is because there is a central point. The moment you create a central point for data, it is very easy for you to benchmark and say, today, conveniently we can say in the aviation industry that we have recovered from COVID-19. 

“But when there is no data, it will becomeguesswork. Everybody will just be, I think it may be this or it may be that. So, for us to be able to ascertain the revenue that will come from cargo business, it’s going to be when we start to implement all these things that we mentioned and we start to keep those numbers. There is even no way IATA will not keep those numbers. Because what it means is that it is going through a central port and all of us can see it and say, Okay, yes, with these numbers, this is the growth pattern that we have been seeing. And I can tell you for a fact that you will be alarmed by the end of next year, the figure will be calling concerning cargo. It is going to be astronomical. Trust me,” he said.

On cargo airports, Bernard said cargo airports emerged because it became the easier way to secure approval to operate airport from NCAA, adding that the regulator is more stringent when it comes to approving passenger airport.

He added that the cargo airports are adding values to take advantage of Nigeria’s agriculture exports.