John Ojikutu is Secretary of Aviation Round Table and a former Commandant of the Murtala Muhammed International Airport, Lagos. In this interview with Chinedu Eze, he reasons that the Bilateral Air Service Agreement fund should be used to support the aviation industry. Excerpts:
With the current economic downturn don’t you think Nigerian airlines need financial support, considering the critical role they play in the nation’s economy?
Domestic airlines are collecting cash every day. They sell tickets not on credit but on cash and carry to passengers every day. The domestic airlines should pay for the services that are being given to them. Domestic airlines are not paying government tax. They are also in excess of salary arrears. So the question is, what do they do with their money?
If I go into business I will look at what will be my capital input and what will be my return. Before they go into the business they should have done a very good business plan. The plan will tell them what their profit will be in the business. Of course you know you are going to buy fuel and pay for all these services provided by aviation agencies and other organisations, but at the end of the day you should know what your profit would be. Sometimes I get worried because I feel that some of them do not know what they are doing.
Arik said it operates 120 flights a day and consumes 500, 000 of aviation fuel every day. Has anybody ever sat down to do that calculation? If Arik is buying fuel at N200 per litre that is N100 million per day; so Arik needed to have done the plan to know that there is no profit in this business if I have to be picking passengers at N20, 000 for one hour flight.
If government has liberalised the market, there should not be any control to the sale of tickets. Government should not control how much airlines charge for their ticket. Both government and the airlines seem not to understand somehow, because there are certain things that government is doing, which the airlines are not complaining about. How can you be doing business and government is controlling your price for you.
How will you be in the same business with foreign airlines and the foreign airlines are given more advantage over the domestic airlines even within the country and the domestic operators are keeping quiet. That is why I said that something is going on. We need to dig further to know why the foreign airlines are not crying out. I do not support that government should give them one kobo. This is because they have taken intervention fund of about N200 billion and they have not returned it. How did they allow the money to be taken by the bank? How did they get to the level where the banks were collecting aviation intervention fund?
What has the banks contributed? I said it when these things started. I wrote a letter to the Central Bank of Nigeria in 2010 and requested that the bank should find out the debt portfolio of these airlines to know the genuineness of the debts they claimed they owe the banks. The Ministry of Aviation then did not have the idea of the debts. It was a business of the politically exposed people in government. The Nigeria Civil Aviation Authority is sitting down there. The agency knew that some of these airlines owe government agencies and it did not ask them that out of this money they got from the intervention the amount that should be used to pay aviation agencies.
The Minister of Aviation then Fidelia Njeze asked the airlines to spread the payment of their debts for four years but the airlines were not comfortable with that. Immediately they removed that woman they went behind and started the agitation for intervention fund. Take the case of Air Nigeria and UBA, to me, there is something suspicious about it and if government does not see it so and hold UBA responsible for that money it means we do not know what we are doing. UBA said Virgin Nigeria owed it N42 billion. What transaction gave rise to such huge debt? What was the collateral? The intervention fund was not for the banks; it was for the airlines. What the airlines got from banks were loans. That area should be properly examined. Government has to find out what really went wrong.
Passenger traffic has reduced significantly. Are you not worried that some of these airlines might go under?
What will be the reason; is it because of the debts the airlines owe which they have been asked to pay? The debts we are talking about, some of them have been over 10 years. It is the responsibility of NCAA to make sure that these debts are paid. It should have come into the public glare. I blame the politically exposed people in all these are that are happening. They have been making it very difficult for NCAA to act. By the time an airline is indebted up to N5 billion, NCAA should step in. Some of the airlines took that intervention fund out of the country, which is capital flight. Go into the records and find out how much of that N200 billion intervention fund left this country. They should also go into the record to find out how much of that money went into businesses that are not aviation. This money was like a bazaar, which they travelled overseas to spend. The airlines need to pay that money. They don’t need any intervention fund. They owe aviation agencies for the services they provided them.
What is your view about aviation fuel, which has become perennially scarce?
At the beginning they said there was aviation scarcity. If the domestic airlines are not flying because there is no aviation fuel, how come foreign airlines that come into the country are flying? We should look deep into the marketers themselves to find out why foreign airlines are flying while domestic airlines are not flying. The marketers have adopted pay and get and our own airlines are not doing that. Nigerian airlines are like spoilt children and they have been living like that for too long and we have tolerated them. Aviation business is not done that way.
People want to run airlines as if they are running Ekene Dili Chukwu. When you count the number of seats that you have sold today and multiplied by the ticket price; that is what they look at. They don’t look at the operational cost, the maintenance cost, especially the C-check. One single C-check on one aircraft will wipe of the airline’s profit. If you invest so much in an airlines business, do not expect the kind of return that Ekene Dili Chukwu is expecting. If you invest one dollar, don’t expect one dollar in return; not even 50 cents, but you should be expecting five to seven cents.
What is your reaction to the complaint by airlines that they pay high charges and also pay value added tax (VAT)?
The airlines need to sit down with the government and review those charges. The issue of VAT should not be there as long as they pay taxes to the Federal Inland Revenue. They should demand from government VAT certificate. Government should cancel the other taxes because the airlines are already paying many charges. There are a lot of things that are wrong. The concerned agencies are not living to their responsibilities. If airlines are allowed to owe this much we may end up the way it ended up in 2005 with high record of accidents if we are not careful. The airlines will cut corners. Government needs to sit down with these people and review all these unnecessary taxes. But the airlines must pay for the services they receive and they must pay for fuel.
Don’t you think that government should do something about aviation fuel scarcity? Ghana cut down the price of aviation fuel to N110 per litre because they want to make Accra a hub.
Government had come up with a policy that says anybody can import aviation fuel. But what government should have done is to ensure that NCAA and other concerned agencies will monitor what is imported to ensure they don’t import contaminated fuel. Now they have been given open window to import they can import anything. I think the problem Nigerian airlines have is that they cannot unite.
The domestic airlines cannot unite; everyone wants to stand alone. The airlines are not utilising the opportunities they have. If the Nigeria National Petroleum Corporation (NNPC) and the marketers cannot get fuel to the airports, they should get it there themselves.
The airlines or the marketers should repair the aviation fuel supply pipeline from Mosimi depot to Lagos airport. There are three options. NNPC should repair it or the marketers and NNPC repair it or they concession the pipeline. NNPC is already concessioning pipelines. You repair the pipeline and the pumping station located at the apron. In 1992 when I was the command of Lagos airport, the machines were installed at the cost of $68 million. If you ask them today somebody will say $80 million or $100 million; and the fuel hydrants are there.
It was only the pipeline that got ruptured. They didn’t build the Lagos airport without a hydrant. The airlines were getting from the hydrant before. I was at the airport when the pipeline ruptures and I was there was the plan to repair it was made, but till today nothing has happened. I left that airport in 1994 September. The pipeline ruptured in 1992 or so. But 24 years after nothing has been done. They have not done anything about it.
The response I got when I wanted the pipeline repaired was that if you want to repair it you would have to fight many people because you will step on so many people’s toes. There are those who own the fuel tankers who are benefitting from the status quo and trucking the product incurs more expenses.
It is this additional cost that makes aviation fuel price to be N200 or more. The transporters are collecting money to transport fuel from the depot in Apapa to other airports. When they get to the airport they cannot discharge so they stay there. All these expenses area added to the cost of the product. As at now you may not know the real cost of aviation fuel. They may not tell you, but I know that the cost of aviation fuel in dollar rate is about 35 to 40 cents.
Look at it this way. When they were selling dollar at N180 the marketers were selling Jet A1 at about N80 to N80 per litre. Dollar has increased 100 percent, so if you are going to sell fuel you cannot increase the price above 100 percent, which means that fuel should be sold about N170 to N180 but if you are selling it about N200 something is wrong somewhere.
International airlines seem to be favoured by the Ministry of Transportation and other aviation agencies that they are given frequencies at request?
I think there is a conspiracy, which I call unilateral exploitation of Bilateral Air Service Agreement (BASA) and commercial agreement between government and these airlines. BASA is supposed to be beneficiary to the aviation industry. Any international operation by foreign airline is made possible by BASA.
If the BASA were not there money will not come to the aviation agencies. FAAN is making money from landing and parking of foreign airlines in dollars, NAMA is making money from foreign exchange from airlines that overfly Nigeria’s airspace. FAAN is collecting $50 dollars from every outbound passenger.
Oil marketers sell about 2 million barrels of fuel per day. When you look at the amount of money FAAN is making, NAMA is making, NCAA is making and the oil marketers are making in dollars, annually it is $1.1 billion.