‘Govt Policies Discourage Investment in Airline Business’


Chinedu Eze

The Chairman of Arik Air, Sir Joseph Arumemi-Ikhide has said that certain policies of the federal government on air transport in Nigeria tend to discourage investment in the sector.

Arumemi-Ikhide said considering the pivotal role air transport plays in the economic growth of any nation, the government should introduce policies that would encourage airlines by giving them priority in accessing foreign exchange, review downwards the charges paid by the airlines and remove Value Added Tax (VAT), which is only paid by airlines in the transport industry.

The Arik Air Chairman, who made this known on Wednesday at the Murtala Muhammed International Airport Lagos said government must have to support the commercial airlines for them to survive and succeed.

“Airline operating cost is very high because everything is in foreign exchange, not only for the spare parts but for the inputs, which are all from abroad and this impacts on operators of domestic airlines in Nigeria and most unfortunately government policies or Central Bank of Nigeria (CBN) policies don’t favour domestic operators because government gives priority to manufacturers as CBN said 60 percent of the foreign inflows should go to the manufacturers. They forget that the engine of any economy is air travel,” Arik Air Chairman said.

He noted also that similar policy prevails in the Federal Inland Revenue Service (FIRS), where manufacturers have a different lower tax regime than what airlines pay as taxes because “airlines are seen as service providers and it is the only means of travel that pay VAT. So the state seems to be against airline operation in Nigeria.”

Arumemi-Ikhide said that to ensure safety in air transport CBN needs to be watchful because if airlines are not given access to foreign exchange it means they cannot maintain their aircraft.

He lamented that Nigeria does not have Maintenance, Repair and Overhaul (MRO) facility, noting that Arik Air wanted to build one but it did not get the necessary approval to do so; yet while the airlines spend huge resources to maintain their aircraft overseas they still sell tickets at a relatively cheap price in cognizance of the low disposable income of many Nigerians.

“Our fares are the lowest in the world. Naira exchanges for over N350 to a dollar but flights from Lagos to Abuja is less than N35, 000, which mean we charge less than $100 for one hour flight. I consider it that all of us who operate commercial airlines are doing national service. We do not get aviation fuel and the price of the product is shooting up to the roof.

“Before the flexible exchange rate was introduced we were buying fuel at N110.00 per litre, now it has risen N215 per litre. The situation in the country is not favourable to airlines at all,” the Arik Chairman said.

He explained that why foreign airlines see Nigeria as highly profitable route was because Nigerians like travel and Nigerians like foreign airlines because of their penchant for everything foreign.

“But the economic situation is making us to become a little sensible now. There are Nigerians who see travelling with foreign airlines as status symbol. They should know that when you fly local airlines you are creating jobs; you will be saving foreign exchange you would have taken out of the country because one of the things that weakened the Naira was the amount of money foreign airlines accumulated, which they needed to take out of the country at whatever cost. When the flexible rate was introduced they quickly took their money away,” Arumemi-Ikhide said.

He observed that internal trade is one of the pillars of the economy of any nation because if people trade locally they conserve foreign exchange, noting that local airline operators should use this time to improve in their services to make sure that passengers enjoy their flights.

On the efficiency of airline operation by domestic carriers, the Chairman of Arik Air said the airlines cannot be more efficient than the operating environment, remarking that many airports do not have airfield lighting so there are few airports a flight can land after 6:00 pm.

He also said he supports the establishment of national carrier, noting that a national carrier would make government to pay attention to the needs of other airlines and there is no way they can creating enabling operating environment for the national carrier and other airlines would not benefit from it.