Aviation Sector Stable amidst Challenges


Although Nigerian airlines faced daunting challenges in the last two years of Muhammadu Buhari’s administration, there was some measure of stability in the sector despite the hiccups, writes Chinedu Eze

There were two key incidents that defined the aviation sector in the last two years. One was the protracted scarcity of aviation fuel, known as Jet A1, which price rose as high as N280.00 per litre and the second was the resurfacing of the runway of the Nnamdi Azikiwe International Airport, Abuja, which forced the relocation of air operations in the capital city to Kaduna airport for six weeks.

While the rehabilitation of Abuja airport runway was a big plus for the Buhari administration; it received heavy knocks for the scarcity and high cost of aviation fuel.

But beyond what the administration could do or could not do, the domestic airlines lost over N2.3 billion during the peak Christmas season last year when hundreds of flights were cancelled at different airports in the country due to harmattan haze.

Forex Scarcity
The high price of aviation fuel was caused by the low value of the naira. As the dollar began to rise in value against the naira, prices of imported goods and services spiralled. This was what caused the scarcity and high price of aviation fuel. Marketers faced difficulty sources foreign exchange at lower price below the parallel market price to import the product.

The airlines faced further challenges because they could not source the scarce dollar to import spares, send their pilots to simulator training overseas and even take their aircraft overseas for routine maintenance checks.

But after a long outcry by the airlines to the federal government to give them access to FX, the Central Bank of Nigeria (CBN) created a special window for them and manufacturing concerns to access FX. But the modalities were still cumbersome and the airlines could not withstand the long wait as airline business is critical about time. An aircraft engine that suffered bird strike cannot wait for three months before the engine could be replaced and for the aircraft to become airborne again. The airline would suffer heavy financial losses and may not be able to meet its flight schedules and financial obligations when one aircraft is left as aircraft on ground (AOG).

In late 2016, the Managing Director and CEO of Medview Airline, Alhaji Muneer Bankole summed the CBN policy on FX to the airlines thus: “The CBN came out with a design which they call future, forward, spot; what it means is that you put your money for the next two months, three months, four months and you will be given allocation. In doing that you commit all your operational cash so everything has to cease until that two months; that is what it means. But we are hoping that things will improve. So when you look at the business of aviation it is all in dollars and I believe we are now looking at government to tell them what to do. Somebody right there needs to advise them to see aviation as a priority.”

Things really improved by 2017, when government began to supply dollars to ease the tension on the naira. But the airlines still faced problem sourcing the dollar at a good price.

Abuja Airport
When in March the federal government closed the nation’s busiest airport, the Nnamdi Azikiwe International Airport, Abuja for the repair of its runway, which had become a death trap, many Nigerians were not happy about it because they believed that there could be an alternative to closing the airport, as examples began to emanate where airport runways were rehabilitated while they were still in service.

The closure of the airport led to loss of economic activities in the Federal Capital Territory but the runway rehabilitation saved lives and improved the safety of flight operations to the capital city. Above all, what made the rehabilitation of the runway memorable was the fact that government delivered as promised. The Minister of State, Aviation, Senator Hadi Sirika kept to his promise and etched his promise that he would resign his job if the airport was not reopened at the targeted date in the memory of many Nigerians. The airport was closed on March 8 and reopened officially on April 19, 2017.

To prepare Kaduna airport as an alternative to Abuja for the six weeks the closure of the later would last, government had to upgrade many facilities at Kaduna airport at huge costs. That became a win-win situation because the obsolete facilities at the airport and uncompleted passenger terminal, which the six weeks relocation of Abuja flight operations facilitated their completion, was akin to killing two birds with one stone.

“It is no longer news that the federal government made considerable financial provision to ensure that the Kaduna airport was adequately prepared to play this alternate role including the provision of adequate aids and other relevant infrastructure that the airport did not have. The Minister of State, Aviation, who has been in the forefront of driving this difficult transition, met with initial challenges associated with the movement, but one after another, those challenges were dealt with appropriately in the last four weeks,” said an official of the Federal Airports Authority of Nigeria (FAAN).

Airport Terminals
In the last two years, the federal government has continued to work on the new terminals, which were started under the past administration, at the five international airports in the country, including Lagos, Kano, Port Harcourt, Abuja and Enugu and some of them are over 80 percent completed. In fact, almost all of them would be made operational before end of this year.
The government also introduced a policy mandating Aviation Security (AVSEC) of FAAN to carry arms in order to improve security at the airports. It also reinforced the policy on waiver of Customs duties on aircraft parts and efforts are being made to cut down the prices of aviation fuel despite the fact that the product is still being imported.

Arik Take Over
The major upheaval that has taken place in the aviation industry in the last two years was the takeover of Arik Air by the Asset Management Corporation of Nigeria (AMCON) for its failure to service its debts. Since after the takeover, the new management of the airline seems to be at crossroads about how to turn the airline around amid the challenges of paucity of funds and low passenger traffic occasioned by the current recession. The workers are also in a dilemma about tomorrow, while government is yet to make definite pronouncement on the future of the airline.

But the new management of the airline has brought back some of the aircraft in the fleet on AOG to operations, just as the workers who feared at the beginning of the takeover have continued to retain their jobs.

Airports Concessions
There are three cardinal things this government said it would achieve in aviation in the four-year tenure. One is establishing a national carrier; two is building Maintenance, Repair and Overhaul (MRO) facility and the third is concession major airports.
In the last two years, none of these set objectives had been accomplished. However, the government has initiated steps to actualise them through the establishment of transaction advisers. But government explained that the airports would remain underperforming with obsolete facilities until the private sector injects and modernises these airports.
The Minister of State, Aviation, Senator Sirika recently noted that concession might be the only choice government has now to modernise nation’s airports.

“I think the ultimate solution to all of these is to concession these airports. I have maintained this because I don’t know any other way we can go about it. That is the only way to go because government does not have the resources to continue to invest in these airports. We want to make sure that all the things at the Abuja airport are fixed and the airport returns to normal operation.
However, I think that the ultimate end and solution to all of these is the concession of these airports. I have maintained this. It is the only solution, I don’t know any other way we can do it because government no longer have the resources to continue to invest in these airports,” Sirika said.
However, many industry observers are sceptical about the actualisation of these goals, as no concrete action has been taken two years into the four years administration.

Questionable Appointments
The appointment of new directors for the Nigerian Civil Aviation Authority (NCAA) and the Federal Airports Authority of Nigeria (FAAN), early this year, had been greeted with severe criticism by the labour unions.
The unions excoriated government for appointing outsiders without experience to do jobs that would be effectively done some people in the industry who have better experience and knowledge of the sector.
But the government was earlier commended for appointing professionals in the industry to head the aviation agencies, including the Nigerian Airspace Management Agency (NAMA), the Accident Investigation Bureau (AIB), the College of Aviation Technology (NCAT), Zaria and the Nigeria Meteorological Agency (NIMET).

Funding Challenges
Reviewing the two years of the Buhari administration, a former Commandant of the Lagos airport and the Secretary of Aviation Round Table (ART), Group Captain John Ojikutu (retd) said: “It has opened the decays and the decadence in the sector which for too long have been shielded from the public view. We have come to know that a lot of the private operators have been living on bank loans and government intervention funds yet they remained in acute debts to the services providers. They get concession on Customs duties on aircraft importation and spares and on foreign exchange rate, yet they are indebted to banks, insurance, staff salaries in multiple arrears.
“In all these, they sell tickets on cash basis and not on credit; the question to ask is, what do these airlines do with their earnings?”

Ojikutu said in spite of the indebtedness of these airlines to the government services providers, and invariably the low revenue accrued to government, it has been able to sustain operations in the sector, noting that Abuja that accounts for about 35 percent of air and passengers traffic, whose runway that needed to have been repaired seven years ago was repaired within six weeks. Similarly, many navigational aids and runway approach aids that needed calibration and had exceeded their tolerance emergency were calibrated and have been kept serviceable to sustain operations.

Ojikutu however, did not talk about the high charges levelled on the airlines, the lack of airfield lighting in many airports, which force airlines to operate only six hours and the high cost of aviation fuel, but on airport concession he said: “My advice to government on this path is to concession only the non aeronautical facilities and infrastructure such as the passengers and cargo terminal buildings; aircraft aprons, car parks and toll gates.

“These have little concerns to the International Civil Aviation Organisation (ICAO). However, government must retain the aeronautical services and facilities including airport security. Others will include air traffic control and information services, runways and taxiways, perimeter and security fences, emergency and rescue services, etc. These are the concerns of ICAO and these are the State’s obligations to the Chicago convention in all its 19 Annexes.”