Without Clear Economic Policy, Airlines Won’t Survive, Operators Warn


Chinedu Eze

The Airline Operators of Nigerian (AON) has warned that more airlines would go under unless the federal government introduces clear economic policies aimed at buoying the airlines to profitability.

The Executive Chairman of AON, Captain Nogie Meggison stated this at a press conference on Wednesday.

Meggison expressed concern that while Nigeria has all the potential to become the hub for West and Central Africa, a small country like Ghana, which has been able to put its acts together in aviation is dominating the sub-region in the sector.

The operators insisted that it is through deliberate economic policy that the aviation industry can grow.
“There is an urgent need for a deliberate economic policy that will eliminate the many challenges that adversely affect the sector in a bid to guarantee survival of domestic airlines in the country and to make Nigeria the hub for Africa,” Meggison said.

He noted that Nigeria has huge potential as a country blessed with a natural God-given geographic location at the centre of Africa (4.30hrs to most parts of Africa); with most of its airport at approximately sea level, being the 6th largest producer of crude oil (JetA1), a human population of 190 million, and skilled manpower, yet Nigeria is not a hub for aviation activities on the African continent.

“Following the air crashes of 2005/06, the federal government came up with a deliberate policy to ensure air safety in Nigeria. As fallout of that singular action, today Nigeria has had an excellent safety record of 93 percent between 2006 and 2017. The country also secured the Category 1 safety status and most of the scheduled airlines are currently IATA Operational Safety Audit (IOSA) certified as a strong testimony of the country’s commitment to air safety.
“Safety and economic policy go hand-in-hand. Where there is no financial profit for airlines safety would be compromised. A clear economic policy for the survival of domestic airlines is very critical at this time which has resulted over the years in the death of over 25 airlines in 30 years. Safety and financial economic policy must go hand-in-hand; as airline investors are in the business of aviation for the profit and can’t make profit without safety or have a safe airline without profit,” Meggison said.

The AON said some of the major issues that need to be addressed to grow the sector include, but are not limited to: the Removal of Value Added Tax (VAT), as domestic airlines are the only mode of transport paying VAT, noting that marine, road, rail and even the international airlines don’t pay VAT).

The operators urged government to review the five percent Ticket Sales Charge (TSC) to a flat rate (in line with the global best practices); the harmonisation of over 35 multiple charges, which add huge burdens on airlines.

Others charges include poor navigational and landing aids that limits operations to daylight operation for most airports (Nigerian airlines fly an average of only five hours as against the average of 10 hours worldwide per airplane); high cost and epileptic supply of JetA1; Obsolete infrastructure that hampers the ease of doing business; and lack of consultations with airlines before introduction of new charges and policies among others, which throws off the feasibility studies of airlines out the window.

“These are some of the main reasons for the short life span of Nigerian airlines averaging about eight years,” Meggison added.

He said that IATA recently conducted a quick impact analysis of a potential removal of the domestic VAT of five percent, using an average domestic airfare, it would reduce the ticket price by 4.39 percent, which would mean a boost in domestic air traffic of 3.51 percent or around 133,000 passengers a year together with the multiplier effect of additional turnover of revenue from other indirect businesses; so there would be more landing and parking fees for the airport, hoteliers, car hire, airline support services and most importantly, create spending to jump start the economy out of recession.