Controversy over Airlines’ Debts



Last week, the Minister of State for Aviation, Senator Hadi Sirika said Nigerian airlines are ridden with debts; that one airline owed one aviation agency N13 billion, while another has a total debt profile of about N500 billion.

The minister, who was not amused, seemed to have thrown down his gauntlet to slug it out with the airlines. He went further to say that the airlines are weak and that their problems are self-inflicted.

According to him, “Nigerian airlines are heavily indebted. I am not sure if all of them are financially healthy. The Nigerian Civil Aviation Authority (NCAA) is currently carrying out financial audit of the airlines and I am sure that the result of the audit will not be something the airlines would want to take to the press. Nigerian airlines have refused to grow and their challenges are not caused by government. They are responsible for those challenges.

“My advice to them is to get their acts together to focus, to reorganise, to re-engineer and take advantage of this opportunity offered by the Single African Air Transport Market (SAATM) and be futuristic; rather than to sit here while the train is moving and begin to whine.

When asked about the airlines’ debt profile, he said, “Look, there is an airline that owes one of the aviation agencies N13 billion. There is an airline that owed a total debt of about N500 billion. It is not only debts to the aviation agencies but the collective debts of that airline. That airline almost went under but it was taken over by government agency. I do feel that if these airlines reorganise themselves they can do better.”

Piqued by the minister’s observation, the airlines reacted and accused government of being largely responsible for their woes in the area of unreliable source of aviation fuel, which comes at a relatively high prices, lack of critical facilities including airfield lighting which force airlines not to operate in the evenings and nights to over 17 of the nation’s airports, the high charges, including VAT and the inability of government to protect its own carriers against foreign operators by cutting back multi designation of foreign airlines and also introducing policies that could encourage foreign airlines to partner and share technical skills with Nigerian operators.

Airline operators questioned the veracity of the N513 billion debts and insisted that the aviation agencies do not have transparent system to ascertain how much they are owed, so they just bandy figures about.

Specifically, the Executive Chairman of Airline Operators of Nigeria (AON), Captain Nogie Meggison accused the minister of reeling out figures offhand, insisting that he cannot prove any of the debts he mentioned and noted that the aviation agencies lack the ability to transparently record their revenues and document accurately the debts owed them by the airlines.

The domestic carriers also remarked that debt accrual in the aviation industry is a given because airline operation is a continuum; so as long as airlines render services they incur debts from service providers, which are normally settled.

“Talking about debts, airline business is not a cash business ‎because you accrue the charges, you are presented a bill and you pay. No airline in this world that does not owe,” Meggison said.

On SAATM the AON Executive Chairman said member countries participating in SAATM should provide a level playing field in terms of introducing uniform charges and taxes for the airlines so that equal opportunities are given to the airlines to compete.

Also, reacting to the Minister’s observation on Nigerian airlines, a former Vice-Chairman of Arik Air, Senator Anietie Okon told THSDAY that the airlines do not owe that much and if they are not doing well as alleged by the Minister, it is his responsibility to ensure that airlines improve their operations.

Okon said the minister should be able to calculate the value of the assets of an airline and calculate the percentage of debts to the airline before saying that an airline went under, when there was a preconceived plan to take over an airline.

“If the total debts of an airline are just 10 percent of its assets how can you say that the company is insolvent?

Okon said that because of the critical role airlines play in the economy of every nation, sincere governments give support to airlines, whether government or privately owned.

He recalled that at a certain point in time airlines like Jet Airways of India, Kenya Airways, South Africa Airways and even recently Emirates had financial issues but they were buoyed by their governments to sustain their operations.

“If all airlines in Nigeria are not doing well, what is the Minister doing about it? The Minister is running the most nepostic administration, filling everyway with his people who are not even competent and you are running down those that committed their huge resources the airline industry. You know that the airlines are subjected to multiple taxation; you know that airlines cannot fly to over 18 airports in the country after 6:00 pm because there is no enough facilities and you are saying that government is not responsible for most of the problems of the airlines.

“We took the trouble to invest and you keep on bandying figures, possibly amusing yourself because you don’t know that your management style is crumbling people’s investment,” Okon said.

But the President of Aviation Round Table (ART) a think-tank body in the aviation industry, Elder Gbenga Olowo shared the same view with the minister.

He said: “The Minister is absolutely correct. Nigerian carriers may not be able to take advantage of Single Africa Air Travel Market simply because they are small, single, disunited and parasitic on one another.

 “Almost all of them fly point to point which is not the real game in global aviation. Our airlines do not have robust interline partners, do not have sufficient code share agreements, not in the International Air Transport Association (IATA) Clearing House due to credibility issues, do not belong to global airline organisations like IATA, Africa Airlines Association (AFRAA), small fleet size which cannot guarantee schedule reliability and maintain strong airport slot.”

Olowo said government can also assist the airlines “by attending to the many operational issues hinged on multiple taxes, VAT, domestic enroute charges, too many mark ups on fuel price, high rent, landing and parking fees charged by the Federal Airports Authority of Nigeria (FAAN), given the many inefficient service delivered by them. It is absurd to hear that airlines have to power some airports, provide security on facilities etc and yet pay FAAN for the services.” He said for Nigeria to take full advantage of SAATM, it needs about three mega carriers.