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Abdullahi: Airlines Will Serve Passengers Better with Interline Arrangement
The Director of Consumer Protection, Nigerian Civil Aviation Authority, Adamu Abdullahi, in this interview, says flight delays and cancellation will affect passengers less if domestic airlines cooperate through interlining. He also speaks about other issues in the aviation industry. Chinedu Eze presents the excerpts:
The challenge we usually have in Nigerian is how airlines can be run profitably. Some blame the airlines and the airlines in turn blame government’s unfavorable policies. From your experience so far, what do you think is the problem?
It is really a hydra-headed problem. We can’t blame one side. Let’s start from the regulator’s perspective; the airlines complain that they are over regulated and that they are over charged. When it comes to payments that they make to airports, they say that what they are charged are over and beyond what airlines pay in other climes. I don’t think that is true because the five per cent ticket sales charge that NCAA collects, which the agencies distribute among themselves, is not really from the airlines, it is more from the passengers. So, if your ticket is N100, you are supposed to charge your passenger N105, so the N5 goes to NCAA.
That is the way regulations are crafted. That airlines should collect the 35 per cent on behalf NCAA. When that money comes to NCAA it is distributed, the NCAA gets only 58 per cent of it, NAMA (Nigerian Airspace Management Agency), NIMET (Nigeria Meteorological Agency) and even AIB (Accident Investigation Bureau) gets some certain percentages also. There is distribution process already that takes place whenever those payments are made.
A part from that five per cent, airlines have to contend with landing and parking charges, which as you know, the Federal Airports Authority of Nigeria (FAAN) has been complaining that over the past seven years those charges have not been reviewed.
So, it means that the airlines are really paying less than they would have paid if FAAN were allowed to review its charges. I will also look at what the airlines are paying for: counter space where they sell their tickets and also checking in their passengers as well as other services in the airport. Passenger service charge that goes to FAAN also, also comes from the passenger; not from the airline. So I wouldn’t say that airlines are being charged more than they are charging in other climes. It is just the factor of the way we do business in Nigeria.
Nigeria is a very difficult clime if you want to make your business and in the airline business, there are factors that are really beyond you. If you take even weather, for instance, you will see that not all airports have the needed equipment that you can use to land at zero visibility, which is the current trend in the world over. Here, it is a major issue when it rains or the Harmattan period, which we have now started experiencing. The airlines cannot operate to their ultimatum because they cannot get the right conducive weather for them to operate. The government is looking at that. I know that Instrument Landing Systems (ILS), have been introduced in almost all the secondary airports now. The four international airports have already been taken care of, I believe.
And I would say the airlines themselves still have a long way to go because it is beyond just having the instrument landing systems in your airports, the aircraft must also have corresponding facilities so that this instrument landing system can now yield the optimum result. I don’t think labour is such an expensive venture here. I know in our recent history there is an airline in which the chief executive never allowed blacks to work for him so he preferred expatriates because he believed they are more experienced. He said they were experts in the field of maintenance; therefore, no black person should touch his aircraft. So if an airline chooses to do that; that means you have to pay for those services in dollars.
So you have to take the exchange rate into consideration. If you are paying them $1000, which was just N150, 000 years ago, now you will be paying them N360, 000. You will convert that naira into dollars because people buy their tickets in naira and they pay in naira. But if you can do with what we have here, we do have a lot of pilots and engineers hanging about with all the qualification that are needed but don’t have the opportunity to work. So, if you can do with black pilots and engineers, then I believe that the cost would will come to you much, much cheaper than depending on expatriates.
At a point, government even went to the extent of trying to ensure that our people get employed so that in any cockpit, if the pilot is an expatriate, then the flight officer must be a Nigerian, in as much as that aircraft is a Nigerian registered aircraft. I don’t know how far that policy has gone but that was how it was intended. Other factors also come into play. When you look at fueling, all the fuel that you use in airline operation which about 40 to 50 per cent is fuel.
And that fuel is being imported into the country. So, they have another factor again in foreign exchange. In as much as we can start to refine Jet A1 here, which has been in the pipeline for a very long time, I am sure it will crash some of the prices that we are facing right now. It will also crash the operational cost of the airlines. So, these are some of the issues that we have to contend with. It is really a very difficult climate in which we operate here and we are paying for the consequences.
The airlines also say they pay more insurance compared to other countries and lament the poor fuel distribution and the arbitrary prices that can change any time. Is there nothing the government can do in terms of pricing and insurance?
The issue of pricing for Jet A1 as I stated earlier really depends on how fast we can get back some of our refineries into operation and into refining of Jet A1. Kaduna Refinery and Warri used to refine aviation fuel. But for a very long time now they have not been producing Jet A1. At a stage the Minister of Aviation took some airlines under the auspices of the Airline Operators of Nigeria (AON), they went to see the Group Managing Director of NNPC, Minister of Petroleum Resources all in the effort to get the refineries to start operating in that aspect so that Jet A1 can be refined in the country. So far, that process is still on and has not happened. If it happens; then, things are going to really look up for both the airlines and passengers.
The issue of insurance, as I said earlier, this is a difficult environment in which we operate. Look at Maiduguri, for instance, when Medview Airline wanted to resume flight operations into Maiduguri, of course, a high security alert area, the airline’s insurers expectedly would demand higher premium. So generally, the Nigerian environment is taken to be like that, the business environment here is high risk as far as investors are concerned, it also the same way that the insurance companies also look at it.
In insurance policy that airlines have to take for their aircraft, it has to come in two different perspectives: there is a portion of the insurance that is reinsurance, that one comes at a high premium and insurance companies from abroad have to come in to reinsure because cost of aircraft is really on the high side. Maintenance of aircraft is in dollars, spare parts, everything comes in dollars; you have to look at the high cost of the foreign exchange itself as you insure your aircraft in foreign currency in dollars.
So that dollar aspect is what is really taking its toll also on the airline industry. But I am positive that government will also look into that with the view to redressing it. Now that most of our insurance companies are to be recapitalised, I know that they may have the capacity fully insure equipment used for air traffic services. So let us see how things go and I am sure it will be for good of the industry.
Will you suggest that government intervenes in the area of financing, and also a policy whereby development finance institutions such as the Bank of Industry or even the commercial banks can reach an agreement with government to lend money to airlines in single digit interest rate?
I will support that because that is what governments do for their airlines in other parts of the world. As big as British Airways is, it still gets assistance from the British government. All the airlines that you can think of owned by governments, South African Airways, Kenya Airways, Egypt Air, Emirates especially the Gulf airlines, all the operations you see them doing, they are doing with the full backing of their government. And that full backing is full financial backing. We all know that airline business is really very capital intensive yet the gains come in pittance.
So, it is something that you have to invest a lot in the initial period of setting up the company and with time it will now start yielding fruits. That is part of the reason why an aircraft leasing company is one of the issues in the front burner of the Buhari administration. The current Minister of Aviation has been pursuing it, the issue of MRO (Maintenance, Repair and Overhaul), aviation leasing company are things that he has been looking into seriously along with the establishment of national carrier. So if these three aspects can really come in; then, of course, leasing of aircraft maybe much, much cheaper to airlines than it is now. The current situation where everyone has to go on his own and go and discus and agree on rates they are going to pay for the leasing of aircrafts is usually high for Nigerian airlines. If there is an airline leasing company here, I am positive that it will make it much easier for airlines registered in Nigeria to get aircraft on more agreeable terms for lease than they are getting now.
So let’s see how things go, I am sure a lot of things will be unfolding in the near future. We know that income contributes to how many people can afford to travel air, but do you think that if airlines interconnect local destinations like Enugu to Calabar, Enugu to Kano and these other routes that are idle, do you think it will bring more people to travel by air? Then if Nigerian airlines are getting money at single-digit and aviation fuel is produced locally and sold at a cheaper rate, do you think more people will fly because the fairs will be cheaper? Once fares are cheaper, of course, more people can afford it and they will choose to travel by air. Air travel remains the safest, even if we have to recognise that air accidents have a high toll of victims, but recently in Nigeria, there has been no accidents. Meanwhile, on the road we have seen incidents of kidnapping especially on ever-busy roads such as Abuja-Kaduna.
But if airlines can take advantage of that you will see that they will be able to get a lot of market. There is now a shuttle Abuja-Kaduna by air, an airline does that. I have seen Air Peace going into Kano-Owerri. If such interconnectivity becomes possible, then I believe that everybody will be better off for it. Passengers will be willing to fly if it is more affordable and they can pay for it. And the fact that this security problem in the country has not yet abated, is a plus for the aviation industry.
If you look at the number of airlines operating, you will find out that it is reducing. Why is it that the aviation industry is not attractive to investors?
As I mentioned earlier, the industry is very capital intensive; yet the gains come in peanuts. Most Nigerian businessmen are not ready to face that. They want to make quick money. Of course, that is why you see everybody carrying portfolio calling himself a contractor. They go from one government agency to another, get a business; within the next one month or three months you are paid. Before you know it your profit is three fold, four fold, as the case maybe. In the aviation industry the profit margin is very low and long term. What we need really are much stronger airlines.
The problem we have as of now is that we have very small operations, an airline with maybe two or three or four aircraft, start of operations, sooner or later two, three of the aircraft go for checks and before you know it you are in trouble because there will be issues. Yesterday there was an issue with an airline in Abuja that kept us awake well into the wee hours of this morning. And it is something that normally happens whenever our aircraft go on maintenance, you will start asking yourself whether these airlines did not plan that they would go for maintenance. These aircraft were going on maintenance, why did they go ahead and sell the tickets? As of 8:00 pm out of Abuja, one airline had four outstanding flights; meanwhile, it was operating with only one aircraft. That is of course big problem for passengers as well as for consumer protection officers and the airline itself.
This is because the airline will keep trying to assuage the passenger, and telling them that everything that is happening is due to operational reasons. Passengers will want to know what that operational reason is, but the airlines don’t want to tell them that the operational reason is technical. Because when they do people will start saying they should refund their money, so it is like a cat and mouse game. And it drags into the wee hours of the day and the wee hours is really not good arrival time at a place like that and it is really not the time you should joke with your security and safety in the environment that we have nowadays.
So if our airlines can capitalise and have more aircraft, have even redundancy aircraft so that whenever you have a technical problem you can go ahead and take from the pool or take from the redundant ones that have been parked there, in case of such emergency. But such plan does not take place here because no airline can afford just to keep an aircraft on the ground, waiting for any happenstance so that the aircraft can be put to use.
What would have saved the situation would be if they have this interlining agreement among themselves. If they interline or agree to use each other tickets; at the end of the month they can sit down and sort themselves out. For example, when you buy an Arik Air ticket for instance you should be able to use the ticket on another airline, if the Arik flight is not taking off as scheduled. At the end of the month the airlines will sit down together and sort out payments.
I know that a former Director General of NCAA tried that so much so that he still believes it is one of the things that was not actualised before he left the office. But I will still advise that if airlines will embrace interlining, it will be the best option, so that they will be able to sort things among themselves. We even advised them on that sometimes and they follow our advice. Medview and Dana Air had that kind of agreement, which they made earlier in the year and whenever Medview had issues, Dana was able to fly their passengers. Aero also had that arrangement with Arik at a time. They should corporate in such a way that whenever they have issues or problems in their operations, they can rely on one another. That is what we keep advising the airlines, as much as they can come together it will make things easier for them and for ourselves.
Is it possible for government to make it compulsory?
That will be the last effort because making things like this compulsory, the issue is not making it compulsory; it is how do you ensure that it happens. Would you to the extent of withdrawing an AOC (Air Operator Certificate) from an airline just because it refuses to code-share? If it is a policy then it is different. But the way the regulations of civil aviation are made you have to have stakeholder buying into it.
If they support it, you include it in the policy. Once you even consider it as a regulation, you have to call the airlines in, discus with them, agree with them before you can put it as a law and then it becomes binding on all parties. It should be a very good thing and I think we should be able to advise the incoming DG to look at it too and see if it is going to work out. Because if it does; really, as we both agree; it will work very well for us and for our passengers.
Some airlines are agitating that there should be waiver. For instance, if an airline is starting operation, that it should be given one-year tax holiday. Also, airlines argue that despite the waiver given them in terms of payment of VAT, that they still pay the tax. What is your view on this?
Officially yes, there is a waiver, but it hasn’t come to fruition yet; as the airlines keep complaining and I don’t know why the process is taking so long. But this is something NCAA should pursue, as government has made a pronouncement on it. So we will pursue and see how it comes to fruition because it will be a good thing for us. If airlines don’t pay VAT, flight tickets might come down by five per cent.
The former Director General said the NCAA should not be designated as revenue generating agency and paying 25 per cent of its revenue to the government.
How far have you gone with the campaign to stop it and what is the implication of the agency being recongised as revenue generating parastatal?
Let’s discus the background first, the world over Civil Aviation Authorities (CAAs) are always encouraged to be self-reliant. In as much as you are in anyway dependent on government for anything, then somebody there will be taking decisions and will be pushing you to do things that maybe against the interest of the industry.
So it is wisdom, when the Civil Aviation Act of 2006 was crafted that way in which 58 per cent of 5 per cent as well as other small charges that NCAA makes such as height clearance for mast, permission to construct airports, certification of airports as well as other areas in which you get money such as when someone wants you to come and inspect an aircraft before it comes into the country.
All these are recovery, because what we try to do is recover our cost. The engineers that the tickets will be bought for as well as the estacode paid for so that they can go abroad, inspect an aircraft and come back, are all cost recovery. So, whatever it is that this airline pays will be just that cost that the NCAA will now recover. In the same manner, we have oversight function, on airports, airlines, on all other aspects that are aviation related. So, whatever it is that we make, we plough back into the industry. Therefore, that does not make us a revenue generating agency. We are really a cost recovery agency, so that 25 per cent should not apply to NCAA.
It is something that we have written a position paper on and passed it to government and the government is still considering it. We will only keep appealing to government that it should consider this thing wholeheartedly and think deeply. Because it as much as you take out that 25 per cent then NCAA may not be in a position to carry out all the oversight functions that it should do as well as the training and retraining of its staff so that they keep up with current events in the aviation industry.
Why is it that Nigerian passengers when they their flights are cancelled they challenge the local airlines but if it is done by foreign airlines they don’t challenge them?
It is lack of knowledge. Most of the time, because it is only in Nigeria that we take transport lightly. Go to our motor parks and see what touting is going on there, see what kind of quarrels happen there, wherever you have any serious bus stop or motor park, it is just a place where you find riff-raff. The airport environment until of recent has also been like that and most people even believe that when Lagos state government did itself a great favour and revamped Oshodi and sacked the touts there; they now resume duties at the cargo terminal here at the airport.
It is something that is really a security issue and our security agencies that are operating at the airport, especially Aviation Security (AVSEC) of FAAN must be up and alive to their responsibilities. And I think that is one of the reasons why the current Minister of Aviation is even looking at the possibility of arming the AVSEC. It is through that, that everybody will take them seriously and then will ensure that passengers do the right thing. It is not a proper thing for passengers to take laws into their own hands. If a flight is delayed there is no airline in this world that delays its flights intentionally. This is because aircraft make money flying not being on the ground. When they are on the ground you spend your money maintaining them, you pay for parking. So most airlines want their aircraft to fly and make money. No airline wants to collect your money and keep it with them, because that money is not deemed to belong to the airline until they fly you, so it is just a loan that they have collected from you so to speak.
So we keep trying to inform the passengers about what to do. That is why we came up with these screens at the airports; to keep telling the passenger at any given opportunity that these are your rights. But it also comes along with some responsibilities because the airport environment is an elitist environment and there are instances that you really have to keep calm. And this issue of beating up airlines staff is not the best; after all, if you beat them up will that make the aircraft take off? If you block the aircraft and disallowing it from flying or block the boarding gate and disallowing the passengers from going to board their flights, other passengers on the other routes from taking their own flights, how are you sure that it is not that flight that will go and drop passengers and come back and pick you?
So in so doing you are still making your situation worse. And then as we keep saying, by the time you are courteous and behave in the right kind of temperament that you are supposed to in the right kind of atmosphere that you find yourself, it makes things easier. We have a reporting authority, if you report to NCAA that this is what the airline is doing, we are always happy to even take you to the airline operator and ask them what is going on. But I can assure you that there is no way anybody can slaughter comfort in place of safety, because safety comes first.
So, if we find out that the airline delayed flight for safety reasons, we keep away. We just explain to the passenger that this is a safety issue; therefore, they have to exercise a lot of patience, caution and that in the long run they will fly. The regulations envisage that there must be cancellation, flight delays, luggage maybe delayed but that is all the more reason why various levels of compensation are put in the regulations.
So the best the airline can do if it delays passengers upward of two hours is to give you that refreshment as spelt out in the regulations. If it is after three hours the airline is bound to refund you ticket money, just that the refund must be in the form in which you bought your ticket. If you bought your ticket through the agency you get your refund through the agency.
If you bought your ticket online you get your reversal through the online. If you bought your ticket on the counter then you can go to the counter and collect back your money and buy another ticket for another airline and go. So that is why I am telling you that the missing link in all these things is that interlining arrangement.