In a figurative sense, over the decades, there has been turbulence in Nigeria’s skies. The aviation industry has faced many challenges especially in recent times. While trying to survive the hard times caused by COVID-19 pandemic and the global lockdown, the sector was thrown into the challenge of lack of aviation fuel and scarcity of forex to pay foreign airlines.
Also, the different controversial issues surrounding the proposed national carrier is one of the many challenges facing the industry.
Particularly, the astronomical increase in the price of aviation fuel which used to be sold at N200 as of February this year, but has risen to N780, with no end in sight.
The crisis and the failure of the government to act promptly has started taking its negative toll on the local airlines with the oldest of the airlines, Aero Contractors, announcing its decision to temporarily shut down its scheduled operations.
Aside from Aero, other airlines are on the verge of shutting operations due to the attitude of the government towards addressing the challenges.
The Airline Operators of Nigeria (AON) have called for a review of many unpopular policies of the government or they may be forced to shut down operations.
The highly publicised news that Nigeria was indebted to the foreign carriers to the tune of $450 million, being accrued funds generated by them through the services rendered to the Nigerian flying public but trapped in the Central Bank of Nigeria (CBN) for years was the height of Nigeria’s aviation problem with international community.
Though about $200 million has been released, the outstanding is still a challenge; and this is why some foreign airlines have refused to return to Nigeria’s airspace.
All efforts made by the airlines, and even the International Air Transport Association (IATA), the clearing house for over 300 airlines across the world, to make the Nigerian government pay this statutory fund have not materialised well.
It is again on record that the failure of the government to release this huge fund, which has portrayed Nigeria as a place dangerous to do business, has however, started having a negative impact on the Nigerian traveler, who now suffers through the prohibitive fares they pay to the foreign carriers.
However, the lingering scarcity of aviation fuel and forex has forced some airlines to shut down operations.
The minister of aviation, Hadi Sirika, had also said there is no short-term solution because of the challenges, adding that what was happening in the industry is a global problem.
He said, “Energy crisis is real and it is global. Today there are aviation fuel problems all over the world. From America to New Zealand, it is aggravating in Nigeria because we don’t produce the product.”
He also explained that the situation was further compounded by the lingering scarcity of foreign exchange because the source of earning forex has dwindled.
He reiterated that the Nigerian government had in the past sourced 10,000 metric tonnes of Aviation Fuel for the airlines and that the government is willing to do more.
“As we speak, the government is in the process of finding a permanent solution to this issue,” he assured.
According to the minister, some of the solutions in view include, “importation of the product at appropriate price, accelerating the refurbishment of our refineries and also waiting for the coming on stream of Dangote Refinery to boost supply of the product. But that cannot be soon.
“So, when you ask how soon, I wouldn’t know when Dangote will come on stream, I wouldn’t know how soon the refineries will be fixed. I wouldn’t know when imports would become sufficient. But the government is working towards all these to happen.”
Sirika said he will be meeting with relevant stakeholders, including the Central Bank of Nigeria (CBN) to see how the airlines can access dollars at the official market rate rather than the black market rate.
Meanwhile AON president, Abdulmunaf Sarina, said the aviation fuel crisis began from N180 per litre and that it is now pegged at N1000 per litre.
He said the forex crisis is also a huge burden on the industry.
“The rate at which the dollar is escalating now is very alarming. Every day, a difference between 10-15 Naira is added at the parallel market. Last Monday, it was N610 but today, it is N670 to one dollar,” he said.
Similarly, AON vice president, Allen Oyeama, said the airline operators are satisfied with the government intervention so far.
According to him, “We, the airline operators are satisfied with the approach the government is bringing to the table. I told you, Mr. President, in order to alleviate our suffering, approved 10,000MT of fuel. Another 5,000 has come in. We are about to start accessing that. We are pleased with the approach for the long run.
“It is not easy to give a timeline to issues like this because the challenge is global. Even American airlines are threatened too. It’s not only Nigeria.”
On the plans for the establishment of a national carrier, the Nigeria Air, stakeholders kicked against some of the federal government’s arrangements.
The principal managing partner, Avaero Capital Partners, Sindy Foster, noted that the arguments in favour of the national carrier are that it will increase capacity, reduce the cost of tickets and add employment.
“However, it will likely operate at the expense of the domestic airlines, backed by government money and all the largesse that goes with that privileged position. Therefore, it will disadvantage domestic airlines that won’t be able to compete with the bulk purchasing of fuel or the dollars, which appear to be available to the national carrier; so instead of increasing the market, the market will retract.
“The three aircraft that the national carrier is bringing can easily displace 10 aircraft of airlines currently struggling. When supply retracts, prices will go up.
“In terms of employment, the project is starting off on the wrong foot. It has been reported that the three aircraft will be wet-leased which means that the crew will not be Nigerian. For a national carrier that was positioned as a generator of employment for Nigerians, this will be a kick in the teeth.
Similarly, the president of Aircraft Owners and Pilots Association (AOPA), Capt. Alex Nwuba, stated that the airline can hardly survive with wet lease aircraft.
“The market exists. Airlines are operating in this market, they have challenges with the price of fuel, and they have challenges with foreign exchange to pay suppliers. You even have the challenge of airlines that are selling tickets; hundreds of millions of dollars that cannot repatriate those funds. How will these three planes operate on the basis of wet lease?
“So how does that solve our problem as a nation in terms of creating employment as an industry? How does that solve the problem of foreign exchange that we are already facing because we had to pay for that wet lease in foreign exchange?
“How does that solve the problem of availability of funds through the central bank, or will the national carrier get its money through the black market to fund its operation? It is absurd; it’s essentially an absurd proposal made to a group of people that have no knowledge of what’s going on,”he said.
However, the federal government has retracted the planned wet lease and decided on purchasing the plans to be used for the national carrier.
Aero Contractor and Dana Air suspended operation and stakeholders said the crisis was aggravated by the crisis with no end in sight for the crisis.
They argued that to solve the crisis, government should prioritise local refining of JetA-1. They also asked the government to provide special funding for the aviation industry in order to address the issues of foreign exchange and other challenges facing organisations in the sector.
Speaking, center director at the Centre for International and Advanced Professional Studies (CIAPS) Prof. Anthony Kila, lamented that the failure of the government to refine the Jet A1 product locally was negatively affecting the economy.
Kila insisted that the aviation industry should be seen as an essential infrastructure by the government, insisting that aviation should not be treated as elitist.
He explained that apart from the telecommunications industry, aviation was the next to connect humans and cargo, maintaining that the government should not allow the energy crisis to stunt growth in the sector.
Kila emphasised that the more passengers that patronise the sector, the more revenues for the players in the industry and the country at large.
He added, “We should create an aviation sector that is able to create movement for commerce. The issue of energy crisis should not be allowed in the industry. If we want to make the aviation industry viable, we should look at commerce.
‘’’The government can look at establishing a bank of aviation, which will attract other players into the sector, especially investors. Aviation leaders should come together and ensure aviation fuel is refined in the country.’’
Kila also craved more recognition for ATCs in the country, saying they play critical roles in ensuring safety on the ground and in the air.
Also, the immediate past managing director of the Nigerian Airspace Management Agency (NAMA), Capt. Fola Akinkuotu, declared that as aviation fuel continued to be imported into the country, its price and airfares would continue to skyrocket.
Akinkuotu lamented that barely three months ago, a one-way ticket in the business class to Abuja from Lagos was barely N50, 000, but said the airfare had risen to N150,000 in the local market today.
Akinkuotu challenged airline operators to acquire modern equipment to address the challenge of ageing aircraft, hoping that the planned aircraft leasing company by the government would help to resolve the challenge.
He, however, said that adoption of modern technologies by government and other organisations would help to address some of the challenges presently bedeviling growth in the sector.
He added, ‘’There should be appropriate financial institution where the airlines can lend money at single digit interest rates to acquire modern aircraft.
‘’Also, we will continue to pay more for flights. Three months ago, a business class ticket Lagos-Abuja was just N50,000 and it rose to N75,000, but today, it is N150,000 for the same ticket. The government should address the challenges to save the sector.’’
Speaking, the director, Research, Zenith Travel Consult, Olumide Ohunayo, said commercial airline operators have started cutting down on schedules because the nation’s airports are empty and being deserted by passengers due to price hikes.
According to him, passengers have, as well, reacted to increase in price and cut down on air travelling by either embracing technology or other means of transportation.
He said, “Patronage is a bit low now because ticket prices are not coming down. It is increasing daily and this is because aviation fuel is about N903 and we are in the summer, the Russia Ukraine crisis that led to sanctions, which haven’t been lifted, leading to fuel crisis and we still have the naira exchange rate to dollar that hasn’t shown any hope of reducing.
Speaking on what will bring patronage to the airports, Ohunayo, said, “What we can do is to encourage the passengers by showing empathy and explain that prices are conditions of oil markets and assure them safety will always be the priority. Passengers have reacted to the new prices and flights have dropped. What we can only do is that we have to also see how we can keep some of those routes alive and not shutting them down completely for those who want to fly for important meetings because instead of having conferences out of their destinations, organisations are reverting to zoom meetings that were on during COVID-19. This is a difficult time for the industry.”
On his part, the former military commandant, Murtala Muhammed International Airport, Lagos, Group Capt John Ojikutu (rtd), said price will continue to go up until Nigeria starts refining these products locally.
According to him, in the 90s, aviation fuel was refined locally, and transported through the pipelines, while the exchange rate was about N80 to a dollar.
He stated further stated, “The component of commercial aviation fuel anywhere in the world especially in Nigeria is in dollars so, if we cannot change all these components, there is nothing we can do. Also, let me say this: 50 to 70 per cent of people traveling are government and corporate officials, and those are the ones buying tickets because very few people use their money to pay for tickets. So, let’s assume that the traveling public is generally 5 million and paying N50,000, if the price is increased to N100, 000, passengers will drop by 40 or 50 percent of that figure.
“The airline operators are not losing anything in terms of earning, but possibly losing to a hike in fuel price and the only way to address fuel is to refine fuel in this country. That’s the only way out but if we are still bringing fuel into this country under the same conditions, we are not moving anywhere, and I am worried that the industry can collapse in the next two or three years,” he concluded.
