This treatise will no doubt generate mixed reactions from stakeholders and industry obervsers alike, nonetheless I am bound to point out some salient points which many people that have had cause to discuss have been overlooking.
Yes, the airline industry is in distress in recent times ranging from the scarcity of aviation fuel and its high cost – presently being sold by marketers for between N180 and N200 depending on the location of purchace; high cost of maintenance to skyrocketing total operational costs and on top of it all, the huge indebtedness of the very many airlines in Nigeria to service providers and many more.
At the last count, the airlines and allied customers of the industry owed a cumulative huge debt totalling N32billion as at April,2011.
This negative scenario, informed the call, early last year by airline operators to call for a bail out from the Federal Government as it did to the Banking sector of the nation’ economy.
The point should be noted, while they have the right to ask for bail out , the airlines can not in anyway compare the Banking sector to airlines’ sector in the country in all ramification.
The banks were able to get bail out because almost all of them were publicly quoted in the Nigerian Stock Exchange where shareholders are opportuned to check their operational capabilitiies and financial muscles and whether they are making profits or not in addition to the strict monitoring of their operations by the Central Bank of Nigeria.
Those banks that were hitherto known as ‘family’ or sole proprietorship owned have been forced by regulations to consolidate by selling shares to the public and merge with other publicly quoted financial institutions.
Today, the era of ‘one-man, one banking operation’ where customers’ hard earned savings were hitherto plundered is gone for good.
In addition, new mangement were injected into the top heirarchy of the banks by the CBN with specific tenure and not the previous situation where you have ‘chairman /managing director for life’. The bail out given to the banks are being closely monitored to ensure prudent management.
The beauty of the present situation in the banking sector is that any erring chairman, managing director, directors and the board can easily be shown the way out during or after the annual general meeting (AGM).
Can we honestly say the same with the airlines of Nigeria in the present dispensation? The answer is definitely No! If they get the bail out, are they ready for government to appoint for them-Chairmen, Managing Directors, Directors and Board Members as executed by the CBN with the banks?
There is the annoying aspect of these airlines looking up to government for assistance.
The 5% Ticket Sales Tax and 5% cargo Sales Tax are already embedded in their transactions with passengers and cargo customers with government allowing them to remove administrative charge. The balance of such revenues collected on behalf of government, by statute must be paid to the coffers of the government through the Nigerian Civil Aviation Authority (NCAA).
The airlines jointly or individually “conspire” to hold on to the money illegally which runs into billions of Naira.
The question now is,is it morally right for them to be asking for financial bail out from the same government you are owing billions of Naira? Let alone for government to grant such frivolous request? It is unimaginable.Digging a hole to cover another? You will end up having a wide and deep gorge. Common sense should come to play here.
Sole ownership of airlines by money-bags with their closely-knitted family without transparent management in place has been responsible for the demise of over 70 per cent of the country’s registered airlines right from the days of Okada Airlnes, Kabo of old, Harka, Harco, Oriental Airlines, Intercontinental, Freedom Air, African Airlines and many others.
If they have been publicly quoted with shareholders monitoring their performances at the annual general meetings, they would not have gone under.
There was once a report of an airline chairman, who used to send his ‘ladies of the roses’ to collect huge sums of money over the airline’s counter at various times.
At a point, the said airline could not sustain maintenance of its fleet of aircraft nor pay salaries of its domestic and foreign staff, meet its financial obligations to its creditors. Sooner than later the airline closed shop.
The same applies to airlines of today and unless some drastic measure is embarked upon by the government through urgent review of regulations guarding their operations simlar to the banking sector, airlines in the country would want to reap from where they’ve not sowed like a leech and evenyually collapse.
This is also why the idea of merger of the airlines being propounded in some quarters can not hold, until there is positive move towards going to the stock.
If they are to be bailed out, they should bury their pride and get publicly quoted in the Nigerian Stock Exchange by selling shares to the members of the public and financial institutions on top of it all settle their indebtedness to various service providers.
Pending the total overhaul of their operations, the government, through the Central Bank of Nigeria should withhold whatever financial bail out already earmarked for them. If they are given before this exercise, it will end up in bottomless pit.
In recent time, some notable airlines embarked on arm-twisting of government and agencies’ officials, through unsolicited foreign travels, such as inviting them to witness the delivery of their ‘new generation ‘ aircraft in America or Europe with all the hotel bills paid and welfare package not less than $2000 for a one or two nights of their stay and a large entourage of Ministry or Agencies officials.You can imagine how much such an airline would have ended up expending on them if at least twenty were on such free-thrills for up to five days.
That is the reason why if such an airline went fowl of the laid down laws or regulations, they do it with impunity because those that ought to call them to order have been compromised one way or another.
That is also why many of the airlines have the audacity witholding revenue from the coffers of government, when in normal circumstances the directors of airlines responsible for such “day light economic robbery” should be cooling off their heels in the cells of the Economic and Financial Crimes Commission (EFCC).
Another issue that has also generated interest of late, is the high cost of aviation fuel and its attendant negative effect on their operations.
This, to my mind is a self inflicted ‘wound’. If you are using an aircraft and the cost of fuel is high in the market and you are not lifting the volume of passengers that will make your operations profitable, why don’t you trade off the bigger plane for smaller one that will reduce your cost of operations?
I continue to ponder over the years, why airlines would be using wide-body and fuel gustlling jet engine aircraft for 45 minutes to 1hr 30minutes flights.
Prudent management policy ought to have informed the managers that there is no way the airlines can easily break even in such a situation.
The best aircraft model they ought to be using is 90-100 seater regional jet or turbo-prop aircraft that are fuel efficient.
In addition, in a country like ours where we have abundant sunshine and high de-hydration level the rate at which wide-body Boeing 737 burn fuel will be undoubtedly high, there is no magic about it.
In any part of Europe and the Americas you can hardly find airlines operating hub and spoke using 737s for les than 2hours flight.
Using wide-body aircraft that has a range of between 3-5hours endurance for 45-minutes to 1hour 30-minutes flight amounts to ‘killing’ the aircraft in bits, as the structural integrity of the plane will suffer disintegration faster as against the manufactural specification.
The operations of airlines in Nigeria as it is today is feeder operations (Hub & Spoke). All of them are feeding bigger and better run foreign airlines with passengers at the four major airports of Lagos, Kano, Abuja and Port Harcourt.
Even now, the foreign carriers are poaching passengers from domestic airlines at these airports.
How will the airlines generate the much needed revenue to sustain operations. This is another area where government, through the Ministry of Aviation reverse the situation along with the aforementiond discourse
The bottomline of this piece is-Government, through the Ministry of Aviation should evolve a new regulation aimed at jetisioning sole ownership of airlines in Nigeria and enrench a new regime of airlines’ operation by going public through the stock exchange for proper operations and prudent management.
This is the way to turn their fortunes around and not by crying wolf, when they have not properly managed their private empires.