An industry in dire need of palliative to survive

Paulo (not real name), an ICT practitioner based in Lagos, booked his Arik Air flight from Lagos to Abuja. His flight was supposed to depart at 7.00 am but what happened? Paulo, along with other passengers, kept absorbing the frustrations of the long wait and endless postponements of the flight. Eventually, they left Lagos and landed in Abuja at around mid-night.

When I booked my Air Peace ticket from Lagos to Benin recently, the flight was moved from 1.00 pm to 4.20 pm before we eventually departed at 5.10 pm. On my way back, the flight departed Benin at 6.55 pm instead of 5.40 pm. Well, not too bad, you might say. Alex (again, not real name) who also flew to Benin the next day with Air Peace was not as lucky as I was. After two postponements from the initial schedule, Alex arrived Benin at about 8.30 pm. The same aircraft retuned to Lagos with passengers from Benin and then flew to Kano.

Although I cited Arik Air and Air Peace, the intention is not to paint them in bad light. Instead, both airlines alongside Max Air, Aero, Dana, Overland, Ibom Air, Azman and United Airlines — the latest domestic airline in town — deserve our high praises for flying in “bad weather”. Even before Covid-19 pandemic set in, the aviation industry was already distressed. Since June last year, it has been a daily struggle of survival for the airlines operating local and regional flights.

Aviation entrepreneurs operating commercial flights are not smiling at all as they are having a hard time joggling their numbers – they are not adding up. It is therefore not surprising that they see their doctors regularly to check their blood pressures. The time has come for the federal government to step up to the plate with the bailout that was promised. Only a small fraction has been paid out, but the airlines need the life line more than ever before to survive and prevent the aviation industry from total collapse.

Is the airline business not profitable? I don’t think so. If properly run, operating commercial airlines is a profitable enterprise but the operating environment is harsh and unfriendly, according to my source. Bad management is also another challenge in the industry. Two airlines that showed so much promise in the past began to pile up debts until the Asset Management Corporation of Nigeria (AMCON) came to their rescue.

The challenges in the sector also extend to allegations of undue interferences that are politically motivated by NCAA, the Nigeria Civil Aviation Authority, by granting favour to one airline at the expense of another for purely economic reasons. Now that the bailout option is resting squarely on the government’s table in Abuja, the expectation is that political considerations will not be applied to give any airline undue advantage. The world is watching.

Before now, the pressure by passengers on local flights was manageable. Over short distances, most passengers would normally prefer road trips. But that story has changed because our roads are no longer safe. Most inter-city roads are single lanes and where you have dual carriage ways, the state of disrepair is the rule rather than the exception.

Apart from the bad roads, what else do you find? Criminals have taken hold of the highways. Kidnapping for ransom has become a rewarding industry that is experiencing exponential growth. Sometimes, passengers in a commercial bus are also kidnapped for a ransom on each passenger’s head. Armed robbers are also terorrising their victims on a regular basis.

So, we are all scared to travel by road. Attention has therefore shifted to air travel and with reducing number of planes that are fit to fly, market forces of demand and supply have conspired to fork out more money from passengers for flight tickets.

But there are also good reasons to travel by road even with widespread insecurity. There are those who will not travel by air even if they can afford it. Actually, road trips are an excellent way to travel when safety is guaranteed; the experience is always different with stops to eat and stretch your legs, purchase fruits and other food items including boiled or roasted corn that you can munch on the way to your destination. But be ready to part with cash at every “toll gate” mounted by security personnel.

A flight to Benin from Lagos lasts for about 35 minutes but the same journey will take three hours by road in the absence of unforeseen circumstances. On December 26 (Boxing Day) in 1993, I drove to Benin. Segun Joseph, a friend and associate who now lives in the USA with his family, traveled with me.

The road was lonely and quiet as we had expected but it was safe. We were not troubled in any way about blood sucking vampire-bandits going on rampage and attacking us with assault rifles. After two hours and forty five minutes, we were in Benin at around 11.00 am. It was an enjoyable trip.

Nowadays, you are not sure when you will arrive your destination by road. Last Friday, I heard the story of a traveler who got to Benin at past midnight after spending 12 hours on the road. That was a risky affair but it happens all the time.

Flying by air is not cheap. It has never been cheap when compared to other modes of transportation. For our local airlines to survive and shield themselves against the prevailing economic headwinds, they now charge as much as N70,000 on a one way economy ticket to Abuja, for example.

When flights are delayed or cancelled, passengers blow hot and cold; indeed, they actually have every right to be angry. Frustration naturally sets in, too, over missed or delayed appointments. Representatives of the airlines apologise, but as one passenger noted the other day, “when will all these apologies end?” Well, I do not have good news for this passenger. These apologies are not manufactured or procured; they are the result of an aviation industry in a constant state of flux.

All over the world, the aviation industry was badly hit by Covid-19 pandemic. Travel restrictions resulted in colossal loss of revenue and many airlines may never recover from the meltdown.

The Nigerian scenario is not different. As bad as it is, our local airlines are struggling to keep their heads above water. In the airline business, you are required to constantly cough out US dollars to pay for nearly every transaction that includes purchase of aircraft and spare parts, aviation fuel, expatriates wages, training of pilots, aircraft maintenance, etc. Meanwhile, the airlines charge naira for their services, so how will they grow? With the exchange rate at almost N490 to one US dollar in the parallel market, it will be tough for airlines to survive.

A critical component of the airline business is aviation fuel (Jet A1) which was deregulated a long time ago. It means marketers of petroleum products charge differential prices that are ultimately determined by market forces. At between N230 and N270 per litre, the fuel domestic airlines need to fly is expensive.

What the government can do to solve this problem is to facilitate local refining capacity because as long as Jet A1 is imported, its landing price will be determined by the price of US dollars. My source also informed me that it costs a Boeing 737-300 series between N2.5m and N3.5m to purchase fuel to make a one hour flight.

Another area of concern is the different layers of taxes imposed on domestic airlines. Before President Muhammadu Buhari approved that VAT should be waived, Nigeria was the only country in the world where airlines are asked to pay VAT. When aircraft and spare parts are imported, there are compulsory taxes to be paid. Other taxes include navigational and parking charges, passenger service and airport taxes and so on.

However, the airlines with shrewd management tactics are using the right compass to navigate well and weather the financial storm. Airlines that do not spread themselves too lean – by not biting more than they can chew — will survive. By the way, airlines map their routes based on commercial viability. Presently, the favoured routes are Lagos, Abuja, Port Harcourt, Owerri, Benin City, Asaba, Enugu, Kaduna, Kano, Sokoto and Makurdi.

One airline that has applied “Optimisation Theory” effectively is Overland Airways. What the airline has done is to create its own “Blue Ocean” where competition is next to nil. According to a statement on its website, Overland Airways is determined to increase the “prosperity of Nigerian hinterland” by facilitating air travel with a fleet of nine aircraft from Lagos and Abuja to Ilorin, Akure, Dutse, Minna, Bauchi, Asaba and Jalingo.

Overland Airways is reaping the benefits of their “monopoly” and the airline smiles to the bank every day. Their positioning strategy is to power “hinterland economies” by linking them with Abuja and Lagos, the political and economic hubs of the country respectively.

The strategy is working and it explains why Overland Airways is not under any threat of being financially distressed. Instead, the airline is winning awards and it has been ranked as one of the fasted growing domestic airlines in the country since it began operating charter and scheduled flights in 2002.

When flights are delayed, it is not exactly a “capacity” issue, according to my source. Flight delays could be due to technical problems, documentation, VIP movement, bad weather or unruly passengers. Instead of blaming the airlines, passengers should worry more about their safety. Apart from some tragic crashes that we recorded in the past, the safety record of the aviation industry in Nigeria is quite commendable.

No responsible regulator will compromise safety of its air space. In any event, pilots and the cabin crew are also like the rest of us – they are human beings. Who wants to die in a plane crash? In every situation, pilots and the technical team take safety considerations seriously – it is at the heart of all decisions.

When one of the domestic airlines was grounded recently, the regulators wanted to err on the side of caution. No airline should be allowed to “struggle” to the extent that the safety of its passengers will be compromised; the right thing to do is to ground the airline and carry out an extensive audit on its operations.

Airlines operate “triangular movements” with each aircraft. Once an aircraft experiences a delay, it affects all the other flights in that triangle. The consequential delays can spread into other triangles if an aircraft is unable to fly in the triangle it belongs. The same passengers who complain over flight delays in Nigeria accept the situation when it occurs overseas.

To overcome the challenges in the sector, government should create a special window for airlines to access forex at a discounted rate, in addition to the bailout option and local refining capacity.

The airlines on their part should collaborate to train aircraft engineers locally – through a knowledge transfer process — and set up a maintenance repair organisation (MRO) for aircraft maintenance in Nigeria. It will help to save plenty of scarce foreign exchange.

My source also told me that it costs between N300m and N400m – subject to variations in the price of dollars — for a single aircraft to be taken abroad for maintenance. Parking fees are charged daily and when the airline is unable to pay on time to retrieve the aircraft, it affects domestic operations.

Braimah is the publisher/Editor-in-Chief of Naija Times (https://naijatimes.ng)