Africa: Why Nigeria’s Aviation Remains Unattractive

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The aviation industry is said to be catalyst for economic development, but in Nigeria, the sector remains unattractive to investors.

The International Air Transport Association (IATA) reported in 2018 that air transport supports 65.5 million jobs and $2.7 trillion in global economic activity; that over 10 million people work directly for the industry itself.

IATA also said that air travel carried 35 per cent of world trade by value ($6.0 trillion worth in 2017), but less than 1 per cent by volume (62 million tonnes in 2017).

The international body said if aviation were a country, it would have the 20th largest economy in the world – around the same size as Switzerland or Argentina, adding that aviation jobs are, on average, 4.4 times more productive than other jobs in the economy.

IATA also said Africa has 731 airports and 419 airlines with an aviation industry that supports around 6.9 million jobs and $80 billion in economic activity.

According to the association, Africa is set to become one of the fastest growing aviation regions in the next 20 years with an annual expansion of nearly 5 per cent.

In Nigeria, however, industry stakeholders believe that if the aviation sector is robust it would create four times the current existing jobs in the sector and a lot of youths would have been employed by airlines, service companies, businesses and others in the sector.

Poor Performance
Many industry stakeholders said since the liberalisation of air transport sector in 1988, Nigeria has not recorded any successful commercial airline that has thrived for up to 20 years. Most of them went under at the average age of 10 years.

So the industry, which is known for marginal returns on investment, is not attractive to investors because it does not rake in huge profits and it is hindered by government policies that tend to impinge on the progress of the airlines.

Many industry stakeholders are of the view that government really does not care about the growth of the aviation industry, which if well harnessed would be creating hundreds of jobs every year because entrepreneurs would be willing to invest in the sector.
They noted that if there are four or five major airlines that operate both domestic, regional and international services, the aviation industry would contribute more to the nation’s GDP as well as be a training ground for aviation skills and manpower, which could be exported to other parts of the world like Ethiopia and Kenya.

Government Policies
The stakeholders believe also that government through the relevant ministries and agencies deliberately hinder the growth of domestic airlines that actually create jobs and promote policies, noting that government officials tend to encourage foreign carriers that operate into the country.

They noted that despite the fact that government knows that domestic airlines would not grow if foreign airlines are encouraged to operate unhindered into the country, these foreign operators are given priority by government.

They also said there was nowhere in the policy of government that it is compulsory that foreign carriers should partner with domestic airlines for fiscal benefits and for technical exchange and goodwill.

Many industry observers also believe that government is really indifferent to the development of the aviation industry so they are more interested in getting foreign airlines to operate and airlift Nigerians to international destinations. That is why no incentives are given to investors who establish airlines in Nigeria.

Former Chief Operating Officer of Chanchangi Airlines, Alhaji Muhammed Turkur, decried the policy where start-up airlines are not given any tax holiday but they begin to pay taxes and charges from the first day their first flight takes off to the skies.

In the communiqué issued at the end of the conference organised by League of Airports and Aviation Correspondents (LAAC) recently, the association noted that the growth of aviation has been stunted by the absence of a clearly defined policy to guide aviation business in Nigeria thereby discouraging foreign investors to do business in the country.

The conference further noted that there must be long-term legal frameworks to provide the direction of doing business in the aviation industry.

It also said that there is the need to review the Bilateral Air Service Agreements (BASA) to make them mutually beneficial.

“It was observed that granting multiple destinations to foreign carriers is not an economically wise decision. It is a deliberate annihilation of the domestic market. Our commercial agreements must be anchored on the principle of reciprocity,” the communiqué said.

Multi-designation
There was a unanimous agreement that the Nigerian government is not interested in growing a robust aviation industry with viable domestic airlines because it does not have policies that encourage the airlines; rather, it has made Nigeria a feasting ground for foreign carriers that acknowledged that Nigeria is one of their major profitable routes.

Because of the importance of the Nigerian destination, inside sources said that top officials in the Ministry of Aviation and lately Transport are courted by foreign airlines, ambassadors representing the airlines from their country and others to enforce and implement policies that favour them at the detriment of the domestic airlines.

According to industry insiders, since the liquidation of Nigeria Airways in 2004, commercial agreements between foreign airlines and Nigeria have become a big business for top government officials in the Ministry of Transportation.

The sources alleged that each foreign airline has its point of contact that negotiates on its behalf and the point of contact is settled with cash, business class tickets and some are taken on holidays that are fully bankrolled by the airlines.

Nigeria Airways was negotiating commercial agreement with airlines on behalf of Nigeria after Bilateral Air Service Agreement had been signed.
THISDAY learnt that these directors in the Ministry take airlines to the Ministers and woo them to approve frequencies for the foreign operators. The source said that there is no policy that aims to protect domestic carriers and even if there were any they would not be enforced. So the issue of approving frequency for foreign airlines is sometimes carried out clandestinely between the Nigerian officials in the Ministry and foreign airlines or their representatives.

Protecting Nigerian Carriers
Many of the industry observers are of the view that most countries imbed in in their aviation policy how to protect their local carriers against foreign operators. Some insist that the foreign airlines must partner with local carriers; some attach it as condition for additional frequencies while others demand that foreign airlines reserve seats for their indigenous carriers. For example, they would have 30 per cent of the total number of passengers airlifted in every flight by the international operator. In the US any passenger travelling on government expense travels on US carriers or their partners. That is the Fly American Act.

Industry analyst, Alex Nwuba, believes that with support from government, local carriers can compete with mega operators like Emirates, Lufthansa, British Airways and others. He noted that what Nigerian airlines need is for government to give them the needed support since they create jobs, while international operators employ extremely few Nigerians.

“I totally disagree that no Nigerian carrier can compete with a foreign carrier on international routes. With little orientation and mandatory Fly Nigeria Act, a safe operation and good service, Nigerian airlines will be dominant; even more dominant than Ethiopian,” Nwuba said.

Reacting to the arbitrary approval of frequencies to foreign airlines by government, member of Aviation Round Table (ART) and industry stakeholder, Group Captain John Ojikutu (rtd), said government over the years has not shown commitment in growing robust domestic airlines.

He alleged that government officials used privately owned domestic carriers to kill Nigerian Airways and now are using foreign carriers to kill Nigerian airlines.

“I have seen Nigerian airlines grown and faded in Okada Air, Kabo, ADC, Bellview, Chachangi, Triax, which were used to kill Nigeria Airways by Nigerians in government and today am seeing Nigerians in government using foreign airlines to kill Nigeria airlines; so which Nigerians am l expecting to see that will perform wonders?

“Even the ones in Diaspora are afraid of the ones within. Nothing, no miracle except the ones within are tamed not necessarily trained by some exterior or external forces. Jot me down for this,” Ojikutu said.

Aviation Master Plan
Travel expert and organizer of Akwaaba African Travel Market, Ikechi Uko, said Nigeria should have aviation master plan and strictly follow the plan to develop the industry.

“Nigerian Aviation will not grow beyond what obtains today until there is a master plan that stipulates why we do aviation. Today we do aviation for the sake of aviation. Aviation is done for the sake of transportation.

“Only Air Peace has articulated a business case for aviation. It says it is for the sake of job creation; 200 workers for one aircraft. I even heard the former Minister, Senator Hadi Sirika (who is expected to return as Minister for the industry) was quoted during a presentation at the Senate hearing that 300 workers would be employed for each plane. He said this to justify the need for a national carrier; that airlines create jobs,” Uko said.

He noted that other countries also have their targets for the development of aviation, citing that for Dubai, South Africa and Zimbabwe it is for tourism.

“Aviation in Dubai is for tourism and tourism is for national development and strategic economic positioning. Today it is a global hub and the 4th most visited city in the world.

“This would not happen without Emirates and the easy visa regime. Qatar grows aviation for strategic diplomatic and economic prowess. A small country is able to extend its reach and influence globally. All medium powers use aviation as a soft power tool for global positioning or economic development.

“Without a well-defined business case captured in a national development master plan, we will keep going round in circles.

“So Nigeria has to decide why it needs aviation; then build an appropriate strategy to deliver on that,” Uko, the travel expert said.

Government’s Support
What is cardinal for any government is to ensure that there is job for its citizens. With a robust aviation industry, there will be more investment and more jobs for Nigerians. For this to happen, government must support the sector and its operators.

The Chief Executive Officer of African Aviation Services, Mr. Nick Fadugba, said such support is necessary for the airlines to thrive and added that even when the country establishes a national carrier, it must support privately owned airlines to ensure the growth of the sector.
“I want to appeal to the government to support private airlines like Air peace and many others, of course we want a national carrier but this should not be done to the disadvantage of private carriers like Air Peace.

“Air Peace is launching long haul services to Dubai but they need support from government and from the flying public in Nigeria. I don’t see why Emirates coming into Nigeria from Dubai why they can’t partner with Air Peace.

“If Air peace can partner with Emirates to Dubai, it is a win-win. So Emirates shouldn’t have the lion share of the business and it is the government that can influence that”, he said.

By Chinedu Eze
Source: thisdaylive.com

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