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8 domestic airlines may collapse in next 5 years – Investigation

*As mismanagement of bailout funds, merger challenges, others may cripple operations

From all indications, there are evidences that unless all the airlines in the country merge into one strong mega airline within the next seven years, the remaining local carriers operating domestic and regional routes may find it extremely difficult to operate further, due to stiff competition that will arise from the open skies initiatives currently gaining ground on the African continent.

Open Skies for Africa was cemented at the Yamoussoukro Declaration of 1988, in which many countries in Africa agreed to comply with the principles of air services liberalization.

With the deregulation of air services and promotion of regional air markets, making it open to transnational competition, it is expected that most airlines, especially, the weak ones, would finally collapse completely, going by these developments.

Although the implementation of Yamoussouko Declaration has fallen short over the years, but aviation experts have warned that once it comes into force, weak airlines have to give way for the stronger ones within the region. The declaration is expected to take full force within the next five to seven years.

Apart from liberalization of African airspace, it was gathered that most local airlines in the country are not getting it right; and may not compete favourably with other airlines that are more equipped for regular flight operations.

For example, investigations have also shown that less than 20 out of the 47 registered airlines have good insurance policy, thereby further creating a big bottlenecks on their operational efficiency and contributions to the economy.

Further investigations indicate that airlines in Nigeria are not doing well because, they have poor business plans, bad aircraft holding, operation of multiple aircraft types, poor maintenance philosophy, bad crew and aircraft management system.

“Why can’t four airlines merge and share their responsibilities. In the next five years, say maximum of seven years, if Nigerian domestic airlines do not merge, all of them are going to go under because they will not be able to compete due to open skies. That calls for merger and strong fronts”.

“Nigerian airlines are not making it because, they have poor business plans; Apart from Air Peace, their aircraft holding cannot sustain their flight schedules. Another challenge they have is the operation of different aircraft types, which calls for extra expenses since they will now require huge funds to maintain them. The longest flight in Nigeria is perhaps, Lagos- Maiduguri route, which is about two and half hours; A 737 is good for such regional operation, but you find some of the airlines going for bigger aircraft to move from point A to B”, the industry source added.

In addition, it was also gathered that most airline’s Chief Executive Officers have poor corporate governance in running their airlines, a factor, it was gathered, further endangers smooth operations.

“Some of the chief executives are not sincere to themselves. They exhibit poor corporate governance, as they pay foreign pilots differently and indigenous pilots differently. They are involved in what I call corporate fraud; and some of them cart away about 20 per cent of each money their airlines make in a month,” the source hinted.

On the way forward for the domestic airlines, the source pointed out that streamlining of aircraft holding and proposing a realistic business plan to be vetted by Nigerian Civil Aviation Authority (NCAA) experts, would be a way out of the operational crises.

The source stated further that, “To maintain their aircraft efficiently, these airlines have to merge so as to increase their aircraft holdings. They must also run their operations with at least seven aircraft. 25 per cent of the aircraft should be reserved. The practice is that if you have 20 airplane, four should be on reserve, while the other 16 should be scheduled so as to get backup when anything happens. In aviation forums, we were told that any good management system must have 15 per cent aircraft holding visibility and 20 per cent reserve”.

On the much debated five per cent Ticket Sales Charges, the source hinted that airlines are not supposed to belabor themselves with the issue, emphasizing that the proceeds are from passengers and not the airlines.

“They should stop complaining of five per cent TSC. They should lay emphasis on Value Added Tax (VAT) instead of five per cent TSC. It is five per cent, VAT Airlines should tell government to remove from them because government has removed five per cent from other means of transportation. That is something they should fight for. The five per cent VAT should be removed from TSC. Then if TSC costs N20, 000; 10 per cent of that N20, 000 goes to VAT and NCAA. So if they remove five per cent VAT, that is the money they are saving already and it will reduce the cost of tickets”, the impeccable source noted.

Meanwhile, the Chief Executive Officer, CEO, Sabre Travel Network, West Africa, Mr. Gbenga Olowo had continuously advocated for a bigger or a mega airline that would emerge as a flag carrier and not necessarily a national carrier.

According to Olowo, there was no reason Nigeria cannot call the airlines together and find a ways and means to make them strong.

“If I have my way, I will merge all of them into one without killing their individual identity. The total aircraft for Nigerian airlines today is less than thirty. South African airways has 53 aircraft, Ethiopian airline has close to 100. We can bring our airlines together and do a very robust schedule for all their airlines put together,” Olowo said.

For Comrade Abdulrasaq Saidu, Secretary General, Nigerian Aviation Professionals Association (NAPA), airline’s merger would be the only solution for the survival of the domestic airlines in the country.

According to Saidu, poor management of airline by owners as a result of nonchalant attitude remained their greatest challenge; coupled with the inability of the regulating body- the Nigerian Civil Aviation Authority- to play its role as a regulatory agency, further compounded the situation.

He said,”If you go to NCAA, you will see the number of airlines registered without operating. Where are they are using their AOCs, NCAA must wake up from slumber and do the needful. NCAA registered airlines, but it does not monitor them effectively.”

He said that for airlines to break even, that they must become a national carrier, while funds from the Bilateral Air Service Agreement should be injected into the system.

Chukwuemeke Iwelunmo, Lagos

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One Comment

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