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Nigeria @ 60: The Aviation sector and its travails

After several decades since its inception, the Aviation industry continues to face some of its biggest challenges.

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Nigeria @ 60: The Aviation sector and its travails

The Nigerian Aviation sector is about 74 years old today, but it has always been plagued by an economic lull, mismanagement, corruption, and overstaffing, among others.

The industry earned its first identity in the days of West African Airways Corporation (WAAC), which was an airline that operated from 1946 to 1958.

WAAC was jointly owned by the governments of Britain’s four West African colonies—the Gambia, the Gold Coast (now Ghana), Nigeria, and Sierra Leone. The carrier was headquartered at the Airways House in Ikeja, Nigeria, and operated from its hub in Lagos Airport, which is now Murtala Muhammed International Airport.

READ: Arik Air bows to pressure, implements 80% salary cut for staff in April

On September 30, 1958, it was dissolved, as all the shareholder countries but Nigeria set up their own national airlines following their independence.

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As the sole remaining major stockholder of the airline, the government of Nigeria continued to operate it as WAAC Nigeria, and eventually rebranded it to Nigeria Airways Limited in 1971. It became the flag carrier of the country till 2003 when it ceased operations.

Managed by a number of foreign companies, including British Airways, KLM, and South African Airways, Nigeria Airways had its heyday in the early 1980s, just before the departure of a KLM team that had been hired to make the airline efficient and profitable.

READ: Local refining; A panacea for Nigeria’s reliance on imported refined products

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At that time, its fleet consisted of about 30 aircraft, but the carrier was two years behind with its accounts, to the extent that the aircraft were acquired for cash.

Plagued by mismanagement, corruption, and overstaffing, the airline at the time of closure had debts totalling $528 million, as its operative fleet comprised a single aircraft flying domestic routes, as well as two leased aircraft operating the international network. Nigeria Airways was succeeded by Virgin Nigeria, and the ground facilities were taken over by Arik Air.

READ: SAHCO, Arik Air renew contract to boost services 

Nigeria Airways retiree says

Mr. Francis, an ex-staff of the airline who retired from the printing section, recalled that there was a high number of personnel handling the printing of aviation documents of Nigeria Airways, which had its operations concentrated at the MMA in Lagos, such as flight documents, boarding passes, and papers for engineers of the aircraft, among others.

According to him, the printing section was shabbily managed by the officials, who were quacks employed by the military regime then.

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He said, “It got so bad that government officials fly their families without paying for the service rendered, believing that after all, it was government’s property. This kind of attitude was synonymous with Nigerian investments, which lacked professional management expertise. Where is the Nigerian Railway Corporation today, where are the likes of NITEL, NIPOST, among other government agencies?”

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READ: Nigeria’s air passenger traffic up by 2% in Q1 2019, as Lagos tops

Private airlines came, saw but were conquered 

Having realized the importance of engaging the private sector in economic development, the Federal Government opened the Nigerian airspace to private investors.

This led to the emergence of Okada Air in 1982. Based in Benin City, Nigeria, the carrier started with a fleet of BAC-One Eleven 300s and started charter operations in September of the same year. In 1984, a Boeing 707-355C was acquired for cargo operations. By 1990, ten BAC One-Elevens were bought, and eight more were acquired in 1991. The company was granted the right of operating international flights in 1992, but in 1997, the company was disestablished.

From 1971 to date, about 61 airlines had operated in Nigeria. They all came, saw, and were conquered. Some of them are Okada Air (1982 – 2002); ADC Airline (1984 – 2006); AfriJet (1998 – 2009); Albarka Air (1999 – 2005); Bellview Airlines (1992 to 2010); Chanchangi Airlines (1994 – 2012), and First Nation (2010 – 2018) among others.

READ: COVID-19: Virgin Atlantic files for bankruptcy

When Arik Air took over the former Nigeria Airways facilities in Lagos, several industry watchers thought the nation had finally got it right, especially with the aggressive expansion plans of the airline, little did they know that the nation would not come out of the woods so soon.

For instance, on 14 June 2006, Arik took delivery of 2 new Bombardier CRJ-900 aircraft to fly domestic routes throughout Nigeria, and within the African continent from Summer 2006, two ex-United Airlines Boeing 737-300s and three 50 seat Bombardier CRJ-200 aircraft. The campaign of the ‘Tear Rubber’ aircraft was massive, and it boosted the profile of the airline, which was expected to change the face of the aviation sector in the nation.

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However, the tale changed when the FG through the Asset Management Corporation of Nigeria (AMCON), took over Arik Air in February 2017, as the airline was said to have been immersed in heavy financial debt, that had threatened to permanently ground it.

READ: Nigeria @ 60: How the NSE evolved with key national policies

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AMCON alleged that the Airline, which catered for about 55% of the passengers in the country, had been going through difficult times, attributable to its bad corporate governance, erratic operational challenges, inability to pay staff salaries, and heavy debt burden, among other issues.

The ‘undertaker’ estimated the airline’s debt at over N375 billion, comprising domestic and foreign investors. Since then, the bad bank has injected over N1.5 billion into the airline.

However, since the government took over in 2017, the airline has been struggling to keep its head above the waters. Its staff have downed tools over the years, due to poor remuneration among other welfare issues.

The way forward, experts speak …

The Managing Director, Starburst Aviation Limited, Capt. David Olubadewo said:

To achieve a desired result in the sector, the government, banks, and union leaders have their own bit to do, but one must work in tandem with others for it to work. Banks believe that aviation is too difficult to invest in, but that is wrong because it is not different from other sectors. We are all in it to make a profit at the end of the day. I don’t obtain loans from Nigerian banks, because I will end up with -25% loss, but that is not happening in the United Kingdom where I pay 3% interest rate. If I take such loan in Nigeria, it means I am -28 % (interest rate) in red and by the time you get to the top, you are owing millions.”

Contrary to the allegation that most of the airline investors are reckless, he argued that people have forgotten that those people have invested immensely in the sector, and they will never let it die.

READ: Nigeria officially unveils national carrier in London

“In the last 13 years, we don’t appreciate what we have, we have a hub here that is waiting to be tapped. From anywhere in the world, you can get a flight to Lagos, but you can’t get such to Ghana from anywhere in the world, and that is an indication that we have a hub in Nigeria,” he said.

Lookman Animashaun, Director of Engineering at Medview Airline, suggested that the best option for AMCON and the Federal Government is to establish a national carrier with the airline.

He said because of the airline’s debt burden, no investor would be interested in the airline, and if AMCON decided to manage the carrier, it would take it about 30 years to recover the money it invested in the airline, considering the airline’s turnover.

Speaking at the Business Founders Coalition (BFC) in Lagos on Tuesday, Dr. Richardson Ajayi, BFC Coordinator, lamented that foreign investors are preying on Nigerian businesses, and are seeking to push their founders out.

This, according to him, threatens the nation’s dream to build and nurture vibrant private sector businesses capable of competing with global brands, and also reduce employment opportunities for the youth.

READ: British Airways pilots accept 20% pay cut to end job losses dispute

He stated, “The objective of this meeting is to draw the attention of key stakeholders, especially the Government of the Federation, and the business community to the plight of Nigerian entrepreneurs, who out of ‘sweat and grit’ started their business, but at some point in the pursuit of growth, have had to access venture capital funds or foreign investments. Our experiences have largely been tales of woe, which have the possibility of stunting the growth of indigenous businesses like ours. We are also hoping that through this coalition, our government can enact policies and laws that will correct that apparent lop-sidedness.”

Ajayi lamented that most local businesses have been struggling, due to unfavourable operating environment and lack of access to finance to grow their businesses, hence they approach foreign investors and venture capitalists to invest in their business.

While he acknowledged that there are many good private equity companies that have accomplished successful private equity transactions, as well as those that understand the challenges of the market and are patient with their local partners, Ajayi noted that some others seek controlling rights as a major condition to invest.

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper. The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference. The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

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Hospitality & Travel

Arik, Dana Airlines to resume flight operations after curfew

Dana Air and Arik airlines to resume flight operations from Lagos airport tomorrow.

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Arik Air resumes flight schedules to Asaba after one-year break, Proposed Arik and Aero merger to form National carrier disapproved  

Dana Air and Arik airlines are set to resume flight operations from Lagos airport on Saturday, as the Lagos State government relaxed the 72-hour curfew imposed on the state.

The curfew was imposed by the State Governor, Mr Babajide Sanwo-Olu, on Tuesday to forestall further breakdown of law and order, following series of EndSARS protests.

READ: SAHCO, Arik Air renew contract to boost services 

Communications Manager, Arik Air, Adebanji Ola, in a statement issued on Friday, explained that flights across the country would operate as scheduled, and passengers were advised to arrive at the airport early to have ample time to complete boarding formalities.

He said, “Customers who could not use their tickets during the period of the curfew can modify such tickets at no extra cost.

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READ: Local Airlines tell staff to forget April salary

“The management of Arik Air thanks customers for their understanding while the cancellation of flights lasted.”

Also, spokesperson for Dana Air, Mr Kingsley Ezenwa announced that the airline was pleased to inform its passengers that the company would resume full flight operations from Saturday, the 24th of October 2020.

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READ: Chinese automobile maker, GAC Motors to set up assembly plant in Lagos 

He said, “The tickets purchased for flights within the period of the curfew remains valid and can be rescheduled for free by sending an email to us.”

Back story: Nairametrics reported earlier on Friday that the Lagos State Government had eased the 72-hour curfew which was earlier imposed on Tuesday, October 2020, to run from 6 pm to 8 am.

READ: Lagos to support owners of looted, vandalised stores

This was disclosed by Governor Babajide Sanwo-Olu, on Friday, October 23, during a press briefing at State House Marina, after a tour of the state to inspect the level of destruction of public and private infrastructure during the #EndSARS protests that later turned violent.

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This means residents can go out between 8 am and 6 pm, with effect from Saturday, October 24, 2020).

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Nigeria set to lose on latest Bilateral Air Service Agreements

Experts have explained why Nigeria is at the losing end of yet another Bilateral Air Space Agreement.

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Nigeria set to lose on latest Bilateral Air Service Agreements, United States announces changes to work permit visas that could affect Nigerians

It is no longer news that Nigeria signed Bilateral Air Service Agreements (BASA) with the United States, India, Morocco and Rwanda. However, who benefits more from the agreements has been a topical discussion amongst Nigerian stakeholders. Some of them, who spoke with Nairametrics in separate interviews, argued that the development would favour the partner countries more than Nigeria.

They argued that Nigeria has signed this deal with over 80 countries across the world, but has turned out to be disadvantageous to Nigeria. Most of the agreements are only beneficial to the countries and their foreign carriers, without any reciprocal benefits to Nigeria. This is allegedly due to the failure of the Nigerian representatives to put Nigeria’s interest first at the BASA negotiating table.

READ: CBN to sanction exporters who default on export proceed number

In most cases, Nigeria does not really benefit from the deal, especially with no National carrier or a domestic airline that has the required equipment to compete with their foreign counterparts.

Managing Director, Starburst Aviation Limited, Capt. David Olubadewo, who was once Nigeria’s youngest pilot, admitted that he has not seen the agreements. However, he told Nairametrics that the nation does not have the capacity/equipment to compete favourably with the countries it signed the deal with.

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READ: FG to inject over N198 billion on capital projects in power sector in 2021

Capt. Olubadewo said, “In most cases, BASA entails specific agreement between two partners, where parties involved will agree on exchange of flights. It could be 10 flights weekly from Country A and same from the other Country.

“So, if US for instance, has done 10 flights to Nigeria as agreed and Nigeria has not, it will not affect US in anyway.”

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In his own case, Muyiwa Lucas, another stakeholder in the industry, claimed that the aim of the international carriers and their countries is to make sure that indigenous carriers do not rise to compete with them on those lucrative routes like Lagos-London, Abuja-London, Lagos-Dubai, Lagos-Paris, Lagos-Amsterdam, and Lagos-Johannesburg.

READ: Nigeria, India to conclude Bilateral Air Services Agreement deal

In an interview with Nairametrics, he said that the partners are always quick to choose a favourable destination in Nigeria (Lagos and Abuja), while they dictate to Nigeria the airport to land its aircrafts in their countries.

Lucas said, “Nigerian flights are only allowed to drop passengers at Gatwick, which handled 46.1 million passengers in 2018. They don’t allow such in Heathrow airport, which is London’s main hub and also one of the world’s busiest airports with 80.1 million passengers in 2018.

“Arik Air was stopped from operating from Abuja to London, unless it paid for slot allocation, which cost a huge amount of money.

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READ: Nigeria, Ethiopia sign visa waiver agreement

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“But, while British Airways was and is still flying to Abuja, enjoying grandfather rights; Arik Air was paying for slots and when the Nigerian airline deemed that operation unprofitable, it stopped, leaving only British Airways to be operating to Abuja from London with minimum load factor of 85%.”

Lucas argued that while some of the countries introduced clauses to jeopardise Nigerian airlines operation to their countries, Nigeria rarely retaliated in the spirit of diplomatic principle of reciprocity.

READ: Just in: FG bars Air France, KLM and other foreign airlines

However, Pranjal Pande, an Indian Aviation Expert, sees the development from a different angle.

According to him, Nigeria is home to a substantial Indian expatriate population, and India sees thousands of yearly visitors from Nigeria but noted that the lack of direct flights has meant passengers fly mostly with Middle East carriers.

Pande said, “Popular routes from Delhi and Mumbai to Lagos are over 4,100 nautical miles, putting them out of the range of the current generation of narrowbody aircraft. This means that, from India, only Vistara and Air India, the only airlines with widebodies, could start flights to Nigeria. Neither airline has signalled intentions of doing so soon.

READ: Nigeria @ 60: The Aviation sector and its travails

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“It’s most likely that Air Peace will be the first to start flights to India. However, the timing remains up in the air due to the current crisis.”

Backstory: On October 6, 2020, Nairametrics reported that the Federal Government announced the signing of Bilateral Air Service Agreements (BASA) with the United States, India, Morocco and Rwanda.

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A copy of the agreement showed that it was signed in Abuja by President Muhammadu Buhari on September 30, 2020.

The disclosure was made by the Minister for Aviation, Hadi Sirika, through a tweet on his official Twitter handle on Tuesday, October 6, 2020.

What they are saying

The Minister said, “The agreement is the instruments of ratification of the bilateral air service agreement between Nigeria and USA, India, Morocco, as well as Rwanda.”

He added that Nigeria will take advantage of the agreement to strengthen economic, social and cultural ties with the US.

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Transport fare for motorcycle “Okada” more than doubled in 2020

Data from the NBS reveals the average fare paid by commuters for a journey by motorcycle more than doubled year on year.

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Transport fare for motorcycle "Okada" more than doubled in 2020, Lagos State bans Gokada, ORide, MaxNG, others from 15 local governments 

Data from the National Bureau of Statistics (NBS) reveals the average fare paid by commuters for a journey by motorcycle per drop more than doubled year on year (September 2020 vs 2019 respectively).

This was contained in the recently released data on Transport fare for September 2020 in Nigeria. This covers bus journey within the city per drop, bus journey intercity, state route, charge per person, airfare charge for specified routes single journey, journey by motorcycle (Okada) per drop, and waterway passenger transport.

READ: Nigeria’s manufacturing sector contracts for 5th consecutive month – CBN 

Motorcycle Fares

  • According to the report, the average fare paid by commuters for the journey by motorcycle per drop increased by 10.47% MOM and by 111.11% YOY to N255.51 in September 2020 from N231.29 in August 2020.
  • The states with the highest journey fare by motorcycle per drop were Niger (N1,467.49), Kogi (N362.47), and Rivers (N345.80); while states with the lowest journey fare by motorcycle per drop were Adamawa (N76.55), Katsina (N100.84), and Kebbi (N125.60).
  • Similarly, the average fare paid by commuters for bus journeys within the city increased by 7.92% MOM and by 63.88% YOY to N309.73 in September 2020 from N286.99 in August 2020.

READ: These 3 states are the most expensive to travel from in Nigeria

READ: NBS discloses States with highest bus fares in Nigeria (Full List)

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Bus Fares

The states with the highest bus journey fare within the city were Zamfara (N579.84), Bauchi (N492.14), and Cross River (N416.32); while states with the lowest bus journey fare within the city were Abia (N188.50), Kebbi (N192.48), and Borno (N200.80).

  • The average fare paid by commuters for bus journey intercity increased by 0.36% MOM and by 24.30% YOY to N2,022.70 in September 2020 from N2,015.50 in August 2020.
  • The states with the highest bus journey fare intercity were Abuja FCT (N4,315.22), Lagos (N3,073.25), and Sokoto (N3,000.00); while states with the lowest bus journey fare within the city were Kwara (N223.45), Benue (N274.64), and Ondo (N291.07).

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Air Travel

Average fare paid by air passengers for specified routes single journey decreased by -4.59% MOM and increased by 20.60% YOY to N36,884.59 in September 2020 from N38,659.86 in August 2020.

  • The states with the highest airfare were Lagos (N39,750.00), Rivers (N39,520.00), and Anambra (N38,950.00); while states with the lowest airfare were Akwa Ibom (N32,500.00), Sokoto (N33,700.00), and Benue (N35,000.00).
  • The average fare paid by passengers for waterway passenger transport increased by 7.06% MOM and by 34.13% YOY to N734.26 in September 2020 from N685.82 in August 2020.
  • The states with the highest fare by waterway passenger transport were Bayelsa (N2,250.23), Rivers (N2,200.64), and Delta (N2,150.30); while states with the lowest fare by waterway passenger transport were Borno (N200.48), Gombe (N264.29), and Abuja FCT (N294.10).

READ: Nigeria’s inflation rate hits 13.71% as food prices soar

What this means: According to the NBS, transportation makes up 6.4% of consumption expenditure of millions of naira next only to food at over 50%. Transport is also a key input cost for determining food prices and conducting business in the country contributing to the inflation rate. A combination of bad roads. poor infrastructure, exchange rate devaluation, removal of fuel subsidies, and a general rise in prices of goods and services have impacted transportation costs across the country.

 

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