Nigeria’s aviation industry is neck-deep in financial turmoil. The financial asphyxiation choking life out of the country’s airlines is worsened by the tumbling value of the naira and dearth of infrastructure in the industry. Aviation fuel is still imported at an exchange rate of N460 to the dollar. The cabal controlling the market escalates the cost of fuel arbitrarily. Nigeria probably has the highest pump price of aviation fuel in the region. The result has been cancellation of flights and crippling flight delays.
Last week, a leading airline delayed one of its flights from Abuja to Lagos by eight hours. The crisis in the aviation sector has resulted in the collapse of many airlines.
The federal government is responding to the crisis by trying to replace the defunct Nigeria Airways with a new national carrier.
Feelers from the industry suggest that a technical adviser for the project would soon be appointed to facilitate the floating of the airline. Government is expected to own five per cent of the national carrier while private investors would fund the larger holdings.
Government’s line of thought is apparently informed by the invaluable role of air travel in the economy.
Nigeria has peculiar transportation problems. All mode of land transportation is concentrated on dilapidated roads that take hours to make even a journey of 100 kilometres. The rail system is archaic with limited networks. There are no speed trains.
With a crippled land transportation system, the role of the aviation industry cannot be over-emphasised. It accelerates movement of goods and personnel.
However, the federal government’s planned intervention in the aviation industry crisis by floating a national carrier is a wasteful prestige project that would not ease the dearth of infrastructure and financial asphyxiation in the industry.
National carriers are no longer in vogue. Swiss Air, one of Europe’s best managed national carriers collapsed years ago. No one is thinking of replacing it. Sabena, the Belgian national carrier went the same way.
Unlike oil business, the profit margin in aviation is very thin. That probably explains why industry giants like PanAm and British Caledonia are now history. In Europe, Lufthansa, the German airline is probably the only national carrier not considering a merger. Air France, the French national carrier and KLM, the Royal Dutch airlines are in such a tight alliance that could be termed merger. In Lagos the two European giants handle their passengers from the same desk. British Airways has a strong relationship with Iberia of Spain. The industry is so hazardous that mergers are now the vogue.
Besides, many countries have abandoned the national carrier mentality for flag carriers. A flag carrier is owned by private investors but flies the country’s flag.
A national carrier as the name suggests, is owned largely by the national government with considerable private sector investments in most cases.
The decision to hold five per cent of the shares in the proposed national carrier is a sharp contrast with the financial reality on ground. The project would involve huge sums in foreign exchange. Where is the money coming from? Government is still debating the funding of the forex component of the 2017 budget proposal.
There have been talks about selling government holdings in oil firms to fund projects that would get the economy out of recession. Hostile public opinions have intimidated government into re-coiling on the sale of national assets. The senate is now being asked to approve a huge foreign loan to balance the budget. Are the holdings in the proposed national carrier part of the projects to be funded with the proposed $30 billion foreign debt? That would boil down to flushing hard-earned money down a bottomless pit.
The federal government has no business holding even 0.005 per cent of the shares in a national carrier at a time when it cannot take a decisive action on its holdings in the four cash-guzzling refineries that have failed to feed the aviation industry with Jet-A1 to ease the stranglehold by the cabal importing it.
Government should think of how to provide the infrastructure for the private firms in the industry to thrive. Aviation business is capital intensive and in Nigeria, 90 per cent of the funding is in foreign exchange. Nigeria has no hangars for comprehensive checks on aircraft. Even aviation fuel is imported. The five per cent share holding slated for the proposed national carrier should be used to facilitate local production of aviation fuel that could crash the pump price of the product to N80 per litre. Nigerian airlines would heave sighs of relief if the price of fuel which constitutes 40 per cent of the cost of their operations tumbles by 50 per cent. They would only have to contend with the cost of importing spare parts and funding comprehensive checks. With conducive environment, private investors would float new airlines.
Besides, government should take a second look at its open skies policy in the industry. The policy has taken 30 per cent of the business from domestic airlines. Air France, Emirate, Ethiopian Airlines, British Airways and many others fly into the four airports in the country that have considerable passenger traffic. That policy leaves nothing for the local airlines.
National carriers are no longer in vogue. Swiss Air, one of Europe’s best managed national carriers collapsed years ago. No one is thinking of replacing it. Sabena, the Belgian national carrier went the same way
