Aviation
Aviation: A sector on the throes of death
BY EMEKA EJERE
These are not the best of times for operators in the Nigerian aviation sector, with worsening business environment making continued operation of airlines more uncertain by the day.
The airline business in Nigeria is at present facing an existential threat triggered by a conspiracy of acute scarcity of foreign exchange (forex) and escalating price of aviation fuel (Jet-A1), rising from merely N200 per litre about a year ago to close to N900 a litre at present.
On Friday, Azman Air escaped from what would have placed it on the list of airlines that have been temporarily out of the nation’s airspace, renewing its Air Transport Licence (ATL), after fulfilling all outstanding requirements.
The Nigeria Civil Aviation Authority (NCAA) had suspended Azman Air on Thursday, two months after grounding Aero Contractors and Dana Air, reflecting the crisis in the aviation sector.
The Director General of NCAA, Captain Musa Nuhu, had confirmed on Thursday that the agency was withholding the ATL of Azman Air till it provided the required documentation for its operational licenses’ renewal and sign a Memorandum of Understanding on how it would remit its legacy debt accrued from the collection of Passenger Service Charge (PSC).
Had the suspension remained, the number of commercial airlines operating in the nation’s aviation sector would have been shrunk to seven from 10 in less than three months after the NCAA shut down the operations of Dana Air indefinitely for audit amid financial struggles and recurrent flight incidents.
Nigeria’s oldest airline, Aero Contractors, had few days earlier announced temporary shutdown of its operations due to the high cost of operation, especially the hike in price and scarcity of Jet A1 as well as unavailability of foreign exchange to purchase spare parts for grounded aircraft.
“Due to the impact of the challenging operating environment on our daily operations, the management of Aero Contractors Company of Nig. Ltd. wishes to announce the temporary suspension of its scheduled passenger service operations with effect from Wednesday, July 20, 2022,” the airline said.
With the temporary shutdown of Aero Contractors, indefinite suspension of Dana Air shut and now narrow escape of Azman Air, airlines presently operating in Nigeria include: Air Peace; Arik Air; Azman Air; Green Africa; Ibom Air; Max Air; Overland and United Nigeria Airlines.
Dana Air, it was gathered, was shut down due to financial struggles as the airline was no longer in a position to meet its financial obligations and to conduct safe flight operations, as well as, frequent incidents.
For instance, before the suspension, one of the airline’s aircraft, Boeing 737 with registration number (5N DNA), with over 100 passengers bound for Abuja had an engine failure. The pilot, however, made an emergency landing and the aircraft was grounded.
Also, in May, 2022, the airline’s Lagos bound MD-83 aircraft with registration number 5N-JOY, had its tyre burst and immediately caught fire. The aircraft with 50 passengers on board were immediately evacuated as the pilot aborted takeoff.
The suspension order by NCAA read in part: “The decision is the outcome of a financial and economic health audit carried out on the Airline by the Authority, and the findings of an investigation conducted on the Airline’s flight operations recently, which revealed that Dana Airlines is no longer in a position to meet its financial obligations and to conduct safe flight operations.”
Dana Air’s response read in part: “Operational audits are regulatory and airlines are obligated to suspend their operations when the NCAA calls for it and we understand the impact this suspension will have on our partners, staff, passengers and the general public but we are very confident that we would come out stronger as we have done in the past.”
Prior to the suspension of Dana, its Deputy Chief Executive Officer, Sukhjinder Mann resigned his appointment over what sources called a foreign exchange crisis which had made payment of his salary difficult.
Decreasing traffic
According to the NCAA, a significant number of airplanes operating across the country are currently grounded due to the crisis rocking aviation sector.
Speaking at a recent stakeholders meeting in Abuja, Nuhu said the fleet of aircraft were grounded until their owners carried out adequate maintenance on them.
Nuhu’s statement confirmed the report released on June 30, 2022 by Ch-aviation, a global agency with database of airlines in the world that only 44 aircrafts were operating in Nigeria, while 79 were grounded at the time.
The NCAA boss stated that issues around inaccessibility of foreign exchange, hike in aviation fuel and the devaluation of the naira had worsened the fortunes of airlines and agencies in the sector.
He stated that the ongoing audit of airlines and other players in the sector by NCAA showed the precarious financial state of businesses in the industry.
Nuhu said, “When I say the industry, it also includes the agencies in the sector. We also suffer from the same issues you (airlines) suffer. Issues of revenue, foreign exchange, we all suffer.
“The NCAA has started the process of conducting the financial performance and status audits of the industry, starting with the airlines and we’ve done five so far and it makes us get the very best picture.
“We can see the difficulties and the challenges the airlines are having. We are all aware of the astronomical increase in the cost of JetA1 (aviation fuel). The international price is increasing, at the same time the naira is devalued. So it is double jeopardy.”
He added, “Even the foreign exchange is not readily available and the airlines are facing difficulties in getting it to do their transactions for trainings, maintenance, spare parts, etc.
“So a significant number of fleet in Nigeria is grounded, awaiting maintenance. We are all aware and we are not insensitive to the position of the industry.”
Those who have either visited or used the domestic wing of the Murtala Mohammed Airport in Lagos recently have confirmed that the facility is no longer what it used to be as activities there have reduced drastically.
“I passed by the domestic airport (Lagos) recently and the place looked so dry. Some airlines have cut flights to some destinations from 5 or more to just 2 daily. And the rates continue climbing’, a public affairs commentator, Mr. Richard Peters told Business Hallmark.
Our checks show that flights across major states in Nigeria now cost as much as between N100,000 and N150.00 per flight, a situation that has forced many back to travelling by road, despite the high risk involved.
Excruciating premium
Nigerian airline operators are also finding it extremely difficult to pay the premium on their assets such as aircraft and others, as many carriers now break the insurance premium into bits, with some opting to do so monthly, some quarterly and others in pieces.
Speaking on Friday at a two-day aviation, cargo, and export conference in Lagos, the Director, Policy and Regulations, Nigerian Insurance Commission (NAICOM), Leo Akah, has noted that though aviation risks were low, they were high in severity and required strict legal framework and regulatory principles in the insurance sector.
He said, “Our law says no premium no cover and if you don’t pay, you are on your own. You can’t fly if you don’t have insurance. This is an issue. Even accessing foreign exchange to pay your insurance overseas is among the challenges in the sector. The insurance company won’t collect naira from you.
“It is not optional for you not to have insurance as an airline operator. If you don’t insure your liabilities for example, you cannot fly. We liaise with the Nigerian Civil Aviation Authority to ensure that whatever paper is submitted to them at NCAA is evidence that you have insurance so that they can allow you to fly.”
The huge insurance premium in the aviation sector is impacting on the cost of operations of airlines, which are transferred to consumers. Despite Nigeria’s low air crashes, insurance firms, especially those based overseas, charge the country’s airline operators high premiums, relying on bad rating of the continent’s airlines in terms of safety.
