Nigerian airlines now officially in major crisis mode, as business environment on brink of collapse

[By VICTOR NZE]

When earlier this year, the Federal House of Representatives brokered a deal between oil marketers under the aegis of the Major Oil Marketers Association of Nigeria (MOMAN), Depot and Petroleum Marketers Association of Nigeria (DAPMAN), the Nigerian National Petroleum Company (NNPC) Limited, on one side, and the airline owners group, the Airline Operators of Nigeria (AON), on the other, to ensure uninterrupted supply of aviation fuel, it was believed that the crisis challenging seamless flight operations at airports had come to an end.

However, barely a month after the deal was brokered, the status quo returned, leading to the directive by the AON to its affiliate members to shut down operations from May 9, 2022.

The action was called off at the last minute by the AON, following what the group had alluded to as ‘numerous calls from the highest echelons in government with promises to urgently intervene in the crises.’

The shutdown call by the AON on its members was in reaction to the high cost of operations in the country suffered by its affiliate members.

According to President of AON, Alhaji (Dr.) Abdulmunaf Yunusa Sarina, the airlines in the country currently face astronomic and continuously rising cost of Jet-A1, leading to high cost of operations and erosion of commercial margins.

A statement jointly signed by the Executive Director of Max Air, Alhaji Shehu Wada; Chairman, United Nigeria Airlines, Dr. Obiora Okonkwo;  CEO of Arik Air, Capt. Roy Ilegbodu; CEO of Aero Contractors, Capt. Abdullahi Mahmood; and MD, Azman Air, Alhaji Faisal Abdulmunaf, said the AON acceded to requests to withdraw the industrial action for the time being ‘while we allow for a fresh round of dialogue with government in the hope of reaching an amicable solution.’

“We have also reached this decision with the highest consideration for our esteemed customers who have been faced with uncertainty over the last few days and to enable them to have access to travel to their various destinations for the time being during the period of discussions with relevant authorities.

“In view of the above and in the interest of national economy and security considerations, AON hereby wishes to notify the general public that the earlier announced shutdown of operations on May 9, 2022 is hereby suspended in good fate pending the outcome of hopefully fruitful engagement with government,” the operators further explained.

Only last Friday, July 22, the airline operators again declared what it termed ‘a major crisis’ in the industry, following the previously skyrocketing pump price of Jet-A1, also called aviation fuel, now officially in shortage, prompting in its consequence, severe flight delays, cancellations and rescheduling at all airports in the country.

AON had alerted passengers of major flight disruptions across the country following the shortage of aviation fuel, on Friday, as it also warned intending passengers of of flight cancellations, delays and rescheduling in the coming days, in what the group described as a ‘major crisis.’

In a statement titled; ‘Public Notification on Acute Shortage of Aviation Fuel and Flight Disruptions,’ signed by the group’s Spokesman, Prof. Obiora Okonkwo, Friday, AON alerted air passengers of ‘major disruptions in scheduled flights operations including cancellations and unnecessary delays across all airports in the country’ over the aviation fuel shortage presently experienced by domestic carriers.

“This is to notify the members of the public, especially consumers of air transport services in the country, that the aviation sector has been hit by a major crisis with the acute scarcity of aviation fuel otherwise known as Jet-A1.

“For this reason, there will be major disruptions in scheduled flights operations including cancellations and unnecessary delays across all airports in the country.

“This is a foreseen but unintended consequence of the aviation fuel scarcity in the country.

“We, therefore, plead for the understanding of the travelling public to bear with our members as efforts are currently being made to address the development and restore normal flight operations.

“AON is committed to rendering seamless and uninterrupted air transport service across the country.

Earlier, this week alone, aviation fuel reportedly climbed near a staggering pump price N900 per litre across the country, from its crisis-era price of N500/lire.

Some depots in Lagos sold the product to airlines for N822/litre while those in Abuja sold theirs for N859/litre.

In Port Harcourt, the Rivers State capital, airlines purchased aviation fuel was for N852/litre while in Adamawa -N890; and N892 in Maiduguri, the Borno State capital.

Presently, aviation fuel accounts for nearly 80 per cent of operational or running cost incurred domestic airlines in the country.

However, with the product now totally out of the market, the problem has only mounted for operators who also face scarcity of foreign exchange (forex), among others to stay in business.

This week alone, Aero Contractors and Dana Air closed shops over factors directly and indirectly linked to worsening operating environment.

It would be recalled that in February, this year, Chief Allen Onyema, the Air Peace Chairman, told the media that carriers operating in the country lost over N20 billion in refunds to passengers, flight cancellations and delays, even as he also said bird strike incidents have cost his colleagues in the industry over $60 million.

Chief Onyema, who is also the AON Vice President, while speaking on behalf of the group during an interactive session with journalists at the organisation’s secretariat inside the Murtala Muhammed International Airport (MMIA), ikeja, in Lagos, said it cost about $2.5 million just to fix an engine damaged by bird strike, adding that airlines are losing billions of naira as result of this, considering the fact that aircraft engines and other spare parts are not manufactured in Nigeria.

“Airlines do not enjoy delaying and cancelling flights. 98 per cent of these delays cannot be attributed to airlines. It is shocking when public officials join the fray to demonise airlines. Airlines are not the cause of delays and cancellations. Passengers have been emboldened to take laws into their hands while public officials and security agents watch,” the AON VP said.

According to Onyema, Air Peace alone had 14 bird strikes in 2021, and four this year, adding that these have cost his airline billions of naira.

Onyema disclosed that domestic airline operators lost over $60 million to bird strike in 2021, while delays, cancellations and refunds for passengers cost airlines over N20 billion, even as he urged the Federal Airports Authority of Nigeria (FAAN) to improve its wildlife surveillance at airports to stop the ugly trend.

Aero, on Monday, July 18, blamed its decision to shut down flight operations indefinitely from Wednesday, July 20, to ‘challenging operating environment’ in the country.

Dana Air was suspended, same day, Wednesday, July 20, indefinitely, by the Nigerian Civil Aviation Authority (NCAA) following outcome of report of a financial audit the agency carried out on the airline, which revealed that the domestic carrier ‘is no longer in a position to meet its financial obligations and to conduct safe flight operations.’

Aero is under administration, following takeover from their original owners by the Federal Government which placed the aviation firm under receivership of the Asset Management Corporation of Nigeria (AMCON) in 2016.

The airline industry has battled high operational costs owing to rising aviation fuel prices (JET-A1), scarce foreign exchange, drop in general passenger demand, exorbitant airfares, lingering dispute with various labour unions over staff welfare demands, tax remittances, since emerging from the shutdown occasioned by the Covid-19 pandemic, last year.

On its decision to shut down domestic flight operations, Aero Management said, however, that the move will not affect its other businesses such as the Approved Maintenance Organisation (AMO), otherwise known as AeroMRO, the Approved Training Organisation (ATO), also known as Aero Training School, Helicopter and its Charter operations.

The embattled airline management, however, assured that its partners in the Spring Alliance will assist to ameliorate the impact of the suspension on its affected customers to help them reach their destinations.

“Due to the impact of the challenging operating environment on our daily operations, the management of Aero Contractors Company of Nig. Ltd. wish to announce the temporary suspension of its scheduled passenger services operations with effect from Wednesday, July 20, 2022.

“The past few months have been very challenging for the Aviation industry and the airline operators in particular. With the high cost of maintenance, skyrocketing fuel prices, inflation, and forex scarcity resulting in high foreign exchange rates. These are amongst the major components of airline operations,” the airline said.

It would be recalled that in May, this year, the Federal Inland Revenue Service (FIRS) sealed off offices of the Aero Contractors over offences said to border on the failure by the airline to remit taxes amounting to about N350 million.

The closure of the airline offices came barely 24 hours after the National Union of Air Transport Employees (NUATE) and the Air Transport Services Senior Staff Association of Nigeria (ATSSSAN) called on the Federal Government through the Aviation Minister, the National Assembly, Minister of Labour and employment to intervene in the dispute at Aero Contractor and Arik Air to save airlines workers, their families and Nigeria’s aviation industry from imminent disaster

FIRS officials claimed the operation to seal off Aero’s offices became necessary after several letters to the airline had failed to yield fruit, as the airline allegedly refused to respond to the tax agency’s communications.

Aero’s debt consists of legacy taxes that were not remitted before and after the airline was placed under receivership of AMCON.

It was however learnt that the embattled airline has only been able to pay about N50 million to FIRS and that the taxes, which led to the sealing off of Aero’s offices are not current taxes.

Another veteran operator in the industry, Arik Air is also currently under administration, following takeover from their original owners by the Federal Government which placed under receivership of Asset Management Corporation of Nigeria (AMCON).

For Dana Air, the NCAA said the airline’s suspension follows the report of a financial audit it carried out on it.

Consequently, the civil aviation regulatory agency suspended Dana Air’s Air Transport Licence (ATL) as well as its Air Operator Certificate (AOC) with immediate effect.

A statement made public and addressed to the management of Dana Air, by NCAA Director General, Capt. Musa Nuhu, Wednesday, explained that the suspension was ‘pursuant to Section 35(2), 3(b) and (4) of the Civil Aviation Act, 2006 and Part 1.3.3.3(a)(1) of the Nigeria Civil Aviation Regulations (Nig.CARs), 2015.’

“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 Air is no longer in a position to meet its financial obligations and to conduct safe flight operations.

“The NCAA acknowledges the negative effect this preemptive decision will have on the airline’s passengers and the travelling public and seeks their understanding, as the safety of flight operations takes priority over all other considerations,” read the statement.

The situation may not be about to get any better either for other airlines still in business, for which aviation fuel alone represents nearly 80 per cent of running costs, in an economy gradually shrinking and recording poor passenger demand and high levies and taxes by regulatory agencies of government.

For the operators who combine domestic flight with regional and international operations, high taxes and levies, coupled with the problem of low frequencies and drop in passenger demands compound their challenges.

While addressing a press conference, in February, this year, Vice President of the Airline Operators of Nigeria (AON) and Chairman of Air Peace, Chief Allen Onyema condemned the recent granting of multiple designations to two foreign airlines, Qatar Airways and Ethiopian Airlines by the Federal Government.

This is also the group absolved domestic operators of blame over flight delays and cancellations experience by passengers, as according to him, ‘airlines are not the cause of delays and cancellations.’

AON member-companies present at the briefing included; Azman, Air Peace, Aero, Arik, OmniBlue, Dana Air, Max Air and Overland Airways. Others are United Airlines, Caverton, Bristow Helicopters and Ibom Air.

Condemning the multiple designations to Qatar Airways and Ethiopian Airlines by the Ministry of Aviation, Onyema said the decision is bound to impact negatively on the domestic industry, as it harms job creation and growth of the industry in terms of capacity and employment opportunities.

According to the AON chief, the situation would further worsen the precarious situation faced by local airline operators, adding that what the Federal Government did would not augur well with the domestic airlines.

“AON object very seriously with the multiple designations given to Qatar Airways and Ethiopian Airlines. It is the belief of AON that the growth of Nigerian airlines will be stagnated if this continues like this. This will inhibit the growth of local airlines, who provide jobs for Nigerians. All the international airlines do not provide 10 per cent of the job provided by the smallest airline in Nigeria,” Onyema said.

He further lamented that multiple designation to foreign airlines would lead to domestic airlines folding up, adding that this contributed to why so many airlines have closed shop over the years.