The recent DANA Air plane crash leaves in its trail suspension of flight operations of Air Nigeria and First Nation Airline, reducing the number of major carriers in the country to two. Now, passengers and the economy are at the receiving end
He stood in the midst of his colleagues in front of Murtala Muhammed Airport 2, MMA2, terminal building, with hands akimbo, anxiously waiting for his next passenger. This was around 12 pm last Wednesday. A few weeks earlier, at the same time, Akinola Omoniyi, a cab operator at MMA2, would have completed his third trip for the day. As the clock ticked, his anxiety turned into frustration. “This is really terrible; I have not made a single trip all day; what could be happening in this industry?” Omoniyi asked the magazine rhetorically. He was obviously referring to the reduction of flights in and out of the terminal.
But at the nearby General Aviation Terminal, GAT, cab operators were having a field day as passengers thronged the car hire park for cab services. By 1pm of the same day, Moshood Alao, a cab operator at the GAT, had completed his fourth trip for the day. “Business has been good of late, more passengers have been coming to this terminal in the last one week and I am happy; I pray it continues this way,” he said with a broad smile on his face.
The dwindling fortunes of cab operators at MMA2 mirrors recent developments in the aviation industry. Air Nigeria and First Nation Airline both had their operations suspended by the Nigeria Civil Aviation Authority, NCAA, while DANA Air, had its operating licence suspended. All these airlines operate from MMA2, while Arik Air operates from the GAT. This development now leaves Arik Air, Aero Contractors, and IRS Airline as the three major airlines remaining in operation.
There is no doubt that the surge in passenger traffic for the few surviving airlines has boosted their revenues, experts, however, warn that the situation might not augur well for the aviation industry and the economy at large. The airlines have had to increase the number of flights they operate on various routes to accommodate the gap left by those airlines that had either their licence or operations suspended. The effect of this, Mohammed Tukur, assistant secretary general, Airline Operators of Nigeria, AON, explained, is that the airlines would now have to get more pilots, and cabin crew, if the situation persists. But while the three airlines may be smiling to the bank, several others, including service providers, are bleeding.
The magazine found out that agencies such as Federal Airports Authority of Nigeria, FAAN, Nigerian Airspace Management Agency, NAMA, NCAA, Nigeria Meteorological service, NIMET, handling companies like NAHCO, SAHCOL, among others, are also losing huge revenue daily. Arik Air, unarguably the biggest airline in the country accounts for about 42 per cent of flight operations, while the remaining 58 per cent is shared by Aero, Air Nigeria, DANA, IRS, First Nation, and other fringe operators in that order, depending on their size of operations. With the suspension of three key operators, revenue to these agencies has been drastically affected since the taxes they collect will not be as high as when all the airlines were operating. Revenue from sale of tickets, sales tax, passenger service charge, PSC, fuel surcharge, navigational charges have all drastically reduced, while oil marketers are not finding business lucrative at the moment. This is due to the reduced number of aircraft that now have to buy Jet A1, aviation fuel.
For operators of retail outlets at the airports, it is also a mixed bag of blessings. Whereas shop owners and restaurants located at the GAT are recording good patronage, the reverse is the case at the MMA2. The large operations of Arik Air now translate to more business for shopping outlets at GAT. Conversely, the BiCourtney Aviation Services Limited, BASL, operator of the MMA2, is said to be losing huge revenue. Stephen Omolale-Ajulo, public relations officer, BASL, agreed that the reduction in the number of airlines operating in and out of the terminal, naturally translates to huge losses for the company. He, however, declined to quantify what his company has lost so far. “Since DANA Air and Air Nigeria are not currently operating, certainly passenger traffic would be affected. But talking about our revenue loss, this is an information that cannot be divulged to the public” he noted. Chris Aligbe, managing director, Belujane Konzult, an aviation consulting firm, also confirmed that MMA2 would have a sharp drop in revenue considering the fact that major carriers into the facility are now grounded, just as other airports in other parts of the country operated by FAAN.
The huge loss in MMA2 is already having effect on the eateries and shops inside the facility. At the KFC outlet, patronage has not been impressive in the past week, such that empty seats are now a common feature there. The same is applicable to other shops and businesses inside and around the facility. A top source at the airport on the condition of anonymity, told the magazine that the accrued revenue from the operations of Arik Air in GAT is actually BASL’s revenue. “If Arik wasn’t operating there, the businesses there would have been here (MMA2),” the source said.
Since the DANA plane crash on June 3, domestic airline operators have come under intense heat, arising mainly from the state of their aircraft and level of compliance with maintenance processes. As a result, the industry, which had enjoyed an upswing until the accident, is now on the precipice, requiring urgent attention. The implication is that only two big carriers, Arik Air and Aero Contractors, and a medium-sized airline, IRS, now operate domestic flights in the country. The others like Overland Airline serve niche markets. This development limits the choices of passengers and also affects businesses in and around airports and the economy at large.
After an initial lull in passenger traffic following the DANA plane crash, air travel is gradually picking up now. But getting a seat on flights, especially in the morning, has become an arduous task. For instance, Aligbe could not get a seat on an Arik flight from Lagos to Abuja recently and eventually settled for IRS airline. “The entire morning belt of Arik Air from Lagos to Abuja was fully booked; even in the Business Class, I could not get a seat,” he said.
Similarly, Tukur, recalls that for three days, he could not get a Lagos-Abuja seat for his business partner on IRS Airline, since the flights were all fully booked. This is the same scenario across all the routes in the country as passengers continue to wait anxiously for flights to various destinations.
The situation has led to a surge in road travel, despite the poor state of Nigerian roads. Mayowa Sodipo, executive director, Action for Sustainable Development, a non-governmental organisation, had to turn to road travel to honour an appointment to deliver a paper at a conference in Port Harcourt. On getting to the GAT, he was told there was no available seat on an Arik Air, same as Aero Contractors at MMA2. He then opted to go by road.
Experts wonder whether or not the airlines can cope with the surge in passenger traffic. Outside the morning belt, afternoon flights are hardly full, meaning that the airlines can cope with the traffic, at least, for now. Therefore, it is expected that the prospective passengers will be the ones to adjust their schedule.
In all of this, Arik Air is having a field day given its high level of operations. After the DANA plane crash, more passengers have turned to the airline because it has the newest fleet of aircraft with an average age of 5.7 years. Besides, its partnership with Lufthansa Technik as technical and maintenance partners for its aircraft, with presence on ground, has further boosted passengers’ confidence. Sodipo agreed, submitting that Arik Air is certainly the best option to fly now because of its fleet size and maintenance record. Arik Air was also the airline used for the Category 1, CAT-1, certification exercise in the country. The airline spent about $10 million to prepare itself for the CAT-1 exercise and remains the only domestic airline certified in line with the new United States Federal Aviation Administration, US-FAA, and NCAA guidelines.
Banji Ola, media manager, Arik Air, could not be reached in spite of several efforts by the magazine as at press time. However, a source close to the airline, disclosed that the airline sees the situation as a call to service and that is why it has put in extra measures to ensure that the needs of passengers are catered for the more at this time. Quiet unlike the past when a small dislocation in flight services led to airfare increase, no airline has increased its fare so far, but they are all selling at premium price, except for Aero, which is still trying to maintain its promotional online fare. Aligbe says keeping the price the same is just the reasonable thing to do. “It will be quite uncanny for anybody to increase fares now because you will be seen as being heartless and exploitative because what has led to the situation now is a sad one (DANA crash),” he explained.
Fears are, however, rife that due to the pressure on existing airlines, service quality might drop. Aligbe cautions the airlines not to allow the quality of their services to drop at this time. He argued that this is even the time for them to capture passengers who were never travelling with them before now. For him, airlines that are sensible at this time should improve the quality of their service so that people that have never flown with them before will stay with them afterwards. “If service quality drops, then they will say its due to the situation that has brought them here. It’s a time to make customers shift their loyalty,” he said.
The impasse that has beset the aviation industry, if not quickly addressed, experts say, will take a huge toll on the economy. Stella Oduah, minister of aviation, described aviation as the catalyst to any economy, saying it is the engine that generates all that flows in the economy for it to be vibrant. Besides, the present situation does not support the President Goodluck Jonathan’s Transformation Agenda, especially in employment generation. With passenger traffic projected to rise to about 34 million in 2026, three airlines might not suffice.
Tukur argued that the government must take deliberate steps to salvage domestic airlines, whose operations were crippled by government in the first place through its unfavourable policies. “The truth is that government officials are killing airlines. Since the crash of Sosoliso, ADC and Bellview, and the recapitalisation era in the industry, 13 airlines have collapsed in the country and government is not bothered, but paying lip service to reviving the industry,” he said, regretting that currently in the country, passenger traffic is more than the facility available. Besides, he explained that with the type of duty domestic airlines pay to government, the operators would continue to be on their knees.
Stakeholders have also advised that airlines should merge as it is now the trend globally, this gives airlines a stronger footing in the industry. But Nigerian airlines have refused to merge due to the owner-manager syndrome. According to Olumide Ohunayo, an aviation consultant, this syndrome is “a structural cankerworm that is hurting the industry.” This syndrome, according to him, makes access to capital difficult and expensive. Besides, it also erodes executive discipline in the absence of a functional board, while collaborative discussions are primarily trimmed to the owner’s wish rather than commercial.
Tukur says it is rampant to find owners flagrantly taking money out of their airlines without regard for the survival of the airline. The syndrome also whittles down public support or legislative backing as they are seen as personal property and not Nigerian flag carrier. “Why must it be only the owner that approves and signs a cheque? The multiplier effects are delays, cancellation, passenger and staff apathy, among others,” Ohunayo said.
Stakeholders advocate policies that would protect domestic airlines rather than compound their problems. A clear example is the Open Skies Agreement said to have further crippled the domestic operators, which Ohunayo said the government signed blindly. The agreement is believed to be a great disservice to the domestic carriers considering the fact that foreign airlines now fly multiple points in the country. Ohunayo said there should have been an alliance between domestic and foreign airlines for local flight connections, which will invariably grow the local operators. “But we opened our skies and allowed foreign airlines to take over everything, and for this reason, foreign airlines don’t look at domestic airlines as partners. America will never allow such a thing in their country,” he said. He said countries the world over have protected their carriers by not polluting their skies, and engaging in reckless slot allocation, frequencies and most importantly commercial agreements. For instance, the South Africans have refused to sign the Open Skies with the Americans, same with Russia, China, Hong Kong, Mexico and some other countries. Although Brazil signed the Open Skies pact earlier this year, the full implementation is scheduled for 2015.
Some analysts have canvassed for the declaration of a state of emergency in the aviation industry to save it. But Aligbe disagrees. As a way out, government, Oduah said has constituted a committee, which is at present working on what to be done to assist the industry. The committee is said to be working in alliance with the Central Bank of Nigeria, CBN, with the aim of reviving the sector. The federal government is also toying with the idea of a national carrier. But this concept may be dead on arrival considering the opposition to it.
“There is no need for a national carrier but a national flag carrier,” explained Aligbe. This is because the designation of a national flag carrier gives an airline a sovereign cover, a protection that it needs as an international operator, making it difficult for other countries to treat the airline shabbily. Experts believe that if Arik Air had been designated as Nigeria’s national flag carrier, it would not have been shabbily treated at Heathrow Airport, London late last year.
Experts also say Nigerian airlines should toe the examples of other African airlines like Egypt Air, Kenya Airways, South African Airways, which have all plugged into global alliances. These, and an appropriate policy environment, experts say, are the impetus for a robust domestic industry.
Additional report by Helen Eni