Stories by Chinelo Obogo, [email protected]
The Managing Director of Aero Contractors, Capt. Ado Sanusi, has strongly condemned the planned 600% increase in ground handling charges championed by the Aviation Ground Handling Association of Nigeria (AGHAN).
He warned that such a drastic increase would wreak havoc on Nigeria’s already fragile aviation industry, further deepening its challenges.
During a recent media briefing at the airline’s Lagos headquarters, Capt. Ado Sanusi criticised the Nigeria Civil Aviation Authority (NCAA) for backing the proposed hike in ground handling charges. He accused the regulatory body of facilitating what he termed a “cartel-like” operation by ground handling companies, warning that such actions could destabilise the aviation sector.
Sanusi added that allowing such steep increases set a dangerous precedent, potentially encouraging other aviation service providers to exploit the industry further.
However, his stance sharply opposes that of Saheed Lasisi, Group Executive Director, Commercial and International Business at NAHCO.
Earlier this year, Lasisi defended the fee adjustment by the Aviation Ground Handling Association of Nigeria (AGHAN), which is set to take effect on March 31, 2024. He pointed out the disparity between charges for international and domestic airlines, noting that servicing a Boeing 737 for local carriers costs only N70,000; an amount he claims is inadequate to even fuel ground handling equipment.
While Lasisi justified the increase as necessary due to rising operational costs and domestic fare adjustments, Sanusi insists it will cripple an already overstretched industry, an issue that is already overheating the aviation sector.
Sanusi, at the media interface, also spoke on the controversial $300 helicopter landing fees which was suspended after it was vehemently opposed by the operators. He also warned that the multiple taxation imposed on airlines and the debilitating economic environment were part of the reasons Nigerians airlines are currently on ventilators literally speaking.
Ground handling charges
The issue of ground handling charges is a challenge for the aviation industry. Unfortunately, the NCAA has thrown their weight behind the handling companies and supported the increase of their ground handling rates by 600%. This decision would set a dangerous precedent, because you don’t allow two companies to dictate prices and stifle competition. It is unsustainable for the industry.
We are killing the industry. I have written to consumer protection, I’ve written to the Senate and to everybody that needs to be written to. This must be stopped because we have a free economy where we are practicing capitalism. In a free-market economy like that of Nigeria, competition is crucial to ensure fair pricing and quality services. However, the current situation enabled by the NCAA, allows only two companies to dominate the ground handling market, excluding new entrants and setting exorbitant prices. This anti-competitive behavior hinders the overall development of the aviation industry and imposes unnecessary costs on airlines.
This is a very bad precedent to the economy of the entire country. If the handling companies are allowed and they get away with it, believe me, next it will be somebody else. I don’t want to say the airlines, but somebody else can do it and we will cite the example of the handling company that were left to do that. And they even said for you to operate safely, this is the minimum charge. How do you know their cost structure? The role of the NCAA should be to regulate and ensure safety standards, not to interfere in pricing. Setting minimum charges without an understanding of the cost structures of handling companies is problematic. The regulator’s involvement in price setting undermines the principles of a free-market economy and discourages competition.
You can’t tell a company that this is the minimum you charge to operate safely. In no economy will you increase charges by 600% at a time and you expect that economy to grow and people are keeping quiet because of what? Because they are the only two companies which operate as a cartel to make sure that nobody comes in. No Nigerian can come in because they will say that it’s not authorised to come into that field. This is wrong. The aviation industry has been liberalised, so they should allow everybody to do what they want. If you want to do handling, come in and handle, and they should allow any airline that wants to do airline business to do it, anybody that wants to do catering should do catering. The time of Nigerian Airways has gone, now everybody should be allowed to do any business he wants to do.
Helicopter landing charges
If I land my helicopter behind somebody’s house, who do I pay? Do I pay the person or who? I have repeatedly said that you cannot demand charges where you have not invested. It’s not your property, so why are you charging for landing on a rig? Let’s even say that you want to charge for something and you now concession it, I believe there is due process that you follow for concession. I think it’s counterproductive to add another tax. And by the way, young man, that is another tax that they have to add another tax. I think the Minister has done a wonderful job by suspending it and it should remain suspended.
Multiple charges
Let them scrap the 5% charge and instead have a single figure that airlines would pay, representing a full-service fund. By doing so, we would have clarity on the payments required, making it simpler. Alternatively, they could set one figure that can be shared among the three agencies involved, rather than us having to pay multiple fees.
Currently, we pay 5% and then additional fees for every service the Nigerian Civil Aviation Authority (NCAA) provides. For instance, if they come to inspect an airplane, there is an additional charge for that. If they perform an Air Operator Certificate renewal, there is another fee. This means that on top of the 5%, we are paying for various other services, which can quickly add up. This is cumbersome and financially burdensome for airlines.
In addition to the NCAA fees, we also pay the Nigerian Airspace Management Agency (NAMA) for navigational charges. The current system includes other taxes, such as fuel surcharges, that are passed on to us which is increasing the overall tax burden. These multiple layers of taxation have made it very difficult for airlines to operate profitably. The complexity and sheer number of these charges make it challenging for airlines to plan and budget effectively.
This multiple taxation issue should be addressed. I think as a country, we should make a deliberate effort to see that airlines survive. What is the reason that the airlines are struggling? The reason is very simple. You can’t have multiple taxation where the airlines are trying to support or to pay for the services of the agencies. I don’t think the airlines can fund the agencies. It’s not possible. So, there must be another source of funding for the sector because the airlines are struggling and the passengers are struggling to pay.
Also, the 50% IGR deduction from aviation agencies affects us the most. The federal government should look at aviation not as a source of revenue but as an enabler of business for economic growth. If you are looking at aviation as a revenue provider, then it’s going to kill the aviation industry but if it is looking at aviation as an enabler of economic growth and foreign direct investment, then you can see the potential.
I can give you an example of Rwanda which serves as an exemplary case where the government understands that while aviation may not directly generate significant revenue, it acts as an enabler for tourism and foreign investment. The president of Rwanda recognises the potential of aviation to attract tourists and foreign direct investment, which are crucial for the country’s economic development. This approach should serve as a model for other countries, including Nigeria, to adopt a more progressive and supportive stance towards the aviation industry.
Turnaround
This is a great success story for our airline because we were closed down for a while after I came in, we have turned it around and this is the trajectory of recovery. We have made a profit of 12 percent. We have done well for the staff. If you remember, in 2017, we put staff on redundancy and we have successfully paid off. We entered into agreements with three unions and we have fulfilled our obligations for two, remaining. We have almost paid all the outstanding salaries for staff and we have reduced our liabilities to 33%.