By Chinelo Obogo
The Chief Executive Officer (CEO) of United Nigeria Airline, Prof. Obiora Okonkwo, has said that the country’s aviation sector is on ‘life support’ and may not survive the very difficult business environment.
Speaking on a national television network on Friday, he said there is a disproportionate number of grounded aircraft compared to the ones that are flying and that access to single digit loans is impossible. He said these challenges, coupled with multiple taxation and unfavorable foreign exchange rates, create an insurmountable hurdle for the airlines to survive and make profit.
“I said two years ago that the sector is on a life support machine and is taking oxygen. There are sectors that are more vulnerable to any volatile situation and aviation is one of them. Any little thing can affect it adversely. You can wake up and if the weather is not good, you won’t be able to fly. The sector has been having an existential threat. What is keeping the new breed of operators like Air Peace is our level of resilience and patriotism. If we have to weigh our operations based on our profits and losses, we would have long closed shop.
“We need to grow our fleet. We need to increase our capacity and for that reason, we need to have access to single digit loans. We have not asked the government to give us grants. We go to the market to compete for commercial loans at 35 percent interest rate and we don’t have access to the window of foreign exchange. For over a year now, we have not bid in the open market and when you access it, the rate is very high and it makes it very difficult for domestic airlines to compete. When an American goes to his bank, he gets loans at one or two percent interest rate and has 10 to 20 years to pay back. But when you go to your bank, you get loans at 35 percent with a caveat that the rate is subject to change without notification and the next day the Central Bank of Nigeria hikes the MPR then the bank starts charging you 40 percent interest, so how can you survive?
“We have also said several times that Nigerian airlines are over taxed. For every single ticket that is sold, there are about 20 deductions going to different government agencies and these deductions obviously constitute a great percentage of the fare that we charge clients. It is known all over the world by ICAO rules that aviation agencies can only work to recover their costs and not to make profit, talk less of being a source of revenue for the government.