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 Arise TV 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.
“But from what we have seen, a huge chunk of what the agencies get are not re-invested into providing facilities at the airports, but it rather goes into the government’s purse for other purposes. It is against international aviation law. It is important for the government to listen to the appeals made by aviation workers and do the needful,” he said.
Okonkwo further said that Nigeria boasts some of the world’s highest aviation charges, despite substandard airport facilities. He also revealed that domestic airlines operate on razor-thin profit margins, therefore, excessive charges like the 5% service charge and the proposed 800% increase in NAMA fees are unsustainable. He also commended the Minister for Aviation and Aerospace Development, Festus Keyamo, for his effort in making sure that domestic airlines are getting support and also for his accomplishments in the sector so far.
“For us in the business, it is not what we charge the passenger that is the issue, it is the little percentage we make as profit that matters. For instance, the five percent service charge was introduced when there was no funding, it was to bridge a gap for the agencies to operate but it has now become permanent and not only has it become permanent, more charges are springing up like the one the Nigerian Airspace Management Agency (NAMA) plans to do, increasing their charges by 800 percent which is ridiculous. It remains on record that Nigeria’s aviation charges are the highest all over the world more than the US and more than countries where their airport facilities are all functional. Now that even the aviation workers have joined in the complaints, we hope that the government will listen.
“In terms of safety, Nigeria has the safest sector in the world, the only thing is that there are more aircraft on ground than the ones flying and it puts a lot of pressure on the few in the sky. We need to save this sector. The invoice we pay to the NCAA monthly is more than the money we make for ourselves.
“There was a time I said that if you are paying less than $100 for your flight, it means we are subsidising you but many people thought it wasn’t true. At that time, people were paying N50,000 to fly, when it was costing us about N150,000. The unfortunate thing is that we don’t see any help coming from any source because no one is engaging us. Nevertheless, there is a limit to our resilience,” he said.