The Federal Government’s plan to bail out indigenous carriers clobbered by COVID-19 pandemic is creating unease in the aviation industry. The proposed N5 billion intervention funds aimed at cushioning the operations of carriers already tottering on the brink, experts say is too little, too late. In this report, Kelvin Osa-Okunbor, Ibrahim Apekhade Yusuf and Charles Okonji examine the issues
The global air transport industry is yet to recover from the debilitating effects of the coronavirus pandemic, which continues to threaten investment and jobs in the aviation and logistics value chain.
Since March 2020, when the pandemic broke out, global airlines, aircraft manufacturers, lessors, group handling companies, aviation training organisations and aircraft maintenance and repair organisations have lost well over billions of dollars.
Impact of COVID-19 on global air transportation
According to the International Air Transport Association (IATA) global aviation has lost over $ 118.5 billion in 2020 with $ 38.7 billion losses anticipated in 2021.
These losses, the global airlines body said, resulted from reduction in air traffic occasioned by the global pandemic which triggered travel restrictions for over 290 carriers.
But, governments across the globe have assisted airlines in many ways, designing financial relieves such as bailout packages to serve as lifeline for many carriers on the brink of collapse.
Concerted efforts by Federal Government to address situation
Though belated, the Federal Government said it proposed a N5 billion financial bailout to mitigate the impact of COVID-19 pandemic on the operations of airlines and aviation agencies.
The disclosure, however, has not gone down well with airlines and other stakeholders in the aviation sector.
The government was not only criticised for acting slowly in rescuing struggling carriers out of the woods, many industry experts said the amount was grossly inadequate and Ill-timed.
Besides, some industry experts berated the government for wanting to assist private businesses when such initiative many years ago was abused by some operators.
Industry experts’ verdict
Some industry experts and stakeholders have described as grossly inadequate the N5billion proposed as COVID -19 Intervention Fund for airlines and others providing services in the industry.
They said though the government meant well for players in the sector, the N4billion announced by Aviation Minister, Captain Hadi Sirika as intervention to indigenous carriers and another N1billion for other businesses in the sector was enough indication that the sector is on a slow march to recovery.
Sirika, who disclosed the intervention plan last week in Abuja, at the just-concluded three-day Public Hearing hosted by the Senate Committee on Aviation, said the criteria for the disbursement of the funds were underway.
Agitation for increase in proposed amount
Worried over the development, President, Aviation Safety Roundtable Initiative (ASRTI), Gbenga Olowo, berated the government for approving a paltry N4billion as intervention fund for the airline industry.
He said such a move by the government was not only insensitive but an after-thought at a time indigenous carriers were grappling with about N360 billion losses.
Olowo said: “Mr President and Minister Hadi Sirika, thank you for the palliative. Domestic airlines alone are owing about N22 billion to the Nigerian Civil Aviation Authority (NCAA). Domestic carriers incurred over N360billion losses. This is as a result of the COVID-19 pandemic. Reasonable countries intervened in their aviation industries in the second or third month. This is the eighth month and Nigeria is just responding.
“I think the government should just leave us to die, then we will know Nigeria has no aviation industry. N4billion palliative for the aviation industry is very insensitive. I condemn it totally.
“The airline industry is not made up of aeroplanes alone; there are allied services, people that produce onboard service are part of it; there are those who produce distribution, which we call sales and marketing, these are now outsourced and it is all part of the aviation industry.
“This is without forgetting handling companies; they are all part of aviation. So how do you want to share N4billion among them?”
Suggestions by stakeholders
On his part, Capt. Dele Ore, the former Director of Operations, Nigeria Airways, while noting that the mountainous debts in aviation sector is due to frequent changes in the headship of agencies which makes continuity almost impossible, a fresh bailout, he said, becomes inevitable if the sector must continue to thrive.
According to him, the need to extend credit facilities to the airlines is long overdue to the extent that this will help to revitalise the sector. But then, he said, measures need to be put in place to ensure that such fresh lifelines are put into good use.
Also speaking, Chairman West Link Airline, Captain Ibrahim Mshelia who lauded the Federal Government for the gesture appealed for an upward review to about a trillion naira.
“If you look at the contribution aviation does for the country and the effects of the pandemic itself, it hit aviation more than anyone else and I would only plead that the government should rethink it and look at it because there is no economy that would grow in this modern time without aviation.”
Captain Mshelia stressed that the Minister needs to do more in convincing the Federal Executive Council of the genuineness of airlines’ cause.
He said: “If we don’t take time to look at it critically and support aviation, we stand the risk of having our airlines eliminated one by one and in reality; we are suffering, really suffering.”
In suggesting the N1 Trillion bailout, Captain Mshelia listed areas where funds were needed urgently by airlines including aircraft maintenance, training and retraining, spare parts, Jet A1.
Head of Research, Zenith Travels, Olumide Ohunayo said the bailout should be no less than N100 billion.
He argued that airlines in other countries are already accessing the second tranche of bailout which includes a reduction of service charges to about 50 per cent which is currently ongoing in various parts of Europe.
Ohunayo said: “Sincerely, I think that N4billion for bailout is grossly inadequate and the timing is a bit too late for me.”
On what the funds should be, he said:”I don’t think anything less than N100b is too big. it’s not like you’re giving them this money free, it will be a loan and they will pay back. If you’re given them free, I’d say yes it’s okay but you are not, so bring out the conditions let’s see how the condition favors them or are we waiting for new airlines to come and join them?
“You cannot do it for airlines who are dead or who are just coming in airlines, which without an Air Operators’ Certificates? For me, this should be strictly for the scheduled operators.”
National Assembly to the rescue
Chairman Senate Committee on Aviation Smart Adeyemi informed the minister that its proposed N5billion COVID-19 intervention fund was inadequate and unacceptable as it will not be enough to save jobs in the industry or keep aircraft in the air.
The Senate Committee on Aviation rejected the proposed N5 billion for airline operators and other businesses in the sector.
The offer, the committee said was grossly inadequate to make any meaningful impact or relieve the impact of COVID -19 on the industry.
Adeyemi said: “N4 billion is not enough, yes you might say they are in business, but their business is the soul of our economy. Countries all over the world are providing bail out for their airlines Nigerian government needs to provide all the support possible to resuscitate the aviation sector.
“In the absence of this, so many airlines will struggle to stay in business or worst still be forced to withdraw their services.
“Bailout funds will mitigate the devastation. The N4 billion approved fir operetta re is too small, going by what is happening globally in the aviation sector. If government wants to really the airline operators in business, and we do not want them to close shops government should shore up the amount.”
Revisiting past bailout funds
A few years ago, the Federal Government approved over N200 billion as intervention to some domestic carriers.
The whereabouts of the Federal Government’s intervention fund for the aviation sector has continued to generate controversies between the disbursing Central Bank of Nigeria and operators in the aviation sector.
While the CBN is still on the trail of operators that received the Federal Government’s largesse in 2011, the airline operators have continued to deny ever receiving any funds.
Former Chairman of the association, Capt. Nogie Meggison, said two intervention funds of the government were deployed as debt buy back for airlines heavily indebted to banks.
A few years ago, the government disbursed another N120 billion to operators as intervention funds.
Among the recipients were Arik Air, Air Nigeria, Chanchangi Airline, Dana Air, Aero, Kabo, Overland, First Nation and Odengene.
Industry sources say carriers accessed between N15b to N35.5b loan.
During a joint hearing of the Senate committees on aviation and anti-corruption that probed funds injected into the aviation sector a few years ago, it was revealed that N81 billion was still outstanding, while the CBN has recovered N39b of the total fund disbursed.
Inquiry by the Senate Committees pointed to the fact that a defunct carrier diverted its N35.5 billion intervention funds for private needs.
Investigations further revealed that the Ministry of Aviation did not have records of the N120 billion intervention funds.
Dissenting views
Worried over the development, Chief Executive Officer of Centurion Securities, Group Captain John Ojikutu (rtd) said there will be need for the government to offer any form of intervention for private businesses if beneficiaries in the past could not account for the money.
The former Military Commandant of Murtala Muhammed International Airport (MMIA) suggested that monetary intervention should not be given to airlines but they can be supported with waiver on some charges.
He said: “The proposals he put forward include free airport landing and parking and air navigational charges for not more than three months for domestic airlines only after the easing of lockdown on operations; 50 per cent Passengers Service Charge (PSC) discount for three months on all domestic passengers.
He said: “The only government direct financial intervention may be necessary as palliatives for the airlines staff salaries only for three months or the period the lockdown lasted but this must be recoverable within 12 months or by June 2021.
“The financial palliative should be used to pay only 70percent of the staff salaries. Those staff must be confirmed to have been registered with the National Pension Board and their pension contributions are up to date. The balance of 30 percent in their salaries not added should account for the period they did not pay for transport to go to work.”
NCAA’s position
Also speaking, Director-General of the Nigerian Civil Aviation Authority (NCAA), Captain Musa Nuhu said the Federal Government was already working the criteria for airlines that will benefit from any intervention proposed for airlines.
The regulator said that irrespective of the number of airline operators that apply for the expected funds, it remains the policy of the Federal Government to disburse it to airlines considered functional.
He said “Any airline can apply, whether functioning or not but it is a policy that participating airlines must be functioning and with an Air Operators Certificate. I also believe that the AON has its own rules and they know the criteria, I believe the AON will not put forward a non- functioning airline,” he said.
Why airlines should not be allowed to close shop
An industry expert who declined to be named said, “ The COVID -19 pandemic has brought on a universal and incalculable devastation to global economies with airlines worst hit.
“But, there is global agreement among governments that no airline or the air travel sector can survive without a good dose of support from the government. In Nigeria, the government must not do less in offering the right support to indigenous carriers which suffer from lack of local aircraft maintenance facilities, warranting them to spend more on facing their airplanes.
“In times like this, our beleaguered airline industry needs cash flow to avert collapse. The economy would be in dire straits should airlines be allowed to go down.
“The fact that some operators abused past privileges should not be taken on the entire industry. The regulators should seek means and ways to go after such debtors and not the government using that as an excuse not to save indigenous carriers from collapse.”
