ECONOMY - 25 SEP 2017

Managing the Gridlock in Nigerian Skies

Managing the Gridlock in Nigerian Skies
Ethiopian Airlines serves 41 domestic and 65 international destinations from its Bole International airport base in Addis Ababa Source: Takashi Matsumura

This article is part of an Aviation Series. Read Part I here

Experience, whether personal or vicarious, is an effective teacher. Considering the success of the global aviation industry, most regions should not have issues adapting their aviation sectors for profitability. However, it can be argued that both the government and institutions set up to steer the aviation sector have fallen short of their responsibilities in Nigeria.

 

Potholes on the runway

When financial markets struggle, the Securities & Exchange Commission (SEC) gets the blame. Likewise, the semi-collapse of Nigeria’s aviation sector must be brought to the feet of the Nigerian Civil Aviation Authority (NCAA).

As such, the new administration has made notable personnel changes in the industry, but changes within NCAA itself have not been as impressive.

Primarily, the government has persistently failed to address legacy challenges in the sector. Take, for example, the low operational, safety, and security standards at most airports which beg for government attention. Meanwhile, the proposed Fly Nigeria Act, intended to increase the industry’s attractiveness as an investment destination, while also addressing infrastructure bottlenecks that prevent operational efficiency, failed to garner meaningful support.

Some private operators, faced with huge debts owed to service providers, remain reliant on bank loans and government intervention funds. These operators get concessions on customs duties on aircraft imports and foreign exchange (FX), yet they are indebted to banks, insurance firms, and staff in multiple arrears.

Most recently, the aviation industry suffered from an inadequate supply of FX and aviation fuel. This led the likes of Aero and First Nation Airways to suspend operations as rising costs and falling revenue bled their balance sheets. In short, the rot in the aviation sector is deep.

 

Counting stars

Nigeria can learn from many success stories; inside and outside the continent. Singapore, with a population of about 5.8 million people, has an airline – Singapore Airlines Limited (SIA) – with more than 112 aircraft in its fleet. Dubai, a principality with less than 3 million people, operates a state-owned airline with over 240 aircraft.

For Singapore, certain factors have helped the airline to move from a small regional player to a large international carrier. The airline has unparalleled and reputable service, across its in-flight and ground staff. In contrast, Nigerian carriers barely understand courtesy as a growth tool.

The airline also boasts of on-time performance that won the heart of its customers, where flights are rarely delayed and aircraft facilities, including meals and entertainment, are top-notch.

Marketing cannot be discounted either; SIA nurtures its close coordination with the Singapore Tourism Board in attracting millions of tourists to arrive and depart via SIA. The campaign of “Even if you do not fly to Singapore, fly via Singapore” is outstanding.

SIA made excellent use of civil aviation and IATA rules in obtaining traffic rights and freedom rights to operate flights and was a pioneer in bringing out the idea of Open sky policy. SIA also managed to achieve 90% occupancy in the forward section (the First Class and Business Class), the most profitable seats on an aircraft. The airline has had to compete with the rest of the world’s international best airlines to attain passengers. This was a drive to achieve the quality to improve and maintain craftsmanship in obtaining an outstanding name.

SIA enjoyed the advantage of politics-free top-management (still a mountain to climb in Nigeria) along with an efficient accounting system. To cap it all off, the Singapore government, which holds a majority stake via the Ministry of Finance, has regularly stressed its non-involvement in the management of the company. And this is even when a perceived government's proactive role seemed to provide a competitive advantage.

Closer to home, we can take a cue from the state-owned Ethiopian Airlines (EA) with a fleet of 85 aircraft and 48 on order. It is one of Africa’s largest and most profitable airlines and has been in operation for 71 years, since its establishment in December 1945. 

Ethiopian Airlines serves 41 domestic and 65 international destinations from its Bole International airport base in Addis Ababa. The success story of Ethiopian Airlines is pretty straightforward; the right aircraft and routes and a government that lets experts do the job. If even 50% of this feat can be achieved in Nigeria, the aviation industry will most likely flourish beyond projections.

The airline is left alone to be run like a business, even though it is 100% government-owned. The ownership and management of the airline are completely separate, and the management is handled by seasoned aviation professionals who run the airline on the standards of a regular profit-making business enterprise.

These examples are poignant for any discussions for a new national carrier.

 

The best is yet to come

From these success stories, any national carrier must be a strong, privately-managed institution, imitating the Ethiopian model and discipline, with its own Maintenance Repair and Overhaul (MRO) facility, and free from government control and interference.

More pertinently, policy efforts must turn towards helping existing airlines survive and creating a conducive economic environment. This should address infrastructure, taxes, charges, funding and partnerships. Ultimately, engagement with sector stakeholders, particularly business owners, would maximise the synergy between business and state.

With such matters addressed by unbiased policies, improved FX liquidity, local production of Jet A1, general economic recovery and regulation, competitiveness and sustainability can be restored to the Nigerian aviation industry. This will bring about the needed transformation in the industry, and, naturally, facilitate job creation in that and supporting industries.

 

This article is part of an Aviation Series. Read Part I here

Follow this Writer ologunkoree on Twitter. Subscribe to read more articles here.

Korede Ologun

Korede Ologun

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