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By Chinelo Obogo [email protected]
For a sector already plagued by financial constraints, Nigeria’s aviation industry struggled the whole of last year with the provision of basic infrastructures to cope with its increasing operational demands, especially during emergencies like the COVID-19 pandemic that hit the rest of the world in 2020.
The industry’s experience in Year 2022 was a combination of highs and lows compounded by acute scarcity of forex and jet A1 that lasted for much of the year leading to a 150 percent increase in cost of flight tickets.
However, in terms of capacity, the African Airlines Association (AFRAA) reported that traffic and African airlines capacity deployed in November last year, reached 85.7 percent and 84.2 percent of the 2019 level respectively. The domestic market share was put at 34.3percent capacity and 34.3 percent of passengers carried while intra-Africa passengers carried represented 30.9percent and corresponding capacity at 24.8 percent. African airlines operations on international routes have now exceeded 2019 pre-COVID-19 level by 2.28 percent.
According to the Managing Director of the Federal Airports Authority of Nigeria (FAAN), Capt. Rabiu Yadudu, the records represented an indication that Nigeria’s aviation has fully recovered from the COVID-19 pandemic era, and it is presently performing at 111 percent. He attributed the quick recovery to resilience and determination of all stakeholders to achieve positive results.
Another high point in the sector in 2022 was the rehabilitation and recommissioning of the Runway 18L/36R at the Murtala Muhammed Airport, Lagos after 14 years of disrepear. The runway was shut for more than three months for light installation to be completed. The absence of lights on the runway had put untold burden on airlines over the years as they burned fuel while taxing to the domestic runway from the international wing of the Lagos airport.
Dana Air, Aero resume operations
After over 61 years of flight operations, Aero Contractors, Nigeria’s oldest indigenous operator ‘temporarily’ shut down its operations. A press statement sent to aviation reporters on July 18 last year by the management of the airline on its decision to shut down did not come as a surprise to keen watchers of the industry. The airline explained it shut down its operations due to the impact of challenging operating environment on its daily operations.
The temporary closure of another domestic airline came in quick succession after Aero shutdown.
On July 20, NCAA suspended Dana Airlines’ Air Transport Licence (ATL) and Air Operator Certificate (AOC) indefinitely, with effective from midnight of July 20, 2022.
The suspension was made pursuant to Section 35(2), 3(b) and (4) of the Civil Aviation Act, 2006 and Part 1.3.3.3(a)(1) of the Nigeria Civil Aviation Regulations (Nig.CARs), 2015. The decision, the Authority said, was the outcome of a financial and economic health audit carried out on the airline by regulators, and the findings of an investigation conducted on the airline’s flight operations recently, which revealed that Dana Airlines was no longer in a position to meet its financial obligations and to conduct safe flight operations.
However, four months after suspending its services, Aero Contractors, which has been under the receivership of the Asset Management Company of Nigeria (AMCON), resumed flight operations on December 5 to 10 destinations. The airline commenced with B737 and Dash 8 (Q- 300/400) after it had satisfied regulatory requirements by the NCAA. It re-launched services with five aircraft.
Managing Director of the airline, Captain Ado Sanusi, said the company now has four strategic business models in order to strengthen its operations, adding that AMCON has given the company the opportunity to raise funds from financial institutions within and outside the country. Dana Air also resumed flight operations on the November 9, after a successful conclusion of the audit by the NCAA. The Accountable Manager/ Chief Operating Officer of the airline, Ememobong Ettete, said the audit was a re-engineering and restructuring process and that having successfully concluded the audit for the second time, and with a new management team fully in charge, operations have to be restarted again.
MRO, aircraft leasing company, national carrier in limbo
On assumption of office as aviation minister, Hadi Sirika, had laid an aviation roadmap that included the establishment of a Maintenance Repair and Overhaul (MRO) Centre; Aviation Leasing Company (ALC); Agro-Allied Cargo Terminals; Aerotropolis or Airport City; National Carrier; Africa Aerospace and Aviation University (AAAU); second Runway of the Nnamdi Azikiwe International Airport, Abuja, among others. acahieving the roadmap in the course of the twelve months of 2022 was indeed a huge task, although there were significant headways in some areas
According to the Managing Director of the Federal Airport Authority (FAAN) Capt. Rabiu Yadudu, Nigeria lost at least $2.5 billion (about N1.25 trillion) in the maintenance of its aircraft to foreign MRO facilities in 2021. He said that such capital flight would have been saved if the country had viable MRO facilities that could adequately cater for all types of aircraft.
To carry out C-checks on Boeing 737 aircraft or its category which is done every 18 months, airlines spend at least $1.8 million. It should however be noted that airlines like Aero Contractors and 7Star own MROs.
Consequently, the Federal Government went into a Public Private Partnership (PPP) deal that was meant to see the establishment of an aviation leasing company and an MRO facility. The Consortium of A J Walters Leasing Limited and Glovesly Pro-Project Limited were announced last year as the preferred bidder to establish the leasing company, while the Consortium of A J Walters Aviation Limited, EgyptAir Maintenance & Engineering (EGME) and Glovesly Pro-Project Limited as the preferred bidder to establish the MRO.
But a reliable source within the Ministry of Aviation told Daily Sun that the agreement between the Federal Government and AJW was yet to be finalised due to the inability of both parties to reach a consensus on the percentage of annual turnover as royalty.
The source said the government proposed seven percent, while the company insisted on two percent and that at the moment, no agreement has been reached. However, the company agreed on the issue of ‘local content’, which means that most of the MRO’s workforce would be Nigerians, except where there is no capacity.
“Nothing has been signed because the government said they should give us seven percent of the annual turnover as royalty but AJW refused and insisted on giving only two percent. The only area that AJW accepted is in local content where they aren’t expected to employ foreigners except where Nigeria does not have the capacity. Till date, they have not shifted from that two percent. At a time, the Federal Government proposed five percent, but AJW stuck to two percent,” the source said.
For the aircraft leasing company, Daily Sun’s source said there were no indications that it would take off anytime soon, while for the national carrier, Sirika announced Ethiopian Airlines Consortium as preferred bidder of the proposed Nigeria Air Limited with a combined score (Technical and Financial Bid) of 86.7 per cent in the final quarter of last year. He said that all preparations for the establishment of the national carrier have been concluded and the airline will kick off within six to eight weeks as it has commenced recruitment of workers and that the aircraft will soon be coming into the country.
ET will own 49 percent of the airline, while a consortium of Nigerian investors will own 46 with the Federal Government taking thye remaining five percent.
Commenting on the money spent so far, the minister gave the figure as follows “money spent for the launch of Nigeria Air, (about N400 million) for all the requirements to establish an Air Operator Certificate (AOC) and be admitted starting an airline operation, is well within the five per cent capital investment of the Federal Government of Nigeria, that will be overall needed to establish the national carrier initially for the AOC approval and everything else required by stringent national aviation regulations, as prescribed in the FEC approved Outline Business Case (OBC). No further FGN funding will be provided above the five percent share capital of the next national carrier of Nigeria, which was provided to launch Nigeria Air.”
The airline was supposed to launch with a shuttle service between Abuja and Lagos with three new Boeing 737-800and other domestic destinations will follow thereafter. The Request for Proposal (RFP) under the PPP Act, governed by ICRC, is completed.
The deal between the FG and Ethiopian Air was badly received by the domestic airlines as shortly afterwards, the Airline Operators of Nigeria (AON) sued the Federal Government to court, listing Nigerian Air, Ethiopian Airlines, Minister of Aviation, Hadi Sirika, and Attorney-General of the Federation, Abubakar Malami, as defendants.
Among other prayers, the airlines want the court to stop the national carrier deal and withdraw the Air Transport License already issued to Nigeria Air by the Federal Government/Nigerian Civil Aviation Authority.
They also claimed that the firm which served as Transaction Adviser for the transaction, was incorporated in March last year and alleged that the company was linked to the aviation minister. Justice A. Lewis-Allagoa of the Federal High Court sitting in Lagos granted their prayers, issuing an order of interim injunction restraining the Federal Government from executing the proposed draft agreement establishing a national carrier between Ethiopian airlines and Nigeria.
He ruled that an Order of Maintenance of Status Quo by all the parties in the suit from taking any further step(s) in relation to the subject matter of the suit pending when the determination of the Motion on Notice is granted.
Aviation fuel, forex scarcity worsens
Just as the industry was still recovering from the effects of covid, another crisis triggered by scarcity of forex, devaluation of the naira and high cost of aviation fuel took another toll in its operation.
Director General of the Nigerian Civil Aviation Authority (NCAA), Capt. Musa Nuhu, admitted that the situation of the industry remained very critical.
The scarcity of Jet A1 which began in late February of 2022 and deteriorated further through the months of March, saw the price rise from N200 in December 2021 to over N400 per litre in February and over N800 per litre. This has caused an almost 300 percent increase of air fare from N25,000 to N70,000 for economy tickets.
The spokesperson of the Airline Operators of Nigeria (AON), Obiora Okonkwo, told the media that the continuous rise in the price of aviation fuel and supply is epileptic and unpredictable at several airports across the country, thereby causing flight delays and cancellations. He said that added to the already difficult situation, is the high cost and scarcity of foreign exchange as airlines carry out most of their activities in US dollars which today sells for about N750 to $1; and is also in short supply. He said airlines are in a ‘life and death’ struggle to secure the foreign exchange that they urgently need to acquire spare parts to ensure the regular routine and scheduled maintenance of aircraft.
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