Stories by Abel Orukpe,
The Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, has said that aviation business is lucrative in countries with large domestic markets.
He said this while presenting a paper titled: “Economic Viability and Optimal Financing of Nigerian Aviation in 2015” at a breakfast meeting with the theme Ownership, Funding and Sustainability of Nigeria Airlines: A Perennial Challenge” organised by Aviation Round Table (ART) in Lagos.
He explained that aviation would mostly be lucrative in countries with large domestic markets such as the United States, Russia, India, Brazil and France, adding that there was strong correlation between economic success and increased demand for travel.
He pointed out that regional integration would play to the advantage of Nigeria, projecting that Nigerian Gross Domestic Product (GDP) would be strong in the next few years despite the fact that oil price plunge was still a major source of concern.
Rewane listed factors that could make airlines in the country to be successful in their operations to include viable route network; strong base, strategic partners, belonging to any of the airline alliances such as Star Alliance, Sky Team, One World, adequate financial resources and efficient fleet.
He pointed out that most of the domestic airlines operating in Nigeria were tilted towards capital restructuring, signifying cash burn and insolvency.
On financial assessment of the airlines that were bedeviled by huge debts and other challenges, the Financial Derivative boss, stated that apart from the fact that all Nigerian airlines were under the financial umbrella of Asset Management Company of Nigeria (AMCON), they all equally benefited from the Central Bank of Nigeria (CBN) intervention fund, but some were still in deep financial trouble.
Other factors militating against the operations of these airlines, he stated, are that these airlines currently owe AMCON about N190 billion, and that they do not have access to banking facilities, noting that there are huge gap between depreciable life of aircraft and short tenure of loans accessed from financial institutions.
On the proposed national carrier, which a ministerial committee had been set up to look at the modalities of setting up, he argued that there are still the quest for the establishment of national airline.
He said that at one time or the other after the demise of Nigeria Airways Limited (NAL), the Federal Government had made several attempts in the past to make Virgin Nigeria, Air Nigeria and Aero Contractor the national carriers, but that it failed.
Rewane argued that in view of the fact that government has limited resources to attend to other pressing economic and social priorities; the funding required for a national carrier is huge, adding that the move would be a tragic waste of tax payers’ funds.
What the Federal Government needed at this pointing in time, he advised, is a genuine market based reforms as against cost of state ownership.
He said that there is the need for a change in aviation paradigm, adding that when the industry is deregulated and liberalised, there would be competition and improved efficiency in the operations of the airlines and other service providers.
The businessman stated that customers would benefit where there is perfect competition and that new investments would come into the aviation industry.
National Carrier – Failed Attempts Table
1, Nigerian Airways 1971 – 2003
2, Air Nigeria 1992/1993 Capt Joji’s
3, New Co 1999/2001 IFC
4, Air Nigeria 2001/2002 by Kema Chikwe
5, Nigerian Global 2002/2003 by Kema Chikwe
6, Nigerian Eagle 2003/2004 by Yuguda
7, Virgin Nigeria 2005/2009 Obasanjo/Branson
8, Air Nigeria 2009/2010 UBA
9, Nigerian Eagle 2011/2012 Jimoh Ibrahim
10, Nigeria One 2012 Stella Oduah
11 ? ? ? 2015.
Source : Independent