Domestic carriers on death row as foreign airlines invade local routes

Ethiopian Airlines


THESE are very tough times for Nigeria’s domestic airlines as they battle to stay afloat amid harsh government policies that are shrinking revenues and throwing their employees into the labour market.

Today, more than ever be­fore, the approval of multiple routes for foreign airlines even when there are no domestic air­line to reciprocate such routes appears to be killing the do­mestic airlines gradually with many contemplating shutting down their operations.

Recent aviation sector sta­tistics reveal that the Nigeria aviation industry is worth $83 billion annually but sadly, lo­cal airlines have dropped from an initial 12 per cent control of the market to only three per cent shares in the last 20 years, while foreign airlines now con­trol the balance of 97 per cent.

Realising how lucrative the Nigerian market has proven to be for investors, foreign airlines, it was learnt, have stopped at nothing, including compromising government of­ficials at the Federal Ministry of Aviation, to take advantage of the absence of a national car­rier and the inadequate capacity of the existing domestic airlines to compete on international routes to secure multiple routes as against conventional norms and best practices.

Presently, Ethiopian Airlines, Kenyan Airways, KLM/Air France, Maroc Air, Qatar and Emirates are all operating com­mercial flights out of more than one airport in Nigeria.

Ethiopian Airlines flies into the Lagos, Abuja, Kano, and Enugu international airports and is about capturing Port Harcourt; Air France flies into Lagos, Abuja, and Port Har­court; Kenya Airways is flying into Lagos and Abuja; Qatar and Emirates are operating into Lagos, Abuja and Kano; Brit­ish Airways is going to Lagos and Abuja and is believed to be working on securing the Kano route; KLM is operating both Abuja and Lagos routes, while Lufthansa is flying into Lagos and Abuja airports. This arrangement has therefore cut off a huge chunk of revenue that would have flowed into the coffers of local airlines leaving most of them operating below capacity and incuring huge debts daily.

Olu Ohunayo, an industry analyst and Country Head for Zenith Travels Limited, said the trend, however, constitutes severe breaches to operational guidelines regarding the Nige­rian content as stated in docu­ments submitted to the Nige­rian Civil Aviation Authority (NCAA) and the Bilateral Air Services Agreement (BASA) signed by Nigeria with other countries. It is also shrinking the fortunes of domestic air­lines and leading to several job losses in the industry and an inability to create new or more jobs in the local industry.

However, a top government official who defended the gov­ernment policy told Daily Sun that the administration of Presi­dent Goodluck Jonathan had allowed it to thrive “in a bid to rake in more revenues from royalties paid by the foreign carriers.” But how sustainable can this arrangement be when it is taking jobs away from Nige­rians and boosting employment overseas.

Meanwhile, an industry source who criticised that decision not­ed that “it is only in a country like Nigeria that such a policy can be implemented as no other na­tion would allow such impunity to thrive.

“The whole practice, the award of multiple routes to foreign air­lines, lacked transparency as it was done in a manner that ne­gates global best practices,” said the source, an official of one of the local airlines who would not want to be named.

“It is a big fraud; it is shrouded in so much secrecy that no one knows how much the govern­ment is making out of these deals. The regulators have been com­promised by the foreign airlines. And the government has never declared publicly revenue figures from the deal. It is even creating a new wave of capital flight,” said an official of one of the domestic airlines.

In fact, an estimated $1.6 bil­lion is being lost on the United Kingdom and United Arab Emir­ates routes where British Airways, Virgin, Ethihad and Emirate Airlines are enjoying a monopo­ly. Late last year, Usman Mukhtar, Director General/CEO of NCAA, disclosed that foreign airlines raked in N231 billion out of Ni­geria from ticket sales alone as over 1.4 million passengers were airlifted by international airlines out of Nigeria. The figure, many analysts said, could hit N350 bil­lion by the end of this year (2015) if more Nigerian airlines are not empowered to ply foreign routes.

Other analysts have, however, gone beyond the fraud in alleged non-declaration of actual rev­enues from royalties to the public to note the inherent harm it is do­ing to the profitability of domestic airlines.

This could be found specifi­cally in the inability of the policy to protect the local airlines that are in the throes of death. To salvage the bad situation, some observers have said it would be better to al­low foreign carriers utilise just one major international route into the country, while the domestic airlines are given the chance of feeding the foreign airlines with passengers from the other airports scattered within the country. That is the trend all over the world.

With multiple designation as in the case of Nigeria means that lo­cal airlines like Aero, Arik, First Nation, Med-View, Chanchangi, among others, which hitherto profited by picking passengers from Kano, Port Harcourt and Abuja and dropping them for onward movements to foreign airlines like Emirates and Ethio­pian Airlines in Lagos have been shortchanged in terms of revenue earnings under the arrangement.

Even the NCAA, which regu­lates the industry has had cause to raise fears over the health of do­mestic airlines given the inability of some operators to meet minor financial obligations like staff salaries.

Daily Sun learnt that the dwin­dling fortunes of local airlines in recent years had wreaked such havoc on their financials that AMCON had to step in to take up both management and equity stakes in most of the existing do­mestic carriers as part of efforts to keep them afloat for the flying public.

Chris Aligbe, an industry ana­lyst who has repeatedly frowned at the new wave of foreign domi­nance of Nigeria’s local routes described the loss to the nation as “incalculable”.

Source : SunOnline

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