President of Aviation Round Table (ART), Mr. Gbenga Olowo, speaks on why domestic airlines collapse, the takeover of airlines by AMCON, eff ects of recession and foreign exchange policy on airlines, among other issues. IME AKPAN reports
Takeover of Arik by Assets Management Corporation of Nigeria (AMCON) and survival of the airline Personally, I have no hope on AMCON because antecedent has not convinced me otherwise. Th e way they have been moving in the last three to four weeks, I see no hope. Th ey took over Aero Contractors and I haven’t seen anything after that.
Th ey removed the chief executive offi cer of Aero and sent him to the Nigerian Airspace Management Agency (NAMA); they brought in the chief pilot from Arik to Aero. All their postings have been haphazard, so I see no hope but I pray that they don’t kill the airline. Th e airline must not go under.
It is not about paying off the banks but it is an in-depth understanding of the cause of the problem. If there are priority allocations of foreign exchange to some sectors, even religion, this is a very sensitive sector for foreign exchange allocation. If the airline operator has borrowed with huge foreign exchange content, and foreign exchange has gotten to such an alarming rate, then there is a problem.
For foreign airlines, they reduce frequencies, they are cutting their expenses, their bigger operational bases are not in Nigeria. So, all they do is sell here and move their money. So, they know how to handle their problems.
Th e Nigerian airlines’ home is here. Somebody needs sympathy for them and that sympathy should be from our own government, our NCAA and the Ministry. I see no reason why we cannot call the airlines together and fi nd a way to make them strong.
If I have my way, I will merge all of them into one without killing their individual identity. Th e total aircraft for Nigerian airlines today is less than thirty. South African airways has 53 aircraft, Ethiopian airline has close to 100. We can bring our airlines together and do a very robust schedule for all their airlines put together. As a roster the fi rst airline for fl ight one, the next fl ight will be used as fl ight two.
If the fi rst airline does not go for any reason, the second airline can go, while the third airline can be used as fl ight three. Th e schedule will be maintained. Non-intervention by FG or its agency to save Arik or Aero Th e Nigerian environment is very hostile for business and our civil servants in the Aviation Ministry (now Ministry of Transport) are supposed to see to the advancement of the sector, ensuring that airlines succeed.
Th ey are supposed to measure their progress from year to year. Th ey should tell us the number of aircraft in the last one year, the number of airlines that have increased their fl eet over the years, the growth rate amongst others. So, if there is no growth, there can be no development. Aviation Ministry, what are you set up to achieve? Where is aviation?
How come Ethiopian Airline took us over? How come South Africa Airways took us over? What is that Ministry doing? Th e civil service is the government. Th e President will talk through the minister of aviation, who is responsible for the ministry, even if the Nigeria Civil Aviation Authority is autonomous. Recession and eff ect on the airlines Th e airlines borrowed a lot and their borrowing has dollar content and you do all your sales in naira.
How can you get the foreign exchange content? You go to Central Bank of Nigeria (CBN); CBN says N305, which is not available. You spend so much on training, maintenance, so much for distribution. You have to pay dollars for virtually everything. Th e dollar is not available so, the operators have to go to the black market to get dollars at a higher rate than the rate he sold the ticket.
How do you want that airline to service his debts? Because he has started, he cannot kill the business, so he keeps on struggling and he gets to a level that all the creditors gang up against him. Th e airlines AMCON has taken what success has it made of them? What is the objective of taking over? Th e job of the receiver manager is to assess your assets and liability and make up your mind on whether you will revive it or kill the company?
All over the world, when a business goes to receivership, he might decide to say since the company is bankrupt they will keep the business running and make sure the business does not die. I do not think we have bankruptcy law in Nigeria and if that is the case, it behoves our regulator to fi nd a way to support our airlines having seen how and why they are dying, which is as a result of direct and indirect contribution.
Foreign exchange policy and the airlines What I am trying to establish fi rst and foremost is the mortality rate of our airlines. Why has it been ten years, after which they die? Belview was 14 years. Th irty per cent is caused by owners’ arbitrariness. Success goes into their head so quickly and they ignore professional decisions and professional managers. In the government environment, there are a lot of factors.
Foreign exchange is one that is highly volatile. It has always been like this in the last forty years. Early 1970s, I remember the exchange rate was four naira to a dollar. During the fi rst coming of President Buhari, we faced the foreign exchange problem and the airlines were running with what was called blended rate. Various banks off ered diff erent exchange rates.
Foreign airlines were faced with that. About fi ve airlines left Nigeria. I was working for a Brazilian airline, Varig. I was deputy General Manager. Th e airline left this country because of foreign exchange. Th ey had naira in Nigeria, but they could not repatriate their revenue due to scarcity of foreign exchange. Iberia left, Varig, Scandinavian Airline amongst others left.
Since then a big vacuum was created. During Buhari’s fi rst coming, there was trade with Brazil; we had counter trade with Brazil. Volkswagen Nigeria was relating with Volkswagen Brazil. We had Sakamori; we had telecom from that country, pharmaceutical businesses from Brazil.
Th ere was huge economy exchange that time, but since the airline left there has been a between Nigeria and Brazil in terms of business interaction. Th ere was huge economic boost between those two continents then. Once aviation link is broken, economy is dead. We lost everything. Why domestic airlines collapse Th irty per cent of the failure of the airlines is due to mismanagement of the owners and 70 percent is as a result of government and the harsh economic environment.
I have been in the sector since 1973 and I have seen the airlines failing within a space of ten years they started operations. So, there is a common factor. Th e business of Nigeria Airways was government business. Th e problem of corporate governance has always been there.
Th e Nigeria Airways was supposed to be repackaged and become a new carrier but the then president said the government is not buying into the repackaging. Th e second generation airlines such as Okada Air, Oriental Airlines, Triax, Kabo among others all meant well. Okada said they wanted to prove to the government that they could do the business and they brought a Boeing B747 but that aircraft never fl ew but was left to rot.
