Last week the federal government justified why it allowed foreign airlines to operate to multiple destinations in the country, but industry experts have argued would retard growth of domestic airlines and the development of the aviation industry, writes Chinedu Eze.
During the first quarter breakfast meeting of Aviation Round Table (ART), which held last week in Lagos, the Minister of Aviation, Senator Hadi Sirika, explained why the federal government allowed foreign carriers to operate to many airports in the country and identified the benefits of that policy.
In a presentation titled, Economic Implication of the Grant of Multiple Entry Points to Foreign Airlines in Nigeria, the Ministry observed that the grant of multiple entry points to foreign airlines into Nigeria has been an issue of contention by the Airline Operators of Nigeria and experts in the aviation Industry for quite a while.
He explained that a Bilateral Air Service Agreement (BASA) is between two countries and not between airlines, so in a BASA, “we have the sharing of frequencies and not the allocation of frequencies. We also have single entry and multiple entries into each other’s countries for passenger and also cargo flights.
“Our nation’s domestic airlines operate within Nigeria, while the capable ones in addition operate as the nation’s flag carriers. They could operate along with a national carrier or without one. As we are all aware, our domestic airlines are made up of healthy and growing airlines
“Multiple entries points are granted to foreign airlines based on the nature of their BASAs. It expands the business and grows the economy of foreign airlines. It also generates revenue for the country, as foreign airlines are able to land at different airports connecting different area of the country to foreign countries thereby promoting commercial trade, tourism and friendly relations,” the Minister said.
He further explained that the grant of entry into more than two airports in Nigeria exposes foreign airlines to domestic routes and therefore into the domestic markets of the domestic airline and this has its negative implications which include the fact that it is against the Carbotage Act; it does not allow the airlines to generate much needed revenue that would help in their growth and although it expands the business and grows the economy of foreign airlines, it also puts pressure on demand for forex as need to repatriate funds which they require for their smooth operations. Technically, it creates capital flight from Nigeria.
However, the Minister also noted, “There are prospects for domestic airlines as they have opportunities for improved domestic markets by distributing international passengers for connection with these airlines. The grant of entry points to foreign airlines should also be such that they are giving multiple entries, to either Lagos or Abuja and not Lagos and Abuja, in addition, to any other airport outside the geographical area of the number one choice of Lagos and Abuja; example, Port Harcourt, Kano and Enugu. In this way they do not take over all the business on all the international airports,” he said.
There is one benefit of multi entry points, the Minister once pointed out; and that is that if foreign airlines operate to Abuja, Kano, Port Harcourt and Enugu, Nigerians who travel from Enugu, Aba, Onitsha, Owerri, Abakaliki could go to the Enugu airport and from there travel overseas. So travellers from Kebbi, Sokoto, Zaria could go to Kano. In doing that it saves them the discomfort and expenses of travelling to Lagos or Abuja to board a flight overseas.
AON
The Airline Operators of Nigeria (AON) in reaction to the position of the Minister said that they might go to court to challenge the matter concerning the designation of foreign airlines to multi entry points.
The operators said they would meet with the Minister to deliberate on the issue and expressed hope the government would look at its policy and review it.
The AON President lamented the billions of naira being lost annually to multiple designations granted the foreign carriers and warned that if the policy continued unabated the domestic airlines would die, while the foreign airlines would eventually take over the domestic market.
“All the foreign airlines that come into Nigeria, everyday the Central Bank Governor cries about the amount of money being repatriated abroad. We are talking about the scarcity of foreign exchange in the country, but the foreign airlines are removing billions of dollars every year from this country, and airlines in Nigerians have been hassled with lots of requests on how to repatriate dollars into the system.
“Yet we are creating more avenues for these things to happen by giving multiple destinations to these foreign airlines. All the foreign airlines that come to this country, maybe about 20 or 30 of them have not been able to employ more than 150,000 Nigerians.
“We keep on badmouthing Nigerian airlines, forgetting that we are the architects of our own undoing. Air Peace alone employs over 4,000 people directly. It would take foreign airlines another 60 years to generate 4,000 jobs. Yet Air Peace has to beg to be given rights to build a hangar in its own country. It has no land in its own country. No land for its assets and passengers,” the Vice President of AON, Allen Onyema who spoke on behalf of the operators said.
Cannibalising Domestic Market
An informed senior executive of one of Nigerian carriers told THISDAY on Monday that designating one foreign airline to more than one airport has many setbacks for the aviation industry and also for domestic airline operators. He said that if Nigeria wants to grow its own airlines it has to leave them to fully exploit the market available to them, as many countries in the world are doing.
“You cannibalise the domestic market when you give multiple entry points to foreign airlines. Other countries don’t give multiple designation to foreign airlines. Kenyan government cannot give a foreign airline the approval to operate to Nairobi and Mombasa, which are the biggest cities in that country. When you come from outside you land in Nairobi and board a local airline to Mombasa. Egypt cannot give you landing right to Cairo and also Alexandria. South Africa cannot give a foreign carrier landing right to Johannesburg, Cape Town and Durban. We are the only country that does this.
“Nigeria is one of the strongest air passenger market in the world. We have high load factor and in Nigeria, air passengers begin to fill the aircraft from the front. Which means that we fill up the first class, the business class and the economy class, made up of 99 per cent Nigerians. Nigeria gives airlines one of the highest yields in the world,” the top airline official said.
He also explained that in many African and other countries of the world, foreign airlines in BASA agreement are made to partner with local carriers. When the foreign airline brings passenger to the country, its local partner would distribute them to other destinations in that country. That way, the local carrier generates revenues from the passengers brought in by the foreign airlines.
He explained that if, for example, Air France comes to Nigeria three times a week with Port Harcourt and Lagos passengers and Lands in Lagos. Assuming that out of 150 passengers100 are dropping in Lagos and 50 are dropping in Port Harcourt. Air France local partner will take them to Port Harcourt.
In one week, the local airline will airlift 150 passengers and in one month it will airlift 600 passengers for the international carrier. If that local carrier made N40, 000 for each passenger; that would be N24 million in one month and this is what Nigerian local airlines potentially lose to foreign airlines due to government multidesignation policy. Extrapolated to about 10 major foreign airlines that operate to more than one entry points in Nigeria it will be N240 million in one month.
“So what the federal government has allowed the foreign airlines to do in Nigeria is to basically cannibalise the domestic market and this is not healthy for the country and any other country that wants its own airlines to grow. We are being deprived of our viable domestic market,” the airline official said.
Supporting Local Carriers
The Secretary General of Aviation Round Table (ART) and the former Commandant of the Murtala Muhammed International Airport, Lagos, Group Captain John Ojikutu, told THISDAY that one key way the Nigerian government can help the Nigerian airlines to grow is to stop giving foreign airlines multiple entry points.
“We need to help local airlines by limiting each foreign airline to one airport in the country. I can tell you, no foreign country will give our national carrier two airports. It is only in Nigeria that this is allowed. You remember the case between Arik Air and British Airport Authority when the Nigerian airline wanted to operate from Abuja to Heathrow in reciprocity to British Airways that was operating to both Lagos and Abuja. BAA resisted it and used high charges to force Arik to stop the service,” he said.
The Managing Director of Flights and Logistics Solutions Limited, Amos Akpan told THISDAY that the federal government was concerned more with the proximity of the international airport to the travellers, remarking that from the government policy on multidesignation, it is indicative that government is inclined to believe that Nigerian airlines may not grow tomorrow to have strong capacity to conduct international flights. He regretted that the policy is already imbedded in the commercial agreement, which follows Bilateral Air Service Agreement signed between Nigeria and those countries that own the airlines that operate into the country.
“From the economic growth of domestic airlines, multidesignation is a hindrance to their growth. It does not encourage synergy or partnership or code-share between foreign airlines and Nigerian carriers. For example, Ibom Air can be taking Air France passengers to Port Harcourt; Azman Air can be taking Qatar Airways passengers to Kano. Such partnership will benefit the domestic carriers. What they need to do is to key their flight schedule to the foreign airlines’ schedule. This is very simple, Ibom Air makes money, Air France makes money, but now it is only Air France that is making all the money. So government can make this a win-win for everyone. What is happening limits the development trajectory of Nigerian carriers and the industry,” Akpan said.
Protecting Nigeria’s Interest
Senior official in one of the aviation agencies told THISDAY that the primary function of government is to support and protect the interest of its citizens. He recalled that the first time in Nigerian history where government went all the way to protect privately owned airline against foreign carrier was what the Minister of Aviation, Senator Hadi Sirika did for Air Peace against Emirates. He said that the action endeared the Minister to many Nigerians.
“Emirates must have been surprised because in the past these officials collect perfumes and drinks, first class tickets, five star hotel accommodation and cash to compromise the interest of the country. But the Minister stood his ground. A precedent has been laid and I hope others coming after him will follow this example,” he said.
He also noted that while security is made the issue, the US Federal Aviation Administration (FAA) look out for the business interest for the US compani
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