NIGERIA: Local Airlines Seek Government Bailout

After more than three months of  forceful shutdown ordered by the Federal Government as part of measures to curb the spread of COVID-19, scheduled  commercial flight operations resumed on domestic routes on July 18, but local airline owners appear to have returned the big birds to a sky more turbulent than they left in mid-March when operations were suspended. In the months that operations where suspended, the industry is reported to have lost over N360billion.

But flight resumption has witnessed the management of Air Peace, Arik Air and Bristow Helicopters pitted against the workers’ union with ultimatums and threats of  disruption of aircraft movement across the country to press home the demand for the recall of pilots, engineers and other workers laid off by the airlines.

For an industry already bedevilled by a lot of factors that had stunted its growth even before the outbreak of Coronavirus, the latest threats by labour to ground the airlines is seen by many as the proverbial last straw that could break the camel’s back.

Root of latest crisis 

With government, trade, commerce, tourism and other socio-economic activities yet to fully peak owing to the impact of the lockdown of the economy leading to low disposable income for majority of citizens,the patronage for air transportation in Nigeria has dropped drastically, with some airlines reporting a dip in load factor by about 70 per cent.

Aircraft with the capacity to carry 140-150 passengers now fly an average of 50-70 passengers on most routes. Those that flew two to four frequencies daily on lucrative routes like Abuja, Lagos, Port Harcourt Kano, have cut down the frequencies to two.

For instance, Air Peace which operated over 120 flights before the lockdown, has come down to about 20, even when it has a workforce of over 3, 000 to deal with and multiple taxes that are not easing out to settle.

With passenger patronage  now averaging 30 per cent per aircraft, the only way to fill a 150-180 seat aircraft is to drop fares. But that’s not a sustainable option either; not in a clime where airlines are still wooing passengers after the COVID-19 lockdown.

And since operational cost on items like fuel, aircraft maintenance, taxes and charges to airports, service providers, navigational, meteorology, regulatory agencies and staff remuneration have remained the same following the resumption of services even amid passenger apathy and drop in revenue, majority of the stakeholders fear the industry could go bust if nothing was done to salvage the few local airlines currently in operation.

“The airlines are now closer to the brink;getting bust is more eminent than ever, not when you are made to pay a multitude of taxes to government agencies, plus the high cost of fuel, yet there is no palliative to support or cushion the impact of COVID-19 from the Nigerian government as seen in other nations around the world,” a top airline official told our reporter.

Experts express fears 

Aviation analyst and member of the Aviation Round Table, Olu Ohunayo, told our reporter that COVID-19 has devastated the global economy with the airline industry as the worse hit.

“Airlines all over the world are struggling to stay afloat. When you park an aircraft for so long and have to restart, it comes with a huge cost. COVID-19 has affected the airlines in a way that we have never seen before,” said Ohunayo.

“We have seen airlines like Lufthansa, Virgin Atlantic throwing out staff and declaring bankruptcy despite the palliatives given to them. Once passengers don’t fly as they should, there is bound to be loss of revenue. In fact, all airlines and aircraft manufacturers are at present in a crisis because of the impact of COVID-19. They have to cut cost of operation to remain in business and they require the understanding of all stakeholders,”Ohunayo added.

Lead Consultant, Etimfri Group, Mr. Amos Akpan and travel agent, Celsius Efreh,expressed the fear that the crisis that would spring up in the next two to three months as fallout of COVID-19 could collapse the industry if it is not properly managed.

“The resumption of operations has seen the airlines running not as businesses, but as if they were charity organisations that have no intention of returning profits or dividends to shareholders. Incomes generated from ticket sales and cargo freight has been so low to sustain operations as businesses. Nigerian airlines are now on life support believing that they can get the requisite oxygen somewhere to resuscitate,” said Efreh.

Weathering turbulent storms 

Faced with the mismatch of income and operational cost, airlines have no better option than to restructure their operations to survive, and slashing workers’ salaries and the laying off of some workers appear the  immediate survival strategy.

In fact, in the last two weeks,  Air Peace, Bristow Helicopters and Arik Air have been at loggerheads with aviation sector unions following the sack of majority of workers, among them some 170 pilots and engineers, while some other airlines like Azman and Max Air have slashed  salaries to the displeasure of the affected workers.

“The COVID-19 pandemic has hit every airline worldwide so badly that it has become very impossible  for airlines to remain afloat without carrying out internal restructuring of their costs. Anything short of what we have done may lead to the collapse of an airline as could be seen in some places worldwide during this period,” said Air Peace in a statement announcing the   sack of pilots and slash of workers salaries by 40 per cent.

“The airline cannot afford to toe the path of being unable to continue to fulfil its financial obligations to its staff, external vendors, aviation agencies, maintenance organisations, insurance companies, banks and other creditors hence the decision to restructure its entire  operations with a view to surviving the times,”it added.

However, the National Union of Air Transport Employees (NUATE) and Air Transport Senior Staff Services Association (ATSSAN) and the pilots union have issued ultimatum to Air Peace, Arik, and Bristow to recall the sacked workers or they would ground their operations within the next two weeks.

Workers’ rights or insensitivity?

Our reporter learnt that while airline owners see job cuts and downward salary review as inevitable for the survival of their businesses, staff and the  industry union would prefer none of that; not in an economy with millions of unemployed youths and that offers no  government support to jobless citizens.

And because the Federal Government, through the Central Bank of Nigeria (CBN) has promised to provide palliatives in form of soft loans for businesses like airlines to cushion the impact of COVID-19, those opposed to the sack of workers have appealed for time to allow for negotiations with the government on the possible bailout for the industry.

But outside labour, operators, service providers and other stakeholders see the hard stance of workers as insensitivity on their part to the reality as the Nigerian airlines are not immune to the fate that has befallen some of the world’s richest airlines.

Aviation analyst, Capt. John Ojikutu  queried the threats of labour to ground the airlines in a post saying: “Ground Arik, ground Air Peace, ground Dana, etc!!! Can you ground the Private Aircraft Operators or foreign airlines EVACUATION FLIGHTS? Think! Think!! Think!!!”

“While their counterparts are daily  getting laid off in various countries of the world, pilots and engineers in Nigeria are insisting on getting regular pay despite the obvious. This is nothing but being insensitive to the reality,” said Efreh.

Akpan, however, expressed the fear that the disruption of operations, at this stage of recovery from COVID-19, could be disastrous for the entire aviation industry currently facing an existential crisis.

“Workers will stop work which means no operations and which translates to nil income. As businesses do not earn income, the unpaid fixed costs keep piling. Companies cannot meet obligations, redundancy sets in, industry is in comatose,” he said.

“Some of the issues raised now were ongoing before COVID-19  set in. So using them now to cripple operations is below the belt punch. We could be having ongoing discussions so that companies do not become bankrupt. Bankruptcy in Nigeria is not the same as it is in America or Europe. The company closes and does not resurrect like the proverbial Phoenix,” he added.

Urgent govt intervention needed 

Although the  federal ministries of Aviation and Labour have waded into the crisis, stakeholders would, however, appreciate the release of government palliatives to the airlines even while appealing to labour to jettison the idea of sabotaging the industry.

Chairman of the Airlines Operators of Nigeria (AON), Capt. Nogie Meggison has said aviation remained the barometer through which the economy of a country is measured and that the government must do everything within its powers to keep the airlines in the sky. The government cannot afford to sit on the fence.

It is therefore a good time for the government to support the local airlines with bailout in the form  of grants and low interest loans that was earlier promised by the CBN as well as  tax rebates to cushion operations and overhead pending market recovery from the impact of COVID-19.

“This is the time for everyone to step back and be patient in all we do in the industry and the unions and staff of airlines should understand that we are in a very bad situation,”Ohunayo said

Efreh on his part said:”Nigerians need the local airlines to remain in the sky for the economy to be effectively resuscitated. Government must call the industry unions threatening to sabotage the airlines to order. Should the airlines fail on the account of government failure to assist with palliative or due to sabotage by labour, everyone will be the loser and the economy worse-of.”


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