Nigeria@60 : The Aviation Sector And It’s Travails

The Nigerian Aviation sector is about 74 years old today, but it has always been plagued by an economic lull, mismanagement, corruption, and overstaffing, among others.

The industry earned its first identity in the days of West African Airways Corporation (WAAC), which was an airline that operated from 1946 to 1958.

WAAC was jointly owned by the governments of Britain’s four West African colonies—the Gambia, the Gold Coast (now Ghana), Nigeria, and Sierra Leone. The carrier was headquartered at the Airways House in Ikeja, Nigeria, and operated from its hub in Lagos Airport, which is now Murtala Muhammed International Airport.

On September 30, 1958, it was dissolved, as all the shareholder countries but Nigeria set up their own national airlines following their independence.

As the sole remaining major stockholder of the airline, the government of Nigeria continued to operate it as WAAC Nigeria, and eventually rebranded it to Nigeria Airways Limited in 1971. It became the flag carrier of the country till 2003 when it ceased operations.

Managed by a number of foreign companies, including British Airways, KLM, and South African Airways, Nigeria Airways had its heyday in the early 1980s, just before the departure of a KLM team that had been hired to make the airline efficient and profitable.

At that time, its fleet consisted of about 30 aircraft, but the carrier was two years behind with its accounts, to the extent that the aircraft were acquired for cash.

Plagued by mismanagement, corruption, and overstaffing, the airline at the time of closure had debts totalling $528 million, as its operative fleet comprised a single aircraft flying domestic routes, as well as two leased aircraft operating the international network. Nigeria Airways was succeeded by Virgin Nigeria, and the ground facilities were taken over by Arik Air.

Nigeria Airways retiree says

Mr. Francis, an ex-staff of the airline who retired from the printing section, recalled that there was a high number of personnel handling the printing of aviation documents of Nigeria Airways, which had its operations concentrated at the MMA in Lagos, such as flight documents, boarding passes, and papers for engineers of the aircraft, among others.

According to him, the printing section was shabbily managed by the officials, who were quacks employed by the military regime then.

He said, “It got so bad that government officials fly their families without paying for the service rendered, believing that after all, it was government’s property. This kind of attitude was synonymous with Nigerian investments, which lacked professional management expertise. Where is the Nigerian Railway Corporation today, where are the likes of NITEL, NIPOST, among other government agencies?”

Private airlines came, saw but were conquered 

Having realized the importance of engaging the private sector in economic development, the Federal Government opened the Nigerian airspace to private investors.

This led to the emergence of Okada Air in 1982. Based in Benin City, Nigeria, the carrier started with a fleet of BAC-One Eleven 300s and started charter operations in September of the same year. In 1984, a Boeing 707-355C was acquired for cargo operations. By 1990, ten BAC One-Elevens were bought, and eight more were acquired in 1991. The company was granted the right of operating international flights in 1992, but in 1997, the company was disestablished.

From 1971 to date, about 61 airlines had operated in Nigeria. They all came, saw, and were conquered. Some of them are Okada Air (1982 – 2002); ADC Airline (1984 – 2006); AfriJet (1998 – 2009); Albarka Air (1999 – 2005); Bellview Airlines (1992 to 2010); Chanchangi Airlines (1994 – 2012), and First Nation (2010 – 2018) among others.

When Arik Air took over the former Nigeria Airways facilities in Lagos, several industry watchers thought the nation had finally got it right, especially with the aggressive expansion plans of the airline, little did they know that the nation would not come out of the woods so soon.

For instance, on 14 June 2006, Arik took delivery of 2 new Bombardier CRJ-900 aircraft to fly domestic routes throughout Nigeria, and within the African continent from Summer 2006, two ex-United Airlines Boeing 737-300s and three 50 seat Bombardier CRJ-200 aircraft. The campaign of the ‘Tear Rubber’ aircraft was massive, and it boosted the profile of the airline, which was expected to change the face of the aviation sector in the nation.

However, the tale changed when the FG through the Asset Management Corporation of Nigeria (AMCON), took over Arik Air in February 2017, as the airline was said to have been immersed in heavy financial debt, that had threatened to permanently ground it.

AMCON alleged that the Airline, which catered for about 55% of the passengers in the country, had been going through difficult times, attributable to its bad corporate governance, erratic operational challenges, inability to pay staff salaries, and heavy debt burden, among other issues.

The ‘undertaker’ estimated the airline’s debt at over N375 billion, comprising domestic and foreign investors. Since then, the bad bank has injected over N1.5 billion into the airline.

However, since the government took over in 2017, the airline has been struggling to keep its head above the waters. Its staff have downed tools over the years, due to poor remuneration among other welfare issues.

The way forward, experts speak …

The Managing Director, Starburst Aviation Limited, Capt. David Olubadewo said:

To achieve a desired result in the sector, the government, banks, and union leaders have their own bit to do, but one must work in tandem with others for it to work. Banks believe that aviation is too difficult to invest in, but that is wrong because it is not different from other sectors. We are all in it to make a profit at the end of the day. I don’t obtain loans from Nigerian banks, because I will end up with -25% loss, but that is not happening in the United Kingdom where I pay 3% interest rate. If I take such loan in Nigeria, it means I am -28 % (interest rate) in red and by the time you get to the top, you are owing millions.”

Contrary to the allegation that most of the airline investors are reckless, he argued that people have forgotten that those people have invested immensely in the sector, and they will never let it die.

“In the last 13 years, we don’t appreciate what we have, we have a hub here that is waiting to be tapped. From anywhere in the world, you can get a flight to Lagos, but you can’t get such to Ghana from anywhere in the world, and that is an indication that we have a hub in Nigeria,” he said.

Lookman Animashaun, Director of Engineering at Medview Airline, suggested that the best option for AMCON and the Federal Government is to establish a national carrier with the airline.

He said because of the airline’s debt burden, no investor would be interested in the airline, and if AMCON decided to manage the carrier, it would take it about 30 years to recover the money it invested in the airline, considering the airline’s turnover.

Speaking at the Business Founders Coalition (BFC) in Lagos on Tuesday, Dr. Richardson Ajayi, BFC Coordinator, lamented that foreign investors are preying on Nigerian businesses, and are seeking to push their founders out.

This, according to him, threatens the nation’s dream to build and nurture vibrant private sector businesses capable of competing with global brands, and also reduce employment opportunities for the youth.

He stated, “The objective of this meeting is to draw the attention of key stakeholders, especially the Government of the Federation, and the business community to the plight of Nigerian entrepreneurs, who out of ‘sweat and grit’ started their business, but at some point in the pursuit of growth, have had to access venture capital funds or foreign investments. Our experiences have largely been tales of woe, which have the possibility of stunting the growth of indigenous businesses like ours. We are also hoping that through this coalition, our government can enact policies and laws that will correct that apparent lop-sidedness.”

Ajayi lamented that most local businesses have been struggling, due to unfavourable operating environment and lack of access to finance to grow their businesses, hence they approach foreign investors and venture capitalists to invest in their business.

While he acknowledged that there are many good private equity companies that have accomplished successful private equity transactions, as well as those that understand the challenges of the market and are patient with their local partners, Ajayi noted that some others seek controlling rights as a major condition to invest.

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