The bell tolls for the Nigerian economy as the government and its
private sector battle a humongous recession considered the worst in 29
years threatens to wipe off millions of jobs in critical sectors.
As at last weekend, the omnious economic headwind had taken its first casualties in the aviation industry when two prominent indigenous airlines, Aero Contractors and First Nation, announced the suspension of scheduled flight operations, thus throwing over 2500 Nigerians into the labour market. And if the recent statistics released by the National Bureau of Statistics is anything to go by, it then means that close to five million Nigerians have lost their jobs in the last one year. That however, may not be the end of the story as many more jobs are on the line as the crisis bites harder in various sectors. Aero Contractors and First Nation announced the suspension of scheduled commercial flight operations citing a harsh operating environment which included the high cost of aviation fuel and acute shortage of foreign exchange to carry out routine maintenances of their aircraft overseas.
“The operating environment within and outside the airline have hindered any possible progress especially in the last six months when the naira depreciated against the dollar thus making it impossible for the airline to achieve its operational targets,” said Aero CEO, Fola Akinkuotu.
Similarly, First Nation spokesperson, Serah Awogbade, stated, “Current foreign exchange constraint, coupled with over 70 per cent devaluation of the Naira partly contributed in no small measure to this development”.
The two airlines jointly employ over 2,500 direct and indirect Nigerian workers and industry analysts are of the view that should they fail to bounce back, Nigeria’s unemployment situation could worsen.
Aside the job losses, the shut down of the two airlines is also expected to lead to a rise in airfares on those routes where they were either major players or second most visible players. With the economy already in recession and disposable income shrinking all the way industry analysts foresee a situation where most air travelers will now opt to journey by road in the event of a spike in airfares.
What went wrong?
The state of infrastructure at Nigeria’s airports may have witnessed an impressive facelift propelling more passenger patronage for airlines like Aero in the last six years, but for investors in the domestic airline industry the passenger surge had failed to translate into profitability owing to several other factors.
In fact, in the past six years, local operators have struggled to stay afloat in the face of five excruciating factors, include: paucity of funds caused largely by the scarcity and high cost of foreign exchange (forex) and the apathy by creditor institutions to grant loans to finance new fleet acquisition and routine maintenance abroad; the high premium charged by local underwriting firms; multiple taxation by regulatory agencies and service providers; as well as the exorbitant cost of aviation fuel which accounts for more than 45 per cent cost of airline’s operation in Nigeria. The fifth, which is the designation of multiple routes to some foreign airlines by the Federal Government, many industry analysts insist had signaled an end to the existence of robust and economically viable airlines plying Nigeria’s domestic routes.
How BASA hurt the airlines
Aero became one of the victims of Nigeria’s highly criticised BASA deals. How? For instance, three foreign airlines: Ethiopian Airlines, Kenyan Airways, KLM/Air France, and Emirates are all carrying out commercial flight operations out of more than one airport in Nigeria. This trend analysts have pointed out negates globally known best practices which seeks to protect the local industry by allowing foreign carrier utilise just one major international route into a country, while the domestic airlines are given the chance of feeding the foreign airlines with passengers from the other airports within the country.
Multiple designation, in the case of what is happening at present in Nigeria meant that local airlines like Aero and First Nation, which hitherto profited by picking passengers from Kano, Port Harcourt to Abuja or Lagos for foreign airlines like Emirates and Ethiopian Airlines was heavily shortchanged in terms of earnings under the new arrangement.
How Aero went down
In January 2004, Schreiner Airways which originally owned Aero Contractors was bought by CHC Helicopters, that took over the 40 per cent holding of Schreiner, while the wealthy Ibru family that same year took over the 60 per cent majority shares as core investors. On July 1, 2010 CHC Helicopters sold off its interest in Aero and that was when the airline became wholly owned by the Ibru family.
Under Ibru’s ownership it underwent a massive transformation in its business model, changing from charter services to scheduled commercial flight operations. This saw the airline expanding its flights services to most of Nigerian airports and some sub-regional routes, while at the same time growing its fleet outside helicopters to include seven Boeing 737-400; six Boeing 737-500; two Dash 8 Q400; and one Dash 8 Q300 aircraft.
Aero under the Ibru’s immediately became the darling of many air travelers in the country and within the West African sub region. Its entry into the commercial airline industry occurred at a time that Nigeria recorded several air crashes in its industry. Aero drew more passengers than other airlines at that time because of its safety record, which was unmatched in the nation’s aviation industry.
The August 31 snag
Unfortunately, August 2016, from a fleet of over 13 aircraft, Aero had shrunk its fleet to just one functional aircraft, a negation of the Nigerian Civil Aviation Authority (NCAA) minimum requirement for an airline to remain in commercial flight operations. On August 31, 2016, Aero’s CEO, Captain Fola Akinkuotu, announced that the airline would be suspending all its scheduled commercial flight operations the following day, September 1, 2016, and about 1,400 staff were asked to proceed on compulsory leave. Akinkuotu cited a harsh operating environment as having wrecked the airline’s fortunes in the preceding six months as reasons for shutting down the airline. But that was far from the truth. Aero, in fact, had been operating for the past six years like a two-engine aircraft that had lost both engines and was merely gliding towards its final crash. This was very evident in its inability to maintain its fleet of over 13 aircraft, it had about a decade ago. The airline business is all about functional aircraft, and once that is absent, the airline ceases to exist.
Aero’s flight into insolvency
Aero’s flight into insolvency was however not just about the external factors cited above. Internally, as the years went by following its takeover by the Ibru’s famility, allegations of widespread mismanagement and stealing from the airline’s vault were rife in the industry. At a stage, the level of mismanagement in the airline was said to have constituted a clog in the ability of the airline to effect routine maintenance of the aircraft in its fleet, than other factors. Some aircraft sent for maintenances abroad could not be brought back owing to the inability to pay. Creditor banks and insurance firms were similarly owed. The Federal Government sensing that the airline was on the brink of collapse compelled the Asset Management Company of Nigeria (AMCON) to step in with a bailout package. An estimated N25billion is believed to have been injected into the airline by AMCON. But the looting did not stop. “Corruption killed Aero,” one of its staff told Daily Sun.
Secretary General of the National Union of Air Transport Employees (NUATE), Mr. Olayinka Abioye, told Daily Sun “that the major problem of Aero Contractors is to be found in the management of the airline’s finances and the lack of trust between AMCON and the Ibru family immediately AMCON came in.” The distrust had dire consequences on some of the initiatives put forward by AMCON to resuscitate the airline. An attempt to either downsize or slash the salaries of over 1,400 workers (considered as bogus) was stiffly resisted by the airline and the industry union. Most of the workers considered to be irrelevant to the contemporary requirements of the airline were alleged to have been related to top shots of the airline, hence the difficulty in retrenching them.
But by February 2016, AMCON was forced to fully take over the airline and sack its board and management staff following the discovery of the massive looting of funds.
Matters became worse when late last year (2015) Aero was sanctioned and made to pay a fine running into millions of naira by the NCCA for violating safety rules and having passengers disembark its Boeing 737-500 aircraft on its chartered flight to the Bauchi airport from Abuja on December 19 2015 using a ladder. As at date, Aero is said to be indebted to creditor institutions and other service providers to the tune of over N30billion.
The way out
Aero’s exit which was joined the next day by First Nation, had sent shivers down the spine of stakeholders in Nigeria’s aviation sector. Although, the NCAA had come out to say that all was well with the industry and promised that the two airlines would soon return to operation, not very many watchers of the industry believed the NCAA story. The Federal Government, according to stakeholders should convene an emergency meeting where airline investors, regulators, and airport owners, would meet to chart the way forward for the industry.
“The industry should be seen as an infant industry and the government should declare a state of emergency in aviation,’ said analyst, Chris Aligbe. “We all the know the challenges; from fuel, forex, insurance, multiple taxes, multiple designation of routes to foreign airlines, and the recent debt recovery drive by some industry agencies, these are all having affect on the airline. It is these issues that the government should speedily address,” Aligbe added.
Chairman of the Airline Operators of Nigeria (AON), Captain Nogie Meggison in an interview with Daily Sun lamented the plight of the two airlines and some others caught under the weight of several government policies, which were inimical to their businesses.
There is only one way out for the distressed airline industry, Meggison said. “It is a big source of concern for all of us in this industry that First Nation and Aero Contractors have stopped operating considering the services they render to Nigerian air travelers and also the fact that they employ a lot of Nigerians,” said Meggison.
“I speak like a Nigerian, the Federal Government now has to sit down and come up with a vision and policies that will get the economies of the airlines out of the woods.”
“The policies that we have are not helping the airlines and we have said this repeatedly. Aviation is the barometer by which the prosperity of any economy is measured.
In Nigeria no airline is operating at its optimal capacity and that is not very good. Under a recession like we are currently faced, a viable aviation and logistics industry is key to getting the economy back on track, and we cannot afford to allow the airlines die” he added.
Air Peace rewards loyal customers with free tickets
Air Peace has issued hundreds of free business and economy class tickets to its loyal customers who have earned enough points under the airline’s frequent flyer programme tagged “Peace Advantage.”
In a message sent to the qualified customers, the airline said it was grateful to them for their loyalty and patronage.
“You have kept faith with us and continued to make Air Peace your airline of choice. On behalf of the chairman and management of Air Peace, please accept our heartfelt gratitude and congratulations,” the airline said.
“The Peace Advantage package,” Air Peace added, “is our way of giving customers a well-deserved appreciation for their decision to fly with us always. With a Peace Advantage card, the traveller gets additional travel time on any destination they wish each time they travel with us.”
Meanwhile, the airline has acquired two new Boeing 737-500 aircraft as part of efforts to boost its fleet and route expansion programme.
Chairman/CEO of the company, Chief Allen Onyeama, who spoke in an interview with journalists recently said the investments in the new aircraft had become necessary following the receipt of licences to commence regional flight operations. Said Onyeama, “One of the new aircraft has the capacity to take 142 passengers, while the other can take 126 passengers. In our fleet, we have nine Boeing and one Donnier arcraft, which makes us the second largest airline in Nigeria in terms of the number of aircraft. Some of the aircraft we will deploy for the regional routes. We have visited the civil aviation and relevant authorities in these countries and plans are at advanced state.
We will soon announce our commencement dates on these routes but one thing that we want to assure our passengers is that we will put in our cockpit the best of pilots,” Onyeama added.
Culled from Sun
As at last weekend, the omnious economic headwind had taken its first casualties in the aviation industry when two prominent indigenous airlines, Aero Contractors and First Nation, announced the suspension of scheduled flight operations, thus throwing over 2500 Nigerians into the labour market. And if the recent statistics released by the National Bureau of Statistics is anything to go by, it then means that close to five million Nigerians have lost their jobs in the last one year. That however, may not be the end of the story as many more jobs are on the line as the crisis bites harder in various sectors. Aero Contractors and First Nation announced the suspension of scheduled commercial flight operations citing a harsh operating environment which included the high cost of aviation fuel and acute shortage of foreign exchange to carry out routine maintenances of their aircraft overseas.
“The operating environment within and outside the airline have hindered any possible progress especially in the last six months when the naira depreciated against the dollar thus making it impossible for the airline to achieve its operational targets,” said Aero CEO, Fola Akinkuotu.
Similarly, First Nation spokesperson, Serah Awogbade, stated, “Current foreign exchange constraint, coupled with over 70 per cent devaluation of the Naira partly contributed in no small measure to this development”.
The two airlines jointly employ over 2,500 direct and indirect Nigerian workers and industry analysts are of the view that should they fail to bounce back, Nigeria’s unemployment situation could worsen.
Aside the job losses, the shut down of the two airlines is also expected to lead to a rise in airfares on those routes where they were either major players or second most visible players. With the economy already in recession and disposable income shrinking all the way industry analysts foresee a situation where most air travelers will now opt to journey by road in the event of a spike in airfares.
What went wrong?
The state of infrastructure at Nigeria’s airports may have witnessed an impressive facelift propelling more passenger patronage for airlines like Aero in the last six years, but for investors in the domestic airline industry the passenger surge had failed to translate into profitability owing to several other factors.
In fact, in the past six years, local operators have struggled to stay afloat in the face of five excruciating factors, include: paucity of funds caused largely by the scarcity and high cost of foreign exchange (forex) and the apathy by creditor institutions to grant loans to finance new fleet acquisition and routine maintenance abroad; the high premium charged by local underwriting firms; multiple taxation by regulatory agencies and service providers; as well as the exorbitant cost of aviation fuel which accounts for more than 45 per cent cost of airline’s operation in Nigeria. The fifth, which is the designation of multiple routes to some foreign airlines by the Federal Government, many industry analysts insist had signaled an end to the existence of robust and economically viable airlines plying Nigeria’s domestic routes.
How BASA hurt the airlines
Aero became one of the victims of Nigeria’s highly criticised BASA deals. How? For instance, three foreign airlines: Ethiopian Airlines, Kenyan Airways, KLM/Air France, and Emirates are all carrying out commercial flight operations out of more than one airport in Nigeria. This trend analysts have pointed out negates globally known best practices which seeks to protect the local industry by allowing foreign carrier utilise just one major international route into a country, while the domestic airlines are given the chance of feeding the foreign airlines with passengers from the other airports within the country.
Multiple designation, in the case of what is happening at present in Nigeria meant that local airlines like Aero and First Nation, which hitherto profited by picking passengers from Kano, Port Harcourt to Abuja or Lagos for foreign airlines like Emirates and Ethiopian Airlines was heavily shortchanged in terms of earnings under the new arrangement.
How Aero went down
In January 2004, Schreiner Airways which originally owned Aero Contractors was bought by CHC Helicopters, that took over the 40 per cent holding of Schreiner, while the wealthy Ibru family that same year took over the 60 per cent majority shares as core investors. On July 1, 2010 CHC Helicopters sold off its interest in Aero and that was when the airline became wholly owned by the Ibru family.
Under Ibru’s ownership it underwent a massive transformation in its business model, changing from charter services to scheduled commercial flight operations. This saw the airline expanding its flights services to most of Nigerian airports and some sub-regional routes, while at the same time growing its fleet outside helicopters to include seven Boeing 737-400; six Boeing 737-500; two Dash 8 Q400; and one Dash 8 Q300 aircraft.
Aero under the Ibru’s immediately became the darling of many air travelers in the country and within the West African sub region. Its entry into the commercial airline industry occurred at a time that Nigeria recorded several air crashes in its industry. Aero drew more passengers than other airlines at that time because of its safety record, which was unmatched in the nation’s aviation industry.
The August 31 snag
Unfortunately, August 2016, from a fleet of over 13 aircraft, Aero had shrunk its fleet to just one functional aircraft, a negation of the Nigerian Civil Aviation Authority (NCAA) minimum requirement for an airline to remain in commercial flight operations. On August 31, 2016, Aero’s CEO, Captain Fola Akinkuotu, announced that the airline would be suspending all its scheduled commercial flight operations the following day, September 1, 2016, and about 1,400 staff were asked to proceed on compulsory leave. Akinkuotu cited a harsh operating environment as having wrecked the airline’s fortunes in the preceding six months as reasons for shutting down the airline. But that was far from the truth. Aero, in fact, had been operating for the past six years like a two-engine aircraft that had lost both engines and was merely gliding towards its final crash. This was very evident in its inability to maintain its fleet of over 13 aircraft, it had about a decade ago. The airline business is all about functional aircraft, and once that is absent, the airline ceases to exist.
Aero’s flight into insolvency
Aero’s flight into insolvency was however not just about the external factors cited above. Internally, as the years went by following its takeover by the Ibru’s famility, allegations of widespread mismanagement and stealing from the airline’s vault were rife in the industry. At a stage, the level of mismanagement in the airline was said to have constituted a clog in the ability of the airline to effect routine maintenance of the aircraft in its fleet, than other factors. Some aircraft sent for maintenances abroad could not be brought back owing to the inability to pay. Creditor banks and insurance firms were similarly owed. The Federal Government sensing that the airline was on the brink of collapse compelled the Asset Management Company of Nigeria (AMCON) to step in with a bailout package. An estimated N25billion is believed to have been injected into the airline by AMCON. But the looting did not stop. “Corruption killed Aero,” one of its staff told Daily Sun.
Secretary General of the National Union of Air Transport Employees (NUATE), Mr. Olayinka Abioye, told Daily Sun “that the major problem of Aero Contractors is to be found in the management of the airline’s finances and the lack of trust between AMCON and the Ibru family immediately AMCON came in.” The distrust had dire consequences on some of the initiatives put forward by AMCON to resuscitate the airline. An attempt to either downsize or slash the salaries of over 1,400 workers (considered as bogus) was stiffly resisted by the airline and the industry union. Most of the workers considered to be irrelevant to the contemporary requirements of the airline were alleged to have been related to top shots of the airline, hence the difficulty in retrenching them.
But by February 2016, AMCON was forced to fully take over the airline and sack its board and management staff following the discovery of the massive looting of funds.
Matters became worse when late last year (2015) Aero was sanctioned and made to pay a fine running into millions of naira by the NCCA for violating safety rules and having passengers disembark its Boeing 737-500 aircraft on its chartered flight to the Bauchi airport from Abuja on December 19 2015 using a ladder. As at date, Aero is said to be indebted to creditor institutions and other service providers to the tune of over N30billion.
The way out
Aero’s exit which was joined the next day by First Nation, had sent shivers down the spine of stakeholders in Nigeria’s aviation sector. Although, the NCAA had come out to say that all was well with the industry and promised that the two airlines would soon return to operation, not very many watchers of the industry believed the NCAA story. The Federal Government, according to stakeholders should convene an emergency meeting where airline investors, regulators, and airport owners, would meet to chart the way forward for the industry.
“The industry should be seen as an infant industry and the government should declare a state of emergency in aviation,’ said analyst, Chris Aligbe. “We all the know the challenges; from fuel, forex, insurance, multiple taxes, multiple designation of routes to foreign airlines, and the recent debt recovery drive by some industry agencies, these are all having affect on the airline. It is these issues that the government should speedily address,” Aligbe added.
Chairman of the Airline Operators of Nigeria (AON), Captain Nogie Meggison in an interview with Daily Sun lamented the plight of the two airlines and some others caught under the weight of several government policies, which were inimical to their businesses.
There is only one way out for the distressed airline industry, Meggison said. “It is a big source of concern for all of us in this industry that First Nation and Aero Contractors have stopped operating considering the services they render to Nigerian air travelers and also the fact that they employ a lot of Nigerians,” said Meggison.
“I speak like a Nigerian, the Federal Government now has to sit down and come up with a vision and policies that will get the economies of the airlines out of the woods.”
“The policies that we have are not helping the airlines and we have said this repeatedly. Aviation is the barometer by which the prosperity of any economy is measured.
In Nigeria no airline is operating at its optimal capacity and that is not very good. Under a recession like we are currently faced, a viable aviation and logistics industry is key to getting the economy back on track, and we cannot afford to allow the airlines die” he added.
Air Peace rewards loyal customers with free tickets
Air Peace has issued hundreds of free business and economy class tickets to its loyal customers who have earned enough points under the airline’s frequent flyer programme tagged “Peace Advantage.”
In a message sent to the qualified customers, the airline said it was grateful to them for their loyalty and patronage.
“You have kept faith with us and continued to make Air Peace your airline of choice. On behalf of the chairman and management of Air Peace, please accept our heartfelt gratitude and congratulations,” the airline said.
“The Peace Advantage package,” Air Peace added, “is our way of giving customers a well-deserved appreciation for their decision to fly with us always. With a Peace Advantage card, the traveller gets additional travel time on any destination they wish each time they travel with us.”
Meanwhile, the airline has acquired two new Boeing 737-500 aircraft as part of efforts to boost its fleet and route expansion programme.
Chairman/CEO of the company, Chief Allen Onyeama, who spoke in an interview with journalists recently said the investments in the new aircraft had become necessary following the receipt of licences to commence regional flight operations. Said Onyeama, “One of the new aircraft has the capacity to take 142 passengers, while the other can take 126 passengers. In our fleet, we have nine Boeing and one Donnier arcraft, which makes us the second largest airline in Nigeria in terms of the number of aircraft. Some of the aircraft we will deploy for the regional routes. We have visited the civil aviation and relevant authorities in these countries and plans are at advanced state.
We will soon announce our commencement dates on these routes but one thing that we want to assure our passengers is that we will put in our cockpit the best of pilots,” Onyeama added.
Culled from Sun
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