Airline operators bemoan fiscal, monetary policy regime

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Domestic airline operators have cited lack of long term funding at sustainable interest rates, unfavourable fiscal and monetary policy environment, coupled with impractical Central Bank of Nigeria (CBN) foreign exchange regulations, high operating costs arising from multiple and duplicate charges by government agencies and service providers, as some of the challenges that had stunted their growth.

 

 

They equally lamented the high cost of aviation fuel, which they said accounted for up to 40 to 50 per cent of an airline's direct operating cost. The operators under the aegis of Airline Operators of Nigeria (AON) also listed other challenges they have to surmount as massive debt burden to regulators, service providers, suppliers and financial institutions, are high cost of aviation fuel, Custom duties, VAT and other tariffs on aircraft, engines, spare-parts, test equipment and ground support equipment.

 

 

They reiterated that the cost of fuel to an airline is a very significant factor to their survival, alleging that the challenges that airlines were facing were as a result of cartel behaviour by the oil marketers, which they stated had led to an exploitative pricing of the commodity.

 

 

From August 2009 to date, airlines have witnessed a 50 per cent increase in the price of aviation fuel, otherwise known as JET A1. According to them the operators had no alternative to this "hostage situation in which they find themselves. They need government's assistance to enforce fair trade practices."

 

 

Aviation fuel price in Nigeria is regarded as the highest in Nigeria, a situation that has led to many foreign carriers sourcing the commodity in other countries. Nigerian airlines had recently planned to also source their commodity from neigbouring Ghana, which sources said was much cheaper, despite the fact that carriers owed oil marketers several billions of naira. The airlines now supply aviation fuel on cash and carry basis.

 

 

The operators expressed their worry in a 30-page report made available to The Guardian of the Presidential Sub-Committee on Proffering Solutions to challenges facing the Airline Industry in Nigeria. The report was submitted to the Federal Government recently by its chairman, Captain Edward Boyo, who is also the Chief Executive of Landover Aviation Services Limited.

 

 

The report which is christened, "Nigeria Airline Industry Revival Action (NAIRA)" is a multifaceted strategic action plan to revive the ailing airline industry of Nigeria, reposition it to serve the country safely and effectively, and facilitate actualisation of the seven point agenda within the purview of Vision 20:2020. Recounting their predicament, the operators noted that by early 2009, Nigerian airlines were already in a difficult position arising from the general economic conditions of high interest rates and inefficient infrastructure to support their operation.

 

 

They listed the global economic meltdown, the stock market crash in Nigeria and the near collapse of some major Nigerian banks as three extraneous occurrences beyond their control, which they said dealt the heavy blow on them.

 

 

According to them, "from over a hundred operators, there are only 17 surviving Nigerian airline operators today, holding the Air Operator Certificate (AOC) and flying in Nigeria and this number is fast reducing. The major challenges facing Nigeria's airline industry are identified as the following ten major points. The issue represented therein requires urgent attention of the government. If urgently tackled by government, it will contribute to actualisation of government's air transport objectives for Nigeria."

 

(Source:Guardian)

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