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Bailing out carriers

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The impact of COVID-19 on domestic air travel is pushing carriers to the precipice. With losses estimated at over N180 billion already accumulated by the carriers, possibilities of early recovery remains slim. Can local airlines remain in business without any intervention by government? Asks KELVIN OSA-OKUNBOR.

The COVID-19 pandemic is taking a huge toll on the aviation sector, fueling fears whether businesses, including airlines, stand any chance of survival.

The pandemic has not only reduced revenue accruing to airlines from ticket sales, it has also caused a significant dip in passenger load factor, induced by a plethora of factors not limited to the risk of virus infection on board airplanes, stringent airport protocols and other considerations.

Significantly, indigenous carriers are struggling to harvest half the figures of passenger traffic during pre-COVID-19 era.

Investigations revealed that operators were finding it difficult to meet their monthly obligations to staff, service providers, banks, lessors, insurance firms and other creditors.

Experts say the sector is experiencing its most difficult time as they are not only losing money, but also trying to evolve survival strategies including salary cut, job erasures, and adjustment on flight schedules, among others  to remain afloat.

According to airlines, ground handling firms, caterers, fuel suppliers, travel agencies and other operators and allied sectors have cut about 24,000 jobs.

Besides, employers still keep many workers by either placing them on compulsory leave and redundancies until business improves.

Nigeria is not immuned to the devastating shocks of COVID-19 pandemic.

According to a report by the the International Air Transport Association (IATA), African airlines have lost nearly $5 billion in revenue  due to low passenger demand. In few months of the pandemic Nigeria’s travel industry lost more than N180 billion.

Worldwide, the virus could cause 75 million jobs to be lost in the industry, according to the World Travel and Tourism Council. But, things are getting worse for operators, who are losing huge sums that would have accrued from ticket sales amid increase in service charge by agencies.

To get out of the woods, stakeholders have asked for a bailout from the government.

In an interview, Chairman, House of Representatives Committee on Aviation, Hon. Nnolim Nnaji, said indigenous carriers required intervention from the government.

Also, the Head of Strategy, Zenith Travels, Mr. Ohunayo Olumide. said the government would not have gone beyond its scope, if it designed some interventions to assist airlines as other countries had done.

In May, stakeholders called on the Federal Government to provide bailout for the carriers to assist them to surmount the challenges of the COVID-19 pandemic.

The Minster of State for Budget and National Planning, Prince Clem Agba, had said: “We are looking at how to provide some form of bailout support to ensure that the industry doesn’t die.”

Chief Executive Officer, Aero Contractors, Captain Ado Sanusi, said it would not be a bad idea for the government to grant support to indigenous carriers, which without support would go under.

Sanusi, however, added that the bailout must be well organised and transparent to ensure that most vulnerable airlines got support.

He explained that the bailout should be different from previous ones that were misapplied, and it should be a grant or soft loan targeted at solving particular problems for the airlines.

He said: “It will be commendable but the bailout should be tied to achieving certain goals for the airlines; maybe, some airlines want to use it to pay salary of their workers, to lease aircraft, to pay for training, aircraft maintenance or other objectives. But the money, whether soft loan or grant, should be given with defined conditions.”

The Chairman, Airline Operators of Nigeria (AON), Captain Nogie Meggison, said the body had appealed to the government for assistance. He said because of the critical role airlines played, there should be support for operators.

“Governments all over the world face one challenge: to kick-start the economy after the COVID-19 lockdown. Because aviation is a catalyst for economic development, nations should support their airlines. Members of the European Union, China, and the United States are supporting their airlines. It is good Nigeria is also doing the same. We say thank you to the Federal Government,” he stated.

An aviation consultant and Principal Partner, Etmfri Group, Mr. Amos Akpan, commended the Federal Government for the planned bailout and called on the Ministry of Aviation to drive the process.

“We welcome the announcement because the bailout is required. But we need clarifications. We want the Ministry of Aviation to drive the process. Our minister knows us and he is part of us. His ministry should take the responsibility of drawing up the bailout application and implementation programme.’’

Also, Chairman of Air Peace, Allen Onyema, said the government had a huge role to play in ensuring airlines’ survival.

Also, the Institute for Tourism Professionals of Nigeria (ITPN) has urged the Federal Government to give attention to the travel industry by introducing a N30 billion stimulus package for the sector.

Its National President, Chief Abiodun Odusanwo, said the airline sector was  hardest hit by  COVID -19.

He listed interventions required to include grant of moratorium period for bank facilities granted operators for not less than six months and tax free regime for the remaining quarters of year 2020.

He said  evidence had shown that epidemics and pandemics had immediate impact on  airlines, which did not operate scheduled flights for three months.

READ ALSO: Driving recovery pills for aviation industry

Adding her voice, a United States Federal Aviation Administration (FAA) and Nigerian Civil Aviation Authority ( NCAA) Licensed Flight Dispatcher and Ground Instructor , Mrs Victoria Jumoke Adegbe, prescribed some recovery pills for indigenous carriers including government support.

The Chief Executive Officer of Insel Networks Limited, an aviation consulting firm, urged government to consider direct financial support to indigenous carriers to compensate for reduced revenues and liquidity.

She said while many domestic carriers were hanging by the thread before COVID-19, with a  large percentage of their earnings gulped by  fuel, maintenance, lease payments, aeronautical charges, personnel emoluments and sundry charges, the lockdown exacerbated their woes.

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