Debts, Cartel, Bad Management Drive Flight Delays, Cancellations

Stakeholders in Nigeria’s aviation industry have identified bad debts by airlines, mismanagement, ageing infrastructure, activities of a cartel, among major oil marketers and now recession as major reasons that have wrecked the operations of domestic airlines, making delays and cancellations of flight the norm.

They told our correspondent that most of the airlines owe major oil marketers and suppliers billions of naira over the years for Jet A1 also known as aviation fuel, which they have refused to pay back.

Aviation fuel alone constitutes about 40 percent of airlines’ expenses.

With the continuous rise in price and scarcity of the product most airlines are compelled to either delay or cancel their flights while international carriers flying to neighbouring African countries like Ghana and Sierra Leone purchase the product before operating to their destinations.

The airlines blame lack of dollars that has left them unable to pay fuel suppliers or, in some cases, landing charges at airports outside the country.

Arik Air, which has a 60 percent share of domestic flights, and the country’s biggest private carrier, has found itself increasingly in the firing line of disgruntled passengers.

This January, angry passengers beat up one of its staff at Lagos airport after third consecutive cancellation of their flight to Johannesburg. In December, staff of the airline grounded its operations by a one-day strike demanding payment of seven months’ salary arrears.

Other domestic operators are struggling. Aero Contractors, the second biggest carrier, stopped services for four months at the end of last year because of “serious financial difficulties”.

A source close to one of the oil marketers told our correspondent that aviation fuel is available in the market, but the major oil marketers and suppliers decided not to sell to airlines on credit due to the backlog of debts.

The source said that oil marketers have adopted the “cash and carry” approach, a situation, which does not favour the airlines that are used to purchasing the product and pay back later, sometimes running into three months.

The source insisted that airlines with cash hardly complain of scarcity of the product, alleging that Arik Air alone owes fuel marketers about N4 billion.

However, Benjamin Okewu, President of Air Transport Senior Staff Services Association of Nigeria (ATSSSAN), attributed the continuous scarcity of Jet A1 to the activities of a cartel in the oil sector.

In order to eliminate what he described as artificial scarcity of the product, Okewu called for the building of dedicated refineries for Jet A1, stressing that aviation has continued to play a vital role in economic development.

Group Capt. John Ojikutu (rtd), Chief Executive Officer (CEO), Centurion Securities and former Lagos Airport Commandant, emphasised that the issue of aviation scarcity and high price had been with Nigeria for a very long time.

Ojikutu recalled that the problem started in the country after the pipeline that supplies aviation fuel from Ejigbo to the airport was vandalised in 1992.

He noted that attempts to use articulated vehicles to bridge the gap brought about the high cost of the product ever since.

He explained that until the names of importers and those who got subsidy for the supply of kerosene as aviation fuel as well as the names of owners of the fuel tankers are made known to the public, the problem would not be resolved.

“Find those who own the tankers and who import fuel, you get closer to why the pipelines cannot be repaired and the reason for the high cost. There are reports that some airlines, which are not operating, but have good credit line with fuel marketers, buy and resell their fuel to other operators at profit. These are unbelievable stories but they are happening”, he said.

Nigeria is one of Africa’s main oil producers but is forced to export crude and import petroleum products because of a lack of domestic refining capacity.

The fall in the price of crude on international markets has seen the naira currency lose value against the dollar and banks no longer have enough liquidity.

Foreign airlines such as United and Iberia have stopped flights to Nigeria because of difficulties in repatriating profits in dollars.

Capt. Nogie Meggison, chairman, Airline Operators of Nigeria (AON), decried the issue of aviation fuel and its recurrence, calling on government to address it.

Meggison said the high cost of the product was affected by a chain of supplies.

According to him, the current problem started on January 16, 1996 when the pipeline supplying aviation fuel to the airport was shut down.

He said the pipeline may have corroded 21 years after it was shut down by the military, calling on the government to look into the issue.

He pointed out that 21 years after the pipeline was shut down, there are now 200 to 300 fuel tankers at the Murtala Muhammed Airport (MMA), Lagos road claiming to supply fuel to the airport, which, he said, also contributed to the increase in price of aviation fuel.

He urged the government to order the Nigerian National Petroleum Corporation (NNPC) to revive the pipeline to put a stop to the current challenge in the industry.

Most Nigerian airlines run their businesses like a grocery store. They just want to make profit,” Ojikutu said.

He said the airlines are heavily in debt and “taking advantage” of the country.

“People are… operating without paying the fuel marketers, without paying their staff, without paying for the services they’re given (insurance, maintenance),” he said.

“If they are not making profit, the question is what do they really do with all this money?…They are selling tickets every day.

“As long as we don’t have a strong, credible, independent regulatory agency we cannot have a viable aviation industry in this country”, he had told AFP.

Sen. Ibn Na’Alla, Deputy Chairman, Senate Committee on Aviation, last December attributed the current aviation fuel scarcity to the handiwork of a cartel.

Na’Alla said that in order to tackle the situation, the government needed to unbundle the entire system and deal decisively with the cartel that has consistently put the industry in deplorable condition.

Last September, the House of Representatives asked the government to declare a state of emergency in the aviation sector, saying 160,000 jobs were at risk.

The lawmakers also called for an investigation into the alleged misappropriation of N120 billion of public funds in 2012 meant to modernise the sector.

Another major challenge is upgrading ageing infrastructure which cannot handle the millions of passengers who now travel every day through the airports.

Hadi Sirika, Minister of State for Aviation, said the Nnamdi Azikiwe International Airport (NAIA), Abuja, will be closed for six weeks in February and March 2017 for total repairs on the runway.

He said the runway, which was built in 1982 with a life span of 20 years, is now “completely gone” and “unsafe for operation”.