• FG, operators divided on implementation strategy, prospects
• Local airlines lack corporate governance, cooperation to compete – Experts
With no structure in place these past four years, Nigeria lags behind other African countries in the race for open skies agenda in air transport, which is estimated to be worth over $1.3 billion in revenue earnings yearly.
Despite being a continental power-house and signatory to the Single African Air Transport Market (SAATM) treaty, internal wrangling between the Federal Government and its implementing partners, the airlines operators, has left the initiative in a balance, with attendant effects on the implementation of the African Continental Free Trade Area (AfCFTA) agenda.
While the Federal Government aims to float a new national carrier to spearhead SAATM, local airlines’ operators said they should not be shoehorned into continental aeropolitics that is allegedly designed to rip-off the Nigerian market in favour of bigger African airlines.
Aviation stakeholders, however, fault protracted market protectionism in the face of low connectivity, urging both the Federal Government and operators to wake up to reality, or be left behind. Specifically, they request the local airlines to complement acquisition of new aircraft with corporate governance, international certification and alliances to become competitive in the open market era.
President Muhammadu Buhari, at the 30th Ordinary Summit of the African Union Assembly of Heads of States and Government, held in Addis Ababa, in January 2018, signed SAATM treaty to enable African airlines to fly without restrictions and change the narrative of Africa operating only two per cent of global air traffic.
Till date, 35 of 55 AU-member countries have signed up to SAATM. They are: Benin, Botswana, Burkina Faso, Cabo Verde, Cameroon, Central African Republic, Congo Brazzaville, Cote d’Ivoire, Egypt, Ethiopia, Equatorial Guinea, Gabon, Gambia, Ghana, Guinea (Bissau), and Guinéa.
Others are: Kenya, Lesotho, Liberia, Mali, Morocco, Mozambique, Namibia, Niger, Nigeria, Democratic Republic of Congo, Rwanda, Sénégal, Sierra Leone, South Africa, Swaziland, TChad, Togo and Zimbabwe. These countries represent over 80 per cent of the existing aviation market in Africa.
The International Air Transport Association (IATA), a clearing house for 290 global airlines, estimates that opening up Africa’s skies will promote the value of aviation throughout the continent, boost traffic, drive economies and create jobs.
IATA survey has it that if just 12 key African countries opened their markets and increased connectivity, an extra 155,000 jobs and $1.3 billion in yearly Gross Domestic Product (GDP) would be created in those countries.
As of today, only a few countries have strengthened operations for the execution of SAATM. They are Ethiopia, through its Ethiopian Airlines; Kenya via its Kenya Airways, Togo through Asky and Rwanda via RwandAir.
Nigeria is conspicuously missing and the devil is in the details. The Federal Government has consistently harped on the benefits of open skies but more as a justification for the controversial national carrier, Nigeria Air, that is still non-existent over four years after unveiling its logo in London.
Operators are generally opposed to executing SAATM with national airlines, citing governments’ protection of the carrier ab initio, which defeats the spirit of open market and free competition of SAATM.
COMMERCIAL aviation expert and former Chief Operating Officer, Africa World Airlines (AWA), Sean Mendis, noted that state subsidies are the most blatant forms of anti-competitive activity and protectionism seen in African aviation today, and a reason open market will not work.
Mendis noted that too many African governments continued to skew the market by throwing funds at “atrociously run and failed entities”, thus, stampeding private sector players, discouraging investment and innovation.
“When you see the huge subsidies some countries are giving their national airlines, you will marvel. Even in the ECOWAS region, Air Senegal got €68 million subsidy last year, Air Cote D’Ivoire got €120 million over five years, RwandAir is getting over €150 million per year; Kenya Airways needs nearly $500 million, Tanzania got $90 million with just five or six planes and Uganda lost $28 million in their first year.
“So, the establishment of more national carriers in the continent would reinforce the anti-competition already existing in the continent, as government-owned airlines, ill-managed, would enjoy more concessions and other incentives that would not be extended to privately-owned carriers, thus setting up unequal competitive environment,” Mendis said.
The operators added that private airlines should naturally implement the agreement but with a common framework and friendly environment that is binding on all.
They reckoned that there is very little the African airlines can do without the Nigerian market. With over 200 million population, an airport in almost all 36 states, and just a six-hour flight to any part of the world, Nigeria surely has the potential market all African airlines desire.
And that perhaps explains the business sense in opening up the sky. Currently, foreign airlines have about 80 per cent share of the Nigerian market, flying multiple destinations in the country. In fact, the new wave of aeropolitics in bilateral air travel pacts was blamed for the woes of Nigerian airlines on the international front.
Chairman of Air Peace airline, Allen Onyema, lately expressed similar sentiments, saying aeropolitics, that is “politics as conditioned by considerations of air power or its dominance” so afflict Nigerian carriers, and indeed, worse among African countries despite the Union’s platitude on open market and unrestricted access.
Onyema, who operates the largest carrier in West Africa, said Nigerian flag carriers had wrongly been “demonised” as lacking requisite capacity to compete, “forgetting the effects of resistance and bad politicking coming for African neighbours”.
He said while Air Peace, for instance, has six international destination slots and 17 regional slots, there must be approval to venture, which had been very difficult.
“Asky Airlines is flying four frequencies to Lagos daily. But their home country, Togo, said they would not allow us in because their government is protecting Asky. It took them a year to reply us. Later, they apologised when I threatened to go to court to stop their airlines from coming to Nigeria.
“Cote d’Ivoire gave us permission to fly into their country but not even an airport office was given, yet they slammed us with $10,000 charges. But how many passengers did we have on that plane? Are they (Air Cote D’Ivoire) paying $10,000 in Nigeria? Why is it that when we complain, we haven’t received any help?”
ANOTHER operator said Nigeria would not be ready for sky liberalisation where local policies have not favoured local carriers to compete with their African counterparts.
“Have we as a country addressed the perennial problems of foreign exchange, Value Added Tax (VAT), multiple taxation and high cost of aviation fuel, policy flip-flop among others that have collectively killed private investors? Let them bring a national carrier, the same bad environment will happen to it.”
Chief Executive Officer of Mainstream Cargo Limited, Seyi Adewale, told The Guardian that both the FG and operators had their valid arguments – the government on prospects of SAATM through national carrier, and operators on enabling local airlines to compete favourably.
Adewale noted that the intra-African trade is huge and this cost can be significantly reduced through SAATM and AfCFTA protocols.
“Nigeria has not been able to effectively utilise or apply her options because there is no national carrier and it is more difficult to immediately transfer these rights to local carriers. If we have a national carrier, the benefit that Bilateral Air Service Agreement (BASA) presents will be to the benefit of the country and there could be possible integration with local carriers,” he said.
For local airlines to live up to the billing, Adewale called for collaboration via code-share arrangements and interlining, continuous acquisition of new and efficient equipment, and improvement on corporate governance, “ to improve the capacity of the finance directorate to be better equipped to manage complex (financing) activities that would be inevitable when SAATM and AfCFTA kick in.”
SECRETARY General of Aviation Safety Round Table Initiative (ASRTI), Group Capt. John Ojikutu (rtd), said the major hurdle for Nigeria airlines, public or private, is the compliance with international operating regulations of IATA BSP and cooperation.
Ojikutu observed that the President was not sure Nigeria was ready as at the time he was to sign the SAATM treaty, which caused Nigeria to delay for about a year. He said while others had begun implementation underground, Nigeria is still not ready.
“If our airlines are not complying with the national economic regulations how would they comply with international regulations and standards? While other continental airlines are having route cooperation, our airlines are mostly in competition with themselves even on local routes. These characteristics do not show them as ready for SAATM,” Ojikutu.
To gain a major foothold, he said, Nigeria should not designate as flag carrier, any airline that shows distress in NCAA’s four-year financial audits or fails to remit home the forex earnings it makes on the BASA routes.
“The local airlines must pull off the dress of single ownership, management and comply with the IATA BSP if they want to go into SAATM.”
African travel and tourism consultant, Ikechi Uko, added that the instrument that would make SAATM work, not only in Nigeria but also across the continent, has not been agreed by all.
Uko noted that the most important element is the regional bloc operations (East, West and Southern) going domestic” to undo mutual suspicion, lack of trust and “special type of African stupidity that we used to manifest”.
“That shows when we give rights to non-Africans, which we deny fellow Africans. But we actually started with aviation being one. The British oversee the company of West Africa, with Ghana and Nigeria owning one airline. How did we get to a state where a Nigerian airline will need approval to fly beyond Accra? Let us all go back and get the regional blocs transformed into domestic airspace, then SAATM can work. If Nigeria, Ethiopia, Kenya and South Africa are ready, the agenda will work.
“Governments said they are ready but operators in each country are saying no because they want to keep their markets to themselves. Nobody wants to open up their space but none is serving Africa well. The few successful players are those that have linked up across regions. Asky and RwandAir are the smallest players that have efficiently done this across Africa. Both have less than 10 aircraft. One does 23 destinations and the other 26 across the regions, with a small fleet,” Uko said.
He noted that the 2063 AU strategic plan has the trio of AfCFTA for trade, SAATM for transportation, and the most important is the African Passport for free movement and tourism. “If the third does not work, the other two will keep hanging in the air,” Uko said.