By Leke Alder
A
few weeks ago, one of the better-known airlines in the country turned
back its passenger plane to take-off point because of a technical glitch
in midair. It was travelling from Lagos to Abuja. The week before that
incident, the same airline disembarked passengers after a 30minute delay
on the tarmac. The engines failed. Yet this is one of the most
professionally managed airlines in the country.
We all know
that all is not well with our aviation industry. The pain from the last
air crash lingers on cancerously in our collective memories. There have
been 26 crashes in Nigeria’s aviation history. The total number of souls
lost, minus ground casualties, is 1,438 with 661 casualties recorded in
the last twelve years alone. The first air disaster was the Nigeria
Airways BAC VC10 crash on November 20, 1969. It killed 87 people. The
last recorded commercial crash was the June 3, 2012 Dana Airlines Flight
9J 992. It killed 153 people. We have a 43 year history with death in
our aviation industry.
Perhaps the most traumatic crash was the
demise of an entire generation of school children in the Sosoliso
Airlines crash of October 29, 2006. Some parents past childbearing age
lost all their kids. When death prematurely visits a home, it leaves
indelible prints in the hearts of the bereaved.
But the nation also
suffers patriotic bereavement when the circumstances of a crash are
preventable. The citizens lose faith in government ability.
To be
sure, we NEED airlines in the country for pragmatic, economic,
political and sociological reasons. Airlines facilitate the national
vision. They aid the development and connectedness of communities. They
open the disenfranchised to the marvels of the modern world and engender
generational attainment. We need airlines because of the sheer
impracticality of total reliance on road transport systems. Our airline
industry must not collapse. It will be a tragedy of monumental
proportions.
At this juncture, let me commend the efforts of the
Ministry of Aviation in revamping the look and feel of some of our
airports. Whatever our level of cynicism, it is a step in the right
direction. We tend to underestimate the role of ambient aesthetics in
our perspective on patriotism. How the average Emirati must feel about
Dubai Airport! And surely the glowing, golden, scarlet and palm frond
motifs on the tails of the forests of planes belonging to Emirates
Airlines must inspire national pride. We need a national carrier, even
if just for patriotic sentiments. The value of patriotism is
unquantifiable.
Several suggestions have been put forward on how
to improve the health of our aviation sector. I do not have a
comprehensive grasp of all that has been suggested but one or two are
clearly not feasible. A forced merger of airlines will not work. The
idea of a forced merger is oft paralleled along the lines of the
restructuring of the banking industry, but forced mergers have their
problems. What you don’t want in an airline corporation are boardroom
wrangles. When there is no corporate cohesion on the board of a bank
money is lost, but in an airline lives will be lost. When capitalized
egos clash in the boardroom, Nigerians will suffer.
The factors
afflicting our aviation industry are myriad. They include lack of access
to inexpensive capital, poor corporate structures, poor management
systems, weak board oversight, poor local infrastructure, sky-high cost
of fleet maintenance, poor IT infrastructure, dollarization of
maintenance costs against local currency earnings, a dearth of highly
skilled professionals across the service spectrum, high cost of aviation
fuel, poor regulatory oversight, corruption, lack of standards,
insensitive customer service culture, poor market accountability,
limited competitiveness, pygmy national will, the missing national
aviation vision, poor disaster response systems and our negative
attitudinal disposition to maintenance culture. Regulatory oversight
alone will not solve the problems of the aviation sector. Neither will
the throwing of money at our airlines. Poor management will fritter such
resources away. We need a more strategic approach. Policy makers must
sit down with regulatory experts, finance professionals, airline
infrastructure consultants, business consultants of different hues, IT
professionals, security experts, civil society and consumer advocacy
groups. Without an aggregation of brains and expertise we will never
have an end-to-end solution. A holistic and all-encompassing blueprint
must be developed and an execution framework mapped out. Aviation works
for the good of a nation when the framework is end-to-end: from policy
to infrastructure to financing to management to security to consumer
experience.
A minimum level of capitalization must be required of
airline corporations. The threshold must be high enough to prevent
ego-driven charlatans, whilst the structure must prevent over-leveraged
corporate promoters.
Ideas have been flown about the financing of
younger fleet for our airlines. Paying leasing corporations directly
instead of giving cash directly to the airlines to purchase aircraft
will address the issue of corporate malfeasance; it will not solve the
problem of cost of capital. And we need to sort out the maths. Net
taxes, operating costs, landing fees, personnel cost, cost of capital,
maintenance, cost of fuel, do our airlines have enough income to
operate? Can their cash flow profiles support loans for the acquisition
of younger fleet? Our pricing regime convolutes issues.
Since
it’s not market driven we have to be mindful of the consequences of such
populism. One, our airlines can only be successful when they have a
very significant number of planes. They must have economies of scale to
succeed. Two, the market must be large enough to sustain such economies
of scale. Three, all our airlines are effectively budget airlines. Four,
the cost of operations must become lower and taxes reduced to create
more margins.
The reality of our operating environment is that
the benefit to the consumer can only be sustained through market forces.
There must be a sizable number of serious players to create
competition, or else we’re going to end up with an oligopoly. Because of
the high cost of entry into the aviation market it’s going to be
difficult to get that many players who are well resourced. As it is,
only the Federal Government has the wherewithal to set up an airline
with 70 planes or more. Therefore, we need a national carrier to create
aviation markets, foster competiveness, close gaps of development,
develop local economies and bring succor to the millions who are forced
to use the road transport network with its over-burdensomeness and
attendant carnage.
The primary purpose of a national carrier is
not profitability (though it must be run efficiently and profitably). It
serves strategic intents. But a national carrier will not succeed in
Nigeria without a concrete wall of partition between management and
government. Political interference kills business ventures.
The
point being made is that we need to go further to develop our aviation
industry. It’s not just the newness of fleet that will prevent disaster
though it will certainly help, the quantity of planes and the quantity
of effective competitors matter. So does the size of the market.
We
are underinvested in aviation as a nation. We need maintenance hangars
for at least mid-level servicing needs. The cost of maintenance is
killing our airlines. Our training facilities tend to be focused on
pilot and airspace management training. We need more than these though
we need an upgrade of existing pilot training facilities. We also need a
comprehensive School of Aviation Management.
As against throwing
money at airlines why don’t we set up an Aviation Leasing Corporation
to reduce the cost of capital for our airlines and serve as middleman
between international finance and the airline industry? If we want to
fix our aviation industry we must think about institutions and take a
long term view. Bulk buying of planes drives down unit cost. The cost
of operations of this corporation must initially be guaranteed by the
federal government in order to rescue our local airlines. As the
corporation grows however the profit from its international operations
can then be used to subsidize our local airline industry. The aviation
leasing company can also cushion the attendant higher cost of accessing
international finance occasioned by Nigeria’s image problem. This
leasing company must be international in scope and professionally
managed.
There is also the need to tackle corruption at various
levels of our aviation industry but our biggest challenge remains the
need to articulate an aeronautical vision that feeds into, and delivers
on the national vision. It is not exactly clear what we want to be as a
nation, or what interests our airlines should serve. Aviation is not an
orphan industry. Neither is it ever just about transportation. We know
what the airline industry means to the Kingdom of England.
Think
BA. We see what role it plays in the overall economic and political
strategy of the UAE. We see the Singaporean model. Airlines are
inextricably linked to national vision. What do we want to be as a
nation? What is the strategic hub of our economic vision? How can our
aviation industry serve this vision? Without this I am afraid, we shall
continue to lust after palliatives and resort to short-term measures.
Leke Alder is a brand strategy consultant. He served on the board of Nigeria Extractive Industries Transparency Initiative.
http://www.thisdaylive.com
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