Friday, November 29, 2013

Aviation: Too Regulated, Too Expensive - Capt. Daniel Omale

By: Capt. Daniel Omale on November 30, 2013 - 1:48am


Without the intervention of the Senate Committee on Aviation, non- schedule operators would have been paying the most exorbitant levy in the history of aviation. The reason for such hefty levy is unknown, but one thing is certain: it can only happen in Nigeria, irrespective of the negative effect it will have on the industry.

A few years ago, the United States government proposed a $50 levy for corporate jet, and it was quashed by the Congress because, according to the lawmakers, such a levy would have impeded the freedom associated with air transportation.

Corporate jet owners, including heavyweights like Dangote and TY Danjuma woke up one day, without forewarning, and got bombarded with extortion of $3000 per trip. The danger posed by the government's action is that any of the agencies, at will, can increase charges without due process of the law governing the aviation industry in this country. It also shows that an investor is constantly at the mercy of the agencies.

Those who risk their body and soul to borrow funds and invest in the industry do so at extreme perils. It's becoming overly expensive to engage in airline business in Nigeria because it is 1000% more costly than anywhere else.

Just two weeks ago, a friend and I were lamenting at the associated costs to Dana Air, the prolonged grounding of its operation. If there is a justifiable cause for suspending the airline's operating permit, there wouldn't have been a cause for alarm, but, out of the blue, a suspension letter came from the Nigerian Civil Aviation Authority (NCAA). This undefined action of the government has, appropriately, plunged the airline and its financiers (some local banks) in a huge financial mess.

Chanchangi and IRS airlines, two enterprises of the Asset Management Company of Nigeria (AMCON), will forever remain huge liabilities to AMCON, if they are forced to stay on the ground because of a single aircraft operation dilemma.

The future of aviation industry in Nigeria is precarious; it is also disturbing for those who have no other choice but to hang in there. This fear is genuine as the majority of investors borrowed at exorbitant interest rate.

Airline business, generally, is unprofitable with uncertain return on investment. But it is even harder to maintain focus if an investor is unprotected from arbitrary, draconian, and selfish misuse of the guiding rules/legislation.

Aviation remains the most regulated of all our economic sectors. It is appropriate if safety is the surrounding issue of this intense over-regulation but when economic effects are added, aircraft operation in either private or commercial category becomes unbearable.

It's practically unjustifiable to exclude stakeholders (investors and workers) from the scheme of how aviation development/underdevelopment should be shaped.

Without the stakeholders, there will be no industry for the agencies to heavily feed on. This is the reason why a country like the United States recognizes the absolute importance of those who operate aircraft in all categories. The Federal Aviation Administration (FAA) gives ample time for stakeholders' input in all intended policies.         

Rule-making by the FAA


It comes as no surprise to anyone that the primary function of the FAA is to regulate civil aviation. In so doing, it proposes, promulgates, and enforces certain titles of the Code of Federal Regulations. A Federal Aviation Regulation is changed or originated when the FAA issues a document known as a Notice of Proposed Rule Making.

Everyone has had high school civics lessons regarding how the government is organized. The function of the legislative branch, namely Congress, is to pass laws; the job of the executive branch and its many agencies and administrations is to enforce those laws; and the function of the courts is to interpret and apply those mandates. The entire body of administrative law is a special area unto itself.

Administrative agencies often act as rule makers, rule enforcers, and, to a great degree, arbiters of conflicts that come about as a result of persons operating in spheres of activity controlled by those rules. The FAA is not an exception.

The law requires that when the Notice of Proposed Rule Making (NPRM) is issued, the administrative agency must allow a particular period of time for comment upon that rule, unless certain emergency conditions exist. Therefore, when the FAA wants to either originate a new regulation or change an existing one, it issues the NPRM and allows the industry a reasonable period of time in which to comment.

Quite often, the comment period appears short, and various industry sources petition the FAA to extend that comment period, which is frequently accomplished. After the comment period closes, the agency is then supposed to consider the comments of the public and those to be affected by the rules proposed and deliberate and consider the same in its process of rule making. Quite frequently, a large outpouring of comment does in fact influence the FAA. Several proposed rules over the past few years have been abandoned or significantly modified after the consideration of public comments. When this process has run its course, the agency then issues its Final Notice of Rule Making, which sets forth the rule as it will be adopted, and gives an effective date for it.

There is absolutely no doubt that public comment is a most important stage of the rule-making process and is, frankly, the only one in which the average person to be affected by the rule has any real voice.

Although trade associations and other relevant groups frequently meet with representatives of the FAA to discuss upcoming rules, average people on the street have an opportunity to make their feelings known through the public comment process.

Nigeria must embrace this rational system or aviation industry will remain under developed, no matter how much lipstick we put on the pig.

Source:  http://leadership.ng