Fed Govt plans overhaul of aviation sector

The Federal Government has concluded plans to carry out an overhaul of the aviation eco – system to accommodate only carriers that demonstrate viable sustainability plan, increased fleet size, sound business models and other criteria to be rolled out by the regulatory authority, The Nation has learnt.

To achieve the objective, experts said the Federal Government is exploring options, including possible consolidation of local carriers, with at least a minimum of six aircraft, guarantee on local maintenance of the equipment through partnership with original equipment manufacturers, flexible lease arrangements and other considerations.Investigations by The Nation show that the new move to clean up the air transport space may not be unconnected with audit reports of some local carriers in the last few years, which indicate high debt to capital ratio, inability to meet financial obligations to personnel, insurers, lessors, aviation fuel suppliers, suppliers of aviation catering , vendors , inability to finance aircraft maintenance according to schedule, paucity of funds for requisite crew training and other mandatory regulatory requirements.

Significantly, a source hinted that the Ministry of Aviation is miffed over discoveries over the poor financial state of local carriers, which could barely run flights operations from revenue generated from tickets sales.A 2022 technical and financial audit of one of the local carriers made public at the weekend by the Nigerian Civil Aviation Authority (NCAA) exposed the underbelly of the beleaguered carriers.

Worried over the optics such audit report has triggered, the government has begun moves to recertify existing carriers to ascertain their technical, safety and financial health.Investigations further reveal that government is also worried that many operators, who hurriedly got into airline business without carrying out proper financial due diligence, continue to struggle to get their old aircraft out of offshore maintenance facilities due to inadequate running capital.

To drive the proposed arrangement, the Federal Government, an expert familiar with the sector’s overhaul, hinted is looking at how deliberate policy , either by way of waivers, guarantees with aircraft lessors / original equipment manufacturers could put local carriers in strong footing either in leveraging operational  capital or equipment.

The expert, who pleaded not be named said the government is wary of providing direct capital injection to operators because of previous experience by past administrations.

Billions of naira ploughed into airlines as Intervention Funds many years ago were misapplied.

The Asset Management Corporation of Nigeria (AMCON), injected over N120 billion to revive struggling airlines.

The money was released by the Central Bank of Nigeria as part of a N500 billion intervention fund. Ten airlines benefited from the fund through loans with tenure of 10 to15 years. The loan was monitored by the Bank of Industry.Out of the 10 airlines, three, Air Nigeria, Chanchangi Airline and IRS, have folded up. Other beneficiaries are Arik, Dana, Aero, Kabo, Overland, First Nation, Odengene.The expert said the Ministry of Aviation is looking at tightening the noose in the conditions required for fresh applicants seeking to get either an Air Transport License (ATL), before such interested investors could scale the hurdle for an Air Operators’ Certificate (AOC), granted by the Nigerian Civil Aviation Authority ( NCAA).

Last week, Minister of Aviation and Aerospace Development, Festus Keyamo, said there is no going in carrying out financial , technical and safety audit of existing carriers in order to regain the confidence of the flying public.

Keyamo said the Ministry of Aviation and Aerospace Development will continue to take decisions that will protect the interest of the country, not minding the views being canvassed by experts in the aviation industry.He said it is the responsibility of the Federal Government to ensure that only carriers that are solvent and have demonstrated the financial and technical capability are allowed to operate on the air transport space.He said the high attrition of local carriers in the last few decades suggests that many investors make foray into airline business without carrying out feasibility studies on the Business.Keyamo said :” The Federal Government is going to carry out an overhaul of the air transport sector to ensure that interests and individuals that are holding the industry on its kneels are cleared out

There is no going back on this, and the government will be looking at the fleet size of existing carriers , the Nigerian Civil Aviation Authority is already trying to implement the minimum of six aircraft policy. That will be coming in place.

“There will get other forms of interventions to ensure we have viable and strong carriers.

“The industry may require some some of consolidation, such as the type considered for the banking sector by the Central Bank of Nigeria. That way, we are confident that local carriers have strong financial base to guarantee safe operations.”

Investigations reveal that local carriers are already jittery over the proposed overhaul , which may forced sone operators to consider merging.

To starve off any backlash of the impending overhaul, done operators , it was learnt are already reworking their business plans to meet up with the revised requirements to be rolled out by the government.

Speaking in an interview, Managing Director of Topbrass Aviation Limited, Dr Roland Iyayi said the government should look at how to assist local carriers rather than embarking on kneel jerk reaction over incidents involving DANA Air.

He said :” We should learn from our past failures and plenty abound, to recognize that solutions for things like this are usually found when we take a holistic approach to problem solving.

“Our aviation system is tottering on the brink of near collapse and our present approach of dealing with the consequences of a much bigger problem will not help it.”