Africa: Tackling unholy pacts in air travel business
Bilateral or multilateral pact is to enhance global air travel business and create win-win for the parties. But when such an agreement is skewed against a partner and a rip-off, then it is time for a contract review or notice to quit. WOLE OYEBADE writes.
The Senate last week moved a motion that summoned key actors in the aviation industry to come and explain why the international air travel business is lopsided and skewed against Nigeria. Among those summoned is the Permanent Secretary of the Ministry of Transport, the Director-General of Nigerian Civil Aviation Authority (NCAA), the Managing Director of the Federal Airport Authority of Nigeria (FAAN) and the local airlines’ operators.
The main issue at stake is the rationale behind the aviation authorities’ magnanimity that allows multiple entries and frequencies to foreign airlines without provisions for reciprocity and gains for local airlines. The fact is that the matter is more deep-seated than official justifications would resolve or dissolve. And if the Senate’s special session on aviation will not be a merry-go-round, the Senators must be abreast of the genesis, intrigues, the need to protect national rights, and the patriotism to put things in order, stakeholders have said.
The air travel business, especially the international end, thrives amid better connectivity. While each country is duty-bound to protect its space, market, and people, the travel business requires freedom of persons, goods, and airplanes to crisscross without infringing on the rights of others. Emerging from the Chicago Convention of 1944, the global aviation community has started entering into voluntary commercial partnerships, otherwise called the Bilateral or Multilateral Air Service Agreements (BASAs or MASAs).
BASA, for instance, covers the basic framework under which airlines are granted economic bilateral rights to fly the two countries. The frequency, the designated airlines of the two signing countries, origin and intermediate points, traffic rights, type of aircraft and tax issues are normally covered by Memoranda of Understanding (MoUs). Today, Nigeria has racked up no fewer than 100 bilateral pacts, mostly initiated by foreign counterparts. The attraction to the most populous black nation is not far-fetched. With a population of 200 million people, an airport in almost all 36 states and just an average of six-hour flight to most parts of the world, Nigeria surely has the potential market all airlines desire.
Currently, 34 foreign carriers operate in and out of Nigeria almost on a daily basis. Among them are nine African carriers. Besides Air Peace that recently opened the Lagos-Dubai operations, only Arik Air and Med-View Airlines are on the international and regional routes. A recent fact-check by the Airlines Operators of Nigeria (AON) revealed that the foreign carriers currently account for 90 percent of the four million international passengers that travel through Nigerian airports yearly.
The capital flight is in excess of $3 billion (N1, 050 trillion). Senator Ifeanyi Uba, who raised the matter on the floor of the upper chamber, was particularly worried over multiple slots and frequencies allotted to foreign carriers in a manner that rival local operations. For example instance, Ethiopia Airlines, the largest carrier on the continent, operates into Enugu, Kano, Abuja, and Lagos daily. Kaduna used to be welcome ET’s Boeing777 until the carrier suspended operation due to low traffic.
Similarly, Turkish Airline operates in four cities of Abuja, Kano, Lagos, and Port Harcourt. Emirates Airline has two frequencies daily into Lagos and one to Abuja. Emirates has notified its readiness for the third daily frequency into Lagos, to further rival Air Peace’s twice-weekly operations on the Dubai route. Most worrisome for Uba is the foreign airlines doing local mop up. “Turkish Airlines has just started Istanbul to Abuja, Abuja to Port Harcourt, Port Harcourt to Abuja, then Abuja to Istanbul. Lufthansa and Air France are also doing the same, thereby running indigenous airlines out of business.” His point is that no country, including these beneficiaries, allows that in the modern aviation business. So, why is Nigeria different?
But it was not like that back in the days. In the heydays of the Nigerian Airways, the defunct national carrier exercised a lot of influence and prestige on both the regional and international routes. A former employee of the airline, Nick Fadugba, recalled with relish that Nigeria Airways in the 80s and 90s had 14 slots into Heathrow airport in the United Kingdom. That suggests how great the airline was and why many of its 6000 former employees will not forgive the Olusegun Obasanjo’s administration for liquidating the airline in 2004.
With the demise of the national carrier and many years without a local alternative, Nigerian successive authorities merely sat back to watch the slots wasted away. Meanwhile, Kenya Airways, apparently facing similar existential threats about two years ago, pulled out of the U.S. route. But unlike Nigeria, Kenya successfully sold its only slot on the U.S. route for $70 million. It is on record that Nigerian authority gave away seven UK slots to defunct Virgin Nigeria for free.
President of the Aviation Safety Round Table Initiative (ASRTI), Dr. Gbenga Olowo, said such is often the lot of countries that use civil servants and not staunch businessmen to negotiate bilateral pacts. Olowo noted that in other climes, governments are often represented by core businessmen and operators that can negotiate the best favourable deals. He said the era of civil servants, with no stake whatsoever, negotiating deals for their selfish and not national interest must come to an end.
He said: “The Senate will have to reverse a lot of the recklessness that has taken place in our BASAs. We have continuously said that what we are doing to our domestic airlines is prodigal.
“Nigeria has been doing a lot of regulations on safety and has been getting pass marks. But in the area of economic regulations, we have been very reckless. Economic regulations, as far as BASA is concerned, is coming up with policies that will, first of all, protect your own airlines and local businesses.” Olowo added that Air Peace, which asked for the government’s protection, following its recent flight operations to Sharjah-Dubai, was justified to seek for assistance due to the hostilities meted to Nigerian carriers by foreign governments.
“ADC tried London and failed; Bellview tried India, Amsterdam, London, Dubai and failed; Med-View went to Dubai and failed. Now, Air Peace is making another good effort to break into these lucrative routes. “So, if our government is serious, especially the aviation ministry and the economic regulations department of the NCAA, they should agree with the protection Air Peace is asking for, which is very simple. “Right now, Emirates is doing seven, and our economic regulators have to reduce it to three so that the market will be free for competition. Otherwise, those doing seven can drop tariffs and will knock off their competitors from Nigeria. So, if you want to help your own, you have to make the reciprocity even,” Olowo said.”
The Director-General of the Nigerian Civil Aviation Authority (NCAA), Capt. Muktar Usman, recently said the government was doing its best to empower domestic carriers to reciprocate the bilateral air pacts, but there was the need for the indigenous carriers to demonstrate capability on the routes. Usman said yearly, Nigeria loses over $5.6 billion which is for 50 percent of the over $10 billion taken way from Africa annually by foreign airlines. Usman said Nigerian carriers have not been able to meet the needs of the market.
Chief Executive Officer, Centurion Securities, Group Captain John Ojikutu (rtd), however, said granting multiple entries and frequencies to foreign airlines, are more of the problem than the solution to the uncompetitive nature of the local airlines. Ojikutu said the government should rather limit the routes to just two per airline, with one in the North and another in the South, but not Lagos and Abuja for an airline.
He explains the rationale: “How can our airlines develop capacity when any foreign airline can fly to all four or five of our international airports? How can our airlines develop capacity when the exclusive market on our domestic and regional routes is left open to foreign airlines? Which law allows only Saudi airlines to airlift nationals of other countries for Hajj? “Would British allow Arik or Med-View to fly to Gatwick and Heathrow the way the British Airways flies to Lagos and Abuja? Or would the U.S. allow Nigerian airlines to have multiple destinations the way Delta Air flies to Abuja and Lagos? “Worse still, which African country would allow a Nigerian airline to gallivant in her country the way Ethiopian airlines is gallivanting to all of Nigeria’s five international airports? We need to call the government’s attention to this lopsidedness, else there is no room for capacity development for the domestic airlines,” he said.