Shortly before his death, President Yar’Adua earmarked about N300bn for airlines’ bailout. This was the largest single aviation intervention fund in the history of Nigeria. The bailout programme was welcomed with caution, because knowing the operating business terrain of Nigerians, the majority of airline operators were considered “risky” borrowers. Paying back the loan was going to be a very huge plight. Sure enough, no recipient has liquidated or repaid any money to offset, at least, part of the loan.
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What started as a good gesture to support aviation development has become another colossal loss for the government that guaranteed the loans. The loan portfolios range from N1.5bn to over N102bn. In fact, the majority of the borrowers have left airline business for other more lucrative ventures.
It is still amazing that Air Nigeria, one of the major recipients, with a loan of N35.5bn, has since closed down its operation, returned the four leased airplanes, and vanished from government’s radar.
Airlines like IRS and Chanchangi, with even lower figures, have equally gone out of business. Arik Air and Aero, the two airlines with very large loan portfolios (totalling about N130bn) are finding it hard to break even, despite the huge financial support by the Asset Management Company of Nigeria (AMCON).
The few names mentioned above are those visible enough. Others like Overland Airways, and Belleview/First Nation Airlines have quietly stayed below the radar of public scrutiny.
On the whole, the bailout became instant misfortune to both the guarantor of the loan and the obligor. The intervention funds became another drainage channel as the former minister of aviation, and the Senate Committee on Aviation collaborated to grant the low-interest bailout largesse to select friends, who owned airlines with large kickbacks as the undertone.
There are stories of airlines that shared the loans with top government officials, who hastened the loan approval processes. No airline operator has or can pay back any part of the loan because, in most cases, over 30 per cent of the amount received went to those who approved and processed the bailout applications.
The reckless procedures adopted by those responsible, Ministry of Aviation and AMCON, have remained fresh in the minds of all stakeholders. Loan approval depended on how much was going back to the officials as “return of favour”. The struggle to recover the funds has become virtually impossible for AMCON, yet there are those aspiring for the next bailout.
Everyone is aware of the pressure group, special interest airline operators, who are bent on using this channel to get money out of the system. What the senators have failed to understand is that it is quite glaring that all those who benefited from the loan before, have not paid a dime back. The same people are pushing the Senate this time around for more money. How on earth will that work out? Of all the problems of the country, is airline intervention fund the most critical at this time?
Although, quite frankly, everyone knows that the quicker the loan approval by the Senate, the better for the committee members and their proxies. With oil price below $40 per barrel, Nigeria cannot fund individual airlines until those who received the loans are compelled to start repaying. This might be a bigger task than envisaged, but it is the most effective path to accountability and probity.
It is estimated that in the past six years, over N200bn has been given to airline owners, with little or nothing to show in the operating capacities of the carriers. Why then should anyone clamour for more financial assistance?
All the airlines in Nigeria are still heavily indebted to banks and other financial institutions despite the first bailout package. It is no secret that commercial airline business is unprofitable, especially in a country like Nigeria where operating costs are higher than the rest of the world. Landing, parking and navigational charges are 200 per cent higher in Nigeria than its neighbouring countries. Cost of aviation fuel has tripled in the last two years, as carriers struggle to meet basic direct operating costs.
It is therefore, more important for the Senate committee to look into how to reduce these costs for the operators than give toxic, unrepaid loans.
The Senate Committee on Aviation, if it has been created, should call for the list of those who got the dole in the first exercise, check their profiles to determine how many of them are still operating and how much their loans have grown to. These are the preliminary steps to follow before further discussions on the issue.
Although the 2006 Civil Aviation Act charges the Nigerian Civil Aviation Authority (NCAA) to handle the economic aspect of an airline’s financial strength, Nigeria needs a professional body or commission to monitor the economic position of all the airlines at all times.
It’s time for a national airlines commission that will work under the NCAA. These two agencies will help eliminate the unnecessary ministry of aviation.
Unlike Nigeria, the U.S government views the civil aviation system as a vital national resource, and therefore, the National Airline Commission was created in 1993. The Commission’s tasks are to investigate the status of the industry and identify any “impediments to a strong and competitive airline industry.’ Where there are impediments, the Commission is to make recommendations to the president, the Congress, the industry and the nation on how to clear those impediments. The defining principles that have shaped the recommendations of the Commission are: the U.S. air transportation system must be efficient, and technologically superior; have the financial strength to respond to rapid change and opportunity; and, efficiently move people, products and services to markets, wherever they exist. These principles, which reflect the views of the U.S. government, have led to a relatively strong and competitive airline industry in America.
Nigeria must first establish a National Airline Commission, whose ultimate goal is to find the most compelling impediments to the growth of airline industry in Nigeria.
The National Airline Commission should have, within its functions, airline financial advisory committee to advise when an airline’s financial condition poses risks to the public or to the industry, and a bailout becomes necessary.
The need to achieve a truly global air service industry is perhaps the most important conclusion of the Commission, yet at the same time it recognises the tremendous obstacles that would have to be overcome to attain that goal.
Since January 1980, no less than 30 airlines have gone bankrupt in this country, and more than 10,000 Nigerians have lost their jobs in the process.
The issue of bailout for the airlines should be carefully handled by the agency, which must be in constant dialogue with the airline operators. This is not the responsibility of the Senate.
National Airline Commission should, within its departments, create the airline clearing house as part of its function to encourage our carriers to foster code- sharing and enhance profitability. The establishment of this agency is long overdue. The current process of bailout disbursement is visibly fraudulent.
Ref: http://www.leadership.ng/columns/457037/airlines-bailout-funds-another-open-fraud
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