SOME TRUTH ABOUT AVIATION IN NIGERIA

Nigerian Airways 747-8I am always baffled at the reaction and response of many knowledgeable Nigerians whenever the subject of the creation of a national carrier (Airline) is broached. After the news broke this week that GMB had ordered the Aviation ministry to look into the possibility of starting a national carrier, the tempo and decibel of all such discussions became magnified. It is no secret that the Nigerian government has had a disastrous history with regards to starting and managing Airlines. As a matter of fact, the Nigerian government has an abominable track record and a long history of failure with regards to any form of commercial venture. While this truth and reality may in fact be responsible for the degree of negativity, worries and disagreements elicited by the president’s directive among many commentators, I have found it quite a curious thing that many of such opinions have been entirely based on very narrow and entrenched perspective which is not only based on half-baked knowledge but is also spurred by a general mistrust, scarred memories of historical failures and a slanted conviction that government’s should play no role in commerce or enterprise. They believe that any such attempt is fated for failure – a position which I vehemently disagree with.

With this in mind, I want to address some of the many issues being raised by my compatriots. I am well aware that we all want what is best for Nigeria even though we may frequently disagree on the means or the methods adopted from time to time. I was going to just make a brief statement on FB (facebook) however, the words kept pouring in and since I am not one to deny myself, I let it go. Quite quickly, I became mindful of the fact that I could not do justice to this topic with the scant provision allowed by a FB status page so I decided to make a slight detour from my blogging agenda and feature it on this blog. The truth is that I am actually in the throes of writing a detailed and comprehensive paper on how to reform the Aviation industry in Nigeria – the paper is intended as one of the episodes in a series of articles being featured here on this blog which I have named ‘The Way Forward’. Thus far, I have released precisely one installment only in this series – suffice it to say there is a lot more coming. While it is true that this is NOT the aviation industry reform write-up that I have coming up, I did however have an irresistible urge and compulsion to write this unscheduled piece so as to serve as a precursor and point out a few things that are often neglected in these arguments.

Airlines, particularly the ones referred to as national carriers, are more than just mere business ventures. Most national carriers are created in hopes of attaining profitability and many do (others don’t), however, various other important reasons are considered and weighed in the creation of a national carrier. It is also these same considerations that often inform the decision by governments to continually sustain and support ailing or unprofitable national carrier ventures. If profitabilityNigerian Eagle were the sole objective and primary consideration for governments, then I can assure you that there are many other investment opportunities that could not only be much less trouble but would also be much more profitable! The truth of the matter is that aviation is an essential part of nation building – it is a primary building block which helps provide a connectivity and a platform for advantageous global participation. National carriers are often not developed to churn out mad profit (although profitability and sustainability are necessary and should remain fundamental objectives). Much rather, such airlines are developed to serve as a robust vehicle (literally and figuratively) for economic growth, massive employment opportunities, national prestige and the instant facilitation and enhancement of multiple profitable downstream and upstream enterprises such as Tourism, Aircraft Maintenance, Finance & Insurance, Aviation Service providers, Petroleum product sector, Hotel industry, General commerce, Advertisement & marketing and so on and so forth. The economic impact and domino effect created by a successful aviation industry has far-reaching and massive consequences.

aviation impactTruthfully speaking, the problem with us in Nigeria is that our memories are scarred and our trust in leadership has been permanently damaged. We have been duped consistently by our so called ‘leaders’ in the past and thus we are unable to shake off our bad experiences and believe in our own potentials! This inherent lack of trust in public institutions and public ventures which we rightly exhibit has paralyzed us, leaving us economically immobile ensuring that we are unable to have a paradigm shift and solve our problems by thinking outside the box! We take economic theories verbatim and fail to make adjustments that are necessary to ensure a proper fit for our own economic peculiarity and social needs. Look around you – was British Airways founded and developed with private funds? Up until 1997, who owned 60% shares in KLM? (the oldest airline in the world). If we are going to sit here and quote theories propounded by western economists, then maybe we should ask them how Air-France became so big and successful? Up until 1999, didn’t the French government own Air-France? Let us look to Asia – Singapore Airlines, Air Asia, Thai, ….which one of them was founded and developed strictly on the basis of meagre private investments? Many people will stand before you and argue against the creation of a proud national airline but will turn around to purchase Ethiopian Airline’s ticket or Emirates’ business class tickets! Was it not other governments that took such bold initiative and risk to invest in and grow those airlines into what they have become today? Were those governments waiting for the private enterprise or foreign investors?? We love to be part of success stories but are always unwilling to show faith and do the work required to produce our own stories! We love to wear diamond and gold jewelries but refuse to acknowledge the need for a mine and the toil necessitated there-in.

The truth of the matter is that the aviation industry demands and requires massive capital outlay for it to be done successfully. You cannot make any considerable impact by doing it piecemeal – it will probably not survive at all! The real secret to success in aviation industry is called ‘scale’ – investment must be done at a scale which ensures survivability and dominance! The other secret is ‘sound management’ – this does not need to be spelt out. To do anything less is to ensure incremental attrition akin to what we are witnessing with Arik Air. These simple words and concept is what makes it so hard and near impossible for the private sector in Nigeria to come up with successful aviation stories. No nation in Africa has the size, the potentials and the capabilities of Nigeria and yet what do we have? We have failed to see and understand our own value and potentials – we will rather consume other nation’s services and live with the growing probability that moribund domestic airlines will inevitably ‘kill’ many of our loved ones. It is such a shame! Without any equivocation, I should like to make clear the fact that there are many problems with the way the aviation sector is currently structured and regulated in Nigeria. There are also other issues of gross incompetence and negligence on the part of airline managements and regulatory agencies. I cannot however address those issues here and now but will do so in the promised write-up. What we need is an attitude that assesses the problem, studies the issues and learns from its mistakes, ….not an attitude of fear which runs away from problems and folds arms in indolence. The problem with most previous attempts made by past administrations could be summarized in one giant swoop, as one occasioned by a lack of commitment on the part of previous leaders and beyond that, a failure to carefully structure and define the ‘venture’ which is being created. If the FGN were to create a new national carrier, three things are crucial and needed. Detailed attention needs to be paid to the following:

  1. Ownership structure and a future plan for divestment
  2. Management structure and incentives for performance
  3. Financial accountability and the implement for oversight
    (Note: I will be spending more time on these points in future)

Aviation potentialsHere is the kicker – the interesting observation that spurred me into writing this quick opinion. Many smart Nigerians continually point to the failed Nigerian Airways and the defunct Virgin Nigeria. They conclude that the Nigerian government has been inept (true) in taking care of its affairs and is thus incapable of setting up a worthwhile enterprise (not true). They contend that such ventures will only enrich few pockets, waste government resources and end up as a catastrophe! Here is what I have to say in response; Many Nigerians do not realize that since the demise of Nigerian Airways, the FGN has wasted much more money on ‘private’ airlines than Nigerian Airways ever needed. Many of these things were done discreetly and has resulted in an outcome that has only helped to support and line the pockets of the so-called private airline operators such as Jimoh Ibrahim, Ibru family and the Arumemi-Ikhide dynasty. Most of these financially strapped private airlines are flying coffins and disasters waiting to happen, however beyond that, they are also insatiable cess-pits which ceaselessly consume government resources one way or another! If you do not believe me here is some data to bolster my claims – AMCON, the Asset Management Corporation of Nigeria, was created and set up in 2010 to bail out and rescue distressed corporations whose operation may be of critical national interest so as to forestall a greater economic fallout. A report from Ministry of Aviation’s Audit claims that five Nigerian airlines, including the defunct Air Nigeria, owed AMCON an estimated N190 billion! At the time of release of the statement, that money was equivalent to USD $1.2 billion! According to the audit report, Aerocontractors owes $200m (N34bn); Arik Air, $600m (N102bn); IRS Airlines, $55m (N9.4bn); Chanchangi Airlines, $55m (N9.4bn); and Air Nigeria, $225.806m (N35bn). These debts have nothing to do with other external (international) debts owed by the airlines or the fees owed to numerous federal government agencies. In essence, the truth is whether we like it or not, the Nigerian government has been sucked in (albeit without the benefit of control, prestige or dividends) and the level of indebtedness indicated above leaves me in no doubt that the money has gone into a bottomless pit. These airlines have nothing of value (no asset) or operational robustness to command such debt profile – the situation is a disaster! The level of indebtedness of Aero contractors alone is such that AMCON has had to take over 60% of its equity share (a gross over-estimation and over-valuation of its value in my opinion). Arik on the other hand, is nothing but a walking corpse or a puppet with strings attached to AMCON’s hips. It’s demise is a question of time. Here is my summation – I will rather support a well intentioned and robust Nigerian Airways, which provides decent income and livelihood for thousands of Nigerian citizens even if it needs an annual subsidy of $100 million, than continue to discreetly pour money into private pockets, criminal enterprises and thieving public officials. DIezani Alison-Madueke alone is alleged to have cost Nigeria anywhere between USD $2 billion and USD $6 billion in the last few years alone! Go figure…

With 170 million citizens, most of whom have yet to blossom economically, no nation needs a sound and effective economicSleeping giant development plan more than Nigeria. To grow and develop an economy, several sectors of the economy have to be induced, tailored and cultivated to deliver the gains and growth needed. You cannot talk about overcoming massive unemployment when you continuously constrict evidenced potentials because of fear and paralysis. You cannot talk about overcoming debilitating poverty when the vast potentials of promising sectors and the domino effect contained there-in are continuously doused in selfishness, fear and negativity. Economic prosperity and growth are products of a multiplex of induced, tailored and targeted incentives which ultimately culminates in economic activities and commerce which invariably has the cumulative impact of raising a nation from an under-developed status to a developed nation, …raising a people from poverty to middle class economy and beyond. It is the pursuit of such vision and possibilities that elevates nations from third world to first world and propels corporations from start-ups to global multi-national corporation status. Nation building is no different from building a house. Like a contractor/owner, a government has the responsibility of ensuring that the nation’s economy is continuously in good health and is growing. A house has critical components which cannot be ignored, so likewise every economy has critical components, every one of these components (sectors) is crucial to its overall health. The neglect, shrinkage or underdevelopment of any of the critical sectors ultimately has a devastating domino effect on the prospects and viability of the rest of the economy. A government cannot afford to lose sight of the big picture for the simple reason that ultimately, it is the cumulative effect (the totality) that matters at the national level! Yes, the Airways could make a loss of $100 million here or a profit of $178 million in another year. However in all, what is the totality of its impact on Nigeria’s economy? $1.5 billion? $2.8 billion?? That is my point. Let us, as citizens, put things in perspective and not shoot ourselves in the foot by denying ourselves the opportunity to move the nation forward when we have a committed president who is willing to do so. Just my two cents……

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2 thoughts on “SOME TRUTH ABOUT AVIATION IN NIGERIA

  1. This is a practical angle to look at this national carrier issue. …instead of lining private pockets of private mismanged airlines owner. At worst, we can sustain ours with a yearly subsidy of $100m. It is practicable

    Like

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