Experts in the aviation sector say the implementation of the ‘New Deal’ as initiated by Franklin Roosevelt, the 32nd president of the United States will help combat the great depression in the Nigeria’s aviation sector.
The New Deal involves a set of unconventional policies, which created a new set of institutions like the Federal Deposit Insurance Corporation (FDIC) to protect depositors funds and the Securities Exchange Commission (SEC) to regulate the stock market. Analysts say the New Deal can be applied to the Nigeria’s aviation sector to help revive the industry.
“Recommendations of the new deals include opening Nigeria’s domestic air space to foreign airlines willing to invest in the sector, increasing partnerships between local and foreign airlines akin to the Virgin Atlantic and Virgin Nigeria relationship through code sharing and interline partnerships.”
“Increasing accessibility between international and local airports through trams built by the private sector, appropriate fiscal incentives to stimulate investments in the sector, improving corporate governance standards amongst operators,” Jimi Ogbobine, head research Augusto&Co, an indigenous Rating organization told BusinessDay.
According to Ogbobine, the Nigerian domestic aviation industry is tethering on the brink today probably facing its own great depression and it will require a ‘New Deal’ to save it from collapse and spur it on to growth.
This suggestions are coming at when the Nigerian domestic aviation industry has been in dire straits for quite a while and recent statistics by the Nigerian Civil Aviation Authority (NCAA) seem to buttress the fragility of the industry.
According to the NCAA, only 6% (nine) of the 150 registered local airlines that existed at the beginning of this millennium still remain. Most of these operators collapsed because they were unable to meet the stringent regulatory requirements while the surviving nine seem to be the outliers.
He noted that even with the ouster of a great legion of operators, the industry is still weakened by inadequate capitalisation, and poor corporate governance that could further undermine its long term prospects and also affect passenger safety.
Experts say that sadly, the government ’ s recent response to some of these challenges will prove to be inadequate in the long run.
The Federal Government recently acquired the biggest domestic airline Arik Air, even amidst the challenges following the earlier acquisition of Aero Contractors.
These acquisitions have been executed through the Asset Management Corporation of Nigeria (AMCON), a state owned enterprise (SOE) which was created to acquire bad loans from banks. Thus, AMCON s acquisition of both Aero and Arik is as a result of the failings of these airlines to meet obligations to their providers of finance ’are the banks.
“An unconventional approach it has become a cliché these days for troubled sectors in Nigeria to indolently seek financial bailouts from the government as the solution to their woes.
“Sadly, the repeated failures of the various bailout programs by successive administrations especially in this Fourth Re-public have not engendered new thinking amongst policy makers. Some of these government bailout funds have only served as golden parachutes for the investors who then exit the industry without concrete repayment plans.
“This New Deal for the domestic aviation sector is a typical of the conventional policy frame-work in Nigeria. This New Deal will be unique in the sense that it will not require direct cash hand-outs but will entail the government adopting unconventional, bold and progressive policies for the domestic aviation sector,” Ogbobine explained.
Ifeoma Okeke
