Nigeria’s economic meltdown has claimed its first victim as Aero Contractors, the oldest operating airline in the country, today suspended flight operations indefinitely.
The country’s domestic airlines are beset with daunting challenges, including the increase in the price of aviation fuel and ongoing shortages, high exchange rate and huge debt burden, estimated at over N40 billion, which Hadi Sirika, Minister of State, Aviation, ordered regulatory agencies to recover.
Aviation sector experts say if the harsh economic situation continues, more airlines may go under, with attendant job losses .
Fola Akinkuotu, Chief Executive Officer, Aero Contractors Airlines, said, “the decision to suspend our flight operations is as a result of the current economic situation in the country, which has forced some other airlines to suspend operation or outrightly pull out of Nigeria.
“The airline had faced grave challenges in the past six months which impacted its business and by extension, the scheduled service operations. These factors are both internal and external environmental factors that have made it difficult for the foremost airline to continue its scheduled services,” Akinkuotu added.
He further observed that the development was part of the strategic business realignment to reposition the airline and return it to the path of profitability.
“The operating environment within and outside the airline has hindered any possible progress, especially in the last six months, when the naira depreciated against the dollar, making it impossible for the airline to achieve its operational targets,” Akinkuotu said.
“The impact of the external environment has been very harsh on our operational performance, hence management’s decision to suspend scheduled services operations indefinitely, effective September 1, 2016, pending when the external opportunities and a robust sustainable environment is in place for Aero Contractors to recommence its scheduled services.
“The implication of the suspension of scheduled service operations extends to all staff directly and indirectly involved in providing services, as they are effectively to proceed on indefinite leave of absence during the period of non-services,” Akinkuotu said.
Nigeria’s economy officially slid into recession for the first time in more than 20 years as the statistics office announced a further contraction in the second quarter (Q2).
Gross Domestic Product (GDP) contracted by 2.06 percent, after shrinking 0.36 in the first quarter.
Nogie Meggison, Chairman, Airline Operators of Nigeria, said that it is a shame that Aero Contractors, one of the biggest and oldest airlines in Nigeria could go under as a result of the harsh economic situation and unfriendly policies in the country.
Meggison mentioned that more than ten domestic airlines have gone under over the years because of the harsh economy, along with government’s insensitivity to the plight of airlines.
Some of the airlines that have gone under are Tat Nigeria, Max Air, Discovery, Kabo Air, Harka Air, Doniar Aviation, Association Aviation and Allied Air.
Meggison said if the economic downturn continues and policies are not implemented to help airlines stay afloat, then more airlines may go under.
The closure of Aero Contractors is coming five months after foreign operators, Iberia Airlines and United Airlines left the country, citing a harsh economic environment and the fixed foreign exchange policy, which caused their funds to be trapped in Nigeria.
Bankole Benard, president, National Association of Nigerian Travel Agencies (NANTA) predicted that over 300,000 direct and indirect jobs may be lost in Nigeria as a result of the economic downturn, forcing airlines to exit the country or reduce frequencies.
Bankole said the development was going to affect travel agencies, government and the general public, stressing that if a ticket that is supposed to be issued in Nigeria is issued in Ghana, the government will lose money.
“There are still airlines that will reduce frequencies and those who will leave. However, the airline business is cyclical. It goes in leaps and bounds and sometimes it goes through the valley before it climbs to a mountain,” Tayo Ojuri, an industry expert and CEO of Aglo Limited, an aviation support service company, told Business Day.
“At this point, we have to wait for the economy to pick up and unfortunately, airline business is the first to get hit when there is an economic crunch and it is the last to come up. When the economy picks up, people will start travelling by air again,” Ojuri added.
He explained that airlines will survive if they can re-access and mitigate their financial risk, adding that with good management, great ethics and great operational prudence, airlines will stay afloat.
IFEOMA OKEKE
