The Minister of Aviation, Senator Hadi Sirika during a public hearing in November 2020 disclosed that the Federal Government had approved N5billion bailout funds for the Aviation sector to ameliorate the devastating impact of COVID-19 Pandemic. N4billion from this amount would be direct support to airlines whereas the remaining N1billion would be to support Aviation Allied and Support Services such as Ground Handling, Catering, Maintenance.
This declaration by the Minister has been received by aviation stakeholders, airliners, aviation enthusiasts, aviation analysts and indeed the interested public with shock!
Nigeria has eight domestic airline operators in scheduled flight category namely Aero Contractors Co. Ltd, Air Peace Ltd, Arik Air Ltd, Azman Air, Dana Airlines, Ibom Air, Max Air Ltd and Overland Airways Ltd. Whereas 24 other airlines are in the unscheduled flight services including Allied Air, ANAP Business Jets Ltd, Caverton Helicopters, Dornier Aviation Nig. AIEP Ltd, etc.
How N4billion, approximately $10.3million, could be considered supportive or adequate to ameliorate the devastating impact of COVID-19 pandemic for these airline operators cannot be imagined.
How N4billion, approximately $10.3million, could be considered supportive or adequate to ameliorate the devastating impact of COVID-19 pandemic for these airline operators cannot be imagined
To put in context, let us consider ameliorating the salaries and wages component of these airlines. A fair assessment of two scheduled domestic airline operators revealed total staff strength of approximately 700 and 2,000 workers across board/ categories. The average total wage bill per worker is approximately N220,000.00 (including deductibles) infers a total wage bill of N154million and N440million, respectively. A 4-month lockdown and no flight posit a total wage bill liability of N616million and N1.76billion, respectively. You may argue that these airliners ought to have some retained earnings or reserves.
Secondly, considering scheduled Aircraft Maintenance & Repair needs during this period of total lockdown for at least four months is also devastating. Whether aircraft are flown or not, there are requirements to ensure and assure regulators that these aircrafts will be serviceable and safe post lockdown period. The two airlines indicated above collectively have at least 36 aircrafts. Using B737 aircraft type as the preferred model for many domestic carriers would additionally infer a discounted four months from the 18 months C-Check schedule. This is an incredibly significant cost noting the dollar-naira exchange rate surge. Irrespective of the airline maintenance program or model adopted, aircrafts are scheduled to be serviced for A-Check, C-Check and D-Check and regulators duly have oversight functions on airline Safety and Routine Maintenance Procedure.
Importantly, it is pertinent to note that the U.S government approved $25Billion as bailout funds via grant and loan options for its airline operators and in the first instance alone. This was principally to fully support airline workers. Similarly, European governments approved 37.9 billion Euros as bailout for European Airlines and the least recipient from the zone, Nordica (Estonia) having a fleet size of only 20 narrow-body aircraft type receiving 30Million Euros or N13.9Billion.
Nordica with total staff strength of 141 receiving such bailout amount smacks the inadequacy of the FG bailout funds of N4billion to all domestic carriers with a fleet of 76 aircrafts inclusive of wide-body aircraft and ageing fleet that connotes higher maintenance cost.
We could understand a real and genuine concern of FG judging from past fraudulent and grievous utilization of past bailout or intervention funds such as the CBN’s brokered PAIF in 2010.
In 2011, N300billion intervention funds under PAIF were approved through the CBN and accessible to the Airline and Power Sector. The specific objective and motivating ideology were “to fast track the development of the aviation sector of the Nigerian economy by improving the terms of credit to airlines”.
The aftermath of this intervention was a devastating result to the polity whereby an airline promoter accessed up to N35.56billion through BOI with a 15-year repayment term and very minimal interest rates.
Shortly after receipt, the promoters and leadership poorly managed the approved funds and later stopped paying staff salaries, did not renew aircraft leasing contracts and fraudulently closed the airline. Additionally, another airline during this period had a major air-crash that almost destroyed the sector post FG intervention fund. This could be the genuine concern of the government.
Meanwhile, FG could use the above as lessons learnt to disburse future grants or loans and most especially to mitigate the present effect of the COVID-19 Pandemic.
FG could design a template and criteria for accessing the bailout funds to include and not limited to an evidence of prompt payment of salaries pre COVID-19 for the last 18 months. Evidence of aircraft maintenance and its schedule during and post COVID-19 lockdown. Also, evidence of good training records of pilots, crew and ground staff pre COVID-19 lockdown; Submission and appropriateness of management reports pre-COVID lockdown.
Submission and assessment of airline cash flow and liabilities pre-lockdown. Analysed exposure to debts, bank loans and other liabilities of airline promoters, owners, major investors or shareholders. Recovery and repayment plan of the airline post COVID-19. Regulator (NCAA) independent Safety check and report per airline. Evidence of payments of applicable Taxes etc.
It is believed that any airline that meets largely these criteria is worthy of accessing a relatively good bailout fund because N4billion cannot cut it for our domestic airline operators (scheduled or unscheduled). FG is advised to consider the submission of the Chairman, Senate Committee on Aviation that recommended the sum of N50billion as a fair amount to support these airlines and the initial communication that FG would approve N13billion for the same.
Adewale is chief executive officer, Mainstream Cargo Limited.
