National Assembly raises alarm over collapse of aviation sector

By Henry Omunu & Tunde Opalana

The National Assembly has cautioned the Federal Government to as a matter of urgency avert looming collapse of the aviation sector as a result of decay in infrastructure, the effects of the COVID-19 pandemic and the non- air worthiness of aircrafts.

As a result, the parliament called for at least N50 billion intervention fund as bailout to allow operators put their planes in shape.

This appeal is coming against the resolve by the government to release a meagre N4billion as bailout to airline operatives.

The Senate cited example of Senegal that recently gave $74million bailout to the sector in the country , Rwanda $150million and United States of America ( USA) $58billion.

Chairman, Senate Committee on Aviation , Senator Smart Adeyemi (APC Kogi) ,raised the alarm on Monday during an interactive session with journalists in Abuja.

He said the aviation sector is very critical to the economy of any Nation and highly capital intensive which make governments across the globe to give bailouts to operators from time to time.

Aside the $50billion bailout, Senator Adeyemi also said many of the airline operators confided in the committee that issues such as custom taxes on imported spare parts of aircrafts, multiple form of taxations and VAT on Air transportation , are running them out of business and tempting them to cut corners.

“Operational challenges running down their businesses as confided in the Aviation Committee are non compliance of the custom department with the executive order to waive any form of taxation on importation of spare parts and commercial aircrafts.

“Non compliance of the executive order on the removal of Value added tax (VAT) from air transport.

“The inability of the airline operators to have access to single digit lending as obtainable in other parts of the world.

“The inability of the airline operators to access foreign exchange as and at when due to enable them pay the value added tax for their aircrafts”, he said.

He added that though the federal government due to COVID-19 pandemic adverse effects on the sector , planned to give out N4billion bailout but based on comprehensive assessment of the pathetic situation at hand , not less than N50billion is required for such intervention.

He said “You would recall that the federal government, haven considered impacts of the pandemic on the aviation industry, with a view to maintaining smooth operations, made the sum of N4 billion naira available as a bailout to these airline operators.

“With further and more critical intervention with airline operators in Nigeria, we gathered that approximately NSO Billion Naira will be required to meet the requirements of airline operators.

“This increase in bail fund is imperative if we are to keep our economy running, guaranty job security and mitigate against retrenchment.

“A critical look at the aviation industry in Africa, Senagal for instance which is no competition for the Nigerian Aviation industry in terms of number of airline operators etc, released a sum of $74 million dollars as bail out funds for their Airline Operators.

Rwanda also released $150 million dollars for its airline operators. “Taking the scope out of Africa, America for instance released the sum of $58 billion dollars as bailout funds for its airline operators. This is to mention a few.

“If comparative analysis ‘is anything to go by, it is clear that the N4 billion naira announced by the Federal Government as bailout funds for airline operators will not be sufficient to sustain three (3) of the needs of the fifteen (15) scheduled flight operators, save the non scheduled operators.

“Our further enquiry has also shown that airline operators are already discouraged and have resorted to cutting corners in carrying out maintenance requirements on their aircrafts.

“This is of course as a result of their poor financial situation. If this is not immediately checked, the effect is best imagined than experienced.

“As duly elected representatives of the people, we are mandated to take seriously any issues which may have adverse effects on the lives of the people we represent.

Where we see red flags, we should immediately bring this to the attention of the people and ultimately, the Federal Government.

“It is important to note that the safety recorded so far in the aviation industry in Nigeria is primarily due to the availability of the spare parts, and a conducive atmosphere to operate”.

Also, the House of Representatives Committee on Aviation says airlines in Nigeria require N50 billion bailout to prevent the industry from total collapse in the aftermath of COVID-19 pandemic.

Chairman of the House committee, Rep. Nnolim Nnaji, made this known while addressing newsmen at the National Assembly Complex on Monday.

He said that adequate mechanisms must be put in place to support the industry which he described as the “bedrock of the economy”.

Nnaji said that countries such as the U.S., Canada, Brazil, Rwanda, Senegal, lndia, China, Korea, United Kingdom, among others, had given bailouts in billions of dollars to their airlines to cushion the impact of coronavirus.

“The Federal Government’s four billion naira bailout to the airlines and some palliatives to the agencies (not yet released) is too small.

The Airlines need at least N50bn bailout funds to cushion the Coronavirus effect. “We are requesting that other mechanisms should be introduced as a support to avert the collapse of the Aviation sector,” he said.

Rep. Nnaji said that the just concluded public hearing on the bills for the review of the Civil Aviation Acts revealed impending crisis in the industry that required urgent attention.

According to him, the hearing is an ample opportunity for the indigenous airline operators to voice out their problems which shall not be treated with levity.

The lawmaker stressed that the industry was in dire need of urgent intervention to save it from imminent collapse.

He said that the operators complained that they were running at a loss and reeled out factors responsible for the situation.

The challenges crippling the industry, he said, included the nonimplementation of the Executive Order on Zero Customs Duty and Zero VAT on importation of commercial aircraft and aircraft spare parts.

He said other challenges listed by the operators were the nonimplementation of the Executive Order on the Removal of VAT from air transportation, inability to access forex and high cost of capital. Other challenges, he said, were the lack of single digit lending interest rate and replacement of NCAA’s five per cent Ticket Sales Charge (TSC) with a Fixed charge similar to FAAN Passenger Service Charge (PSC).

He gave multiplicity of taxes, fees and charges and called for urgent review of NAICOM Act on Aviation Insurance and exceptional permission to grant the externalisation of insurance placements for domestic airlines in the country.

He said that the grant should be on an exceptional basis in the interest of air transport safety due to inability of Nigerian Insurance Companies to cover aviation risks.

He said that the Ease of doing business programme, over regulation of domestic airlines and inadequate night landing facilities in most of the airports affected the operating flight hours daily.

Rep. Nnaji said that aviation was a strategic industry with potential for economic growth and played a crucial role in national development and regional integration.

The chairman said that the industry was the tonic on which many other sectors depended, saying that the consequence of its collapse would be very detrimental to the overall economy.

He added that in 2019, the contribution of the industry to the nation’s Gross Domestic Product (GDP) was N198.62 billion according to statistics from the National Bureau for Statistics (NBS).

He said that the aviation industry was rated as the fastest growing sector in 2019 in spite of the harsh operating environment.

The Rep said that the sector was projected to surpass the amount in 2020 but for the advent of Coronavirus pandemic which dealt a devastating blow to the industry.

“As legislature, we are going to look into these demands to find out why the Nigeria Customs Service would not respect the President’s Executive Order on duty exemption and other palliatives meant to lighten the burdens of the airlines.

“We intend to interact with the leadership of the National Assembly and the Ministry of Aviation on all the concerns raised by the operators and other sundry issues confronting the industry to see how we can address them to avert the collapse of the industry.

“It is important that the Federal Government urgently comes to the aid of the operators by addressing these needs in the overall interest of the national economy.

“It is to relieve the airline operators’ frustration, as well as threat of shutting down their operations due to lack of funds and harsh operating environment.

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“We are not just talking about airlines alone, the service providers, the Federal Airports Authority of Nigeria, (FAAN), the Nigerian Airspace Management Agency, (NAMA), the Nigerian Civil Aviation Authority (NCAA) and the rest are also having their own challenges.

“They need bailout funds to function optimally. “The Aviation sector requires huge capital for infrastructural development, the remittances of 25 per cent of their internally generated revenues (IGRs) should be retained for the next 10 years to help the agencies upgrade their facilities,” he said.