The coronavirus pandemic, also known as covid-19, has thrown the aviation sector in Nigeria into a huge financial crisis.
The pandemic has also grounded activities in the sector across the world.
In Nigeria, the aviation sector, according to the National Bureau of Statistics (NBS) contributed nearly 150 billion Naira to the Gross Domestic Product (GDP) in 2018.
That figure rose by 33 per cent to nearly 200 billion Naira in 2019. The figures showed that aviation sector recorded the fastest growth in activities compared to other transportation sub-sectors in the fourth quarter of 2019.
But since Nigeria recorded its first index case of covid-19 in March, 2020, along with the subsequent closure of all the airports in the country, activities in the sector suffered a sharp decline. Expectedly, revenues have also nose-dived.
The Government had on March 23, 2020 shut all international airports for an initial period of one month as part of efforts to contain the spread of corona virus in the country. Local airports were also shut a few days later.
The lockdown and restriction of airspace movement have led to the grounding of about 120 domestic aircraft nationwide, leaving operators with no income but recurrent expenses.
Recently, Nigeria’s Minister of Aviation, Mr. Hadi Sirika said that the sector has been losing N21 Billion monthly since the outbreak of covid-19. He attributed the huge loss to lack of activities at the sector whose income solely depends on flight operations.
With no flight bringing in and flying out passengers, sustaining the heavy overhead and keeping critical facilities serviceable have been a tough call among stakeholders, including government agencies.
Worst hit is the Federal Airports Authority of Nigeria (FAAN) that has a workforce spread across all 22 airports nationwide. With almost nothing generated in revenue in the last one month, FAAN will require Federal Government’s support to defray 4 Billion Naira monthly overhead costs.
Other agencies face similar predicament. The apex regulatory body for aviation, the Nigerian Civil Aviation Authority (NCAA) requires an average of N750 million overhead cost per month; Accident Investigation Bureau (AIB) N350 million; Nigerian College of Aviation Technology (NCAT) N150 million; Nigerian Metrological Agency (NIMET) N290 million and Nigeria Airspace Management Agency (NAMA) over N500 million per month in overhead expenses.
These agencies are funded both by Federal Government’s budgetary allocations and the Internally Generated Revenue (IGR) from passengers and operator-user charges. For instance, FAAN earns IGR from airport charges and passenger rates of N1000 on each local ticket and 50 dollars on each foreign traveler. Other agencies like NCAA, NAMA, NIMET and AIB earn from the five per cent Passenger Service Charge and Cargo Service Charge.
In the absence of passengers’ movements, these agencies are left with only Federal Government’s allocations. With the drastic fall in international oil price, income accruable to government in revenue has plummeted significantly.
Depending on how long the disruption in aviation operations lasts, no fewer than 91,000 jobs are at risk in Nigeria’s aviation sector along with over 600 million dollars in GDP contributions, according to estimates from the International Air Transport Association (IATA).
Already, Nigerian domestic airlines have started to implement pay cuts and staff retrenchment as the negative effect of the covid-19 takes its toll on the travel and tours industry.
One of the airlines, Arik Air, had announced it will implement an 80 per cent pay cut for members of staff across board for April 2020 and that from May 1, 2020, 90 per cent of its staff will proceed on leave without pay until further notice. Last month, Max Air also informed its staff that they will not be paid salaries for the duration of the imposed lockdown.
IATA has called for regulators to support the industry by providing a package of measures to ensure air cargo operations, including fast track procedures to obtain over flight and landing permits.
Domestic airline operators are also seeking for a bailout from the Nigerian government to help sustain the sector at these trying times, especially now that the lockdown on the sector has been extended by another four weeks by the Nigerian government.
As one of the major drivers of the economy, the aviation sector urgently needs specific attention and intervention from the government. Aviation is a strategic pillar for social and economic development of any country and unless the government intervenes, Nigeria’s recovery from the covid-19 pandemic will be very slow, difficult and painful.
Government could grant direct financial support to passenger and cargo airlines with the aim of revitalizing them thereby stimulating economic growth. Supporting aviation sector now means that the Nigerian economy can pick up more quickly and assuredly after covid-19.
Other measure that could be considered by government to revive the aviation sector is tax relief to airline operators by way of reduction, waiver or deferral of government imposed levies, charges, fees and taxes.
Government should also make foreign exchange more readily available to airline operators.
Aviation in Nigeria is completely denominated in foreign exchange as procurement of aircraft, maintenance, spare parts, jet oil, pilot training among others, are all done in other currencies.
Unless airline operators have access to foreign exchange at reasonable rate, it may be difficult for the aviation sector to recover early.