RE: IT’S TIME NATIONAL AIRLINE IS PRIVATIZED

The Tanzanian experience in the article published on www.nigerianaviationnews.blogspot.com has further proven the futility in liquidating and starting national carriers all over again when factors such as government ownership, protection of the skies and other competitive issues are not properly factored before taking emotional decisions that will hunt the country financially and reduce operational efficiency of other domestic carriers. Countries such as Greece, Ghana, Cote d Ivoire, Belgium, Switzerland, Cameroon, Senegal, Zambia e.t.c have gone through the painful process and have bitten the dust like the Tanzanians are doing presently as reflected in the article. The disparity in fares saga has again woken the passion for a national carrier with our unionist making quick reference to airlines in Ethiopia, South Africa, Egypt and other Middle Eastern countries as models of vibrant national carriers. Ethiopian Airlines was managed by foreigners for 25 years before reverting to the Ethiopians who have doggedly maintained and improved on the operational standard, same for South African Airways. The Middle Eastern government, chair a functioning board while competent professional are recruited from all over the globe to manage these carriers without any interference. Also, some of these countries have protected these carriers by not polluting their skies, slots, frequencies and most importantly commercial agreements. The South Africans have refused to sign the open skies with the Americans, same with Russia, China, Hong Kong, Mexico their neighbour and some other countries. Brazil signed earlier this year with full implementation scheduled for 2015 despite its closeness to America and stronger economy when compared to Nigeria. For China it’s the American labour unions not the Chinese that are resisting the open skies agreement because of perceived jobs losses and cheap wages that will accompany the agreement, yet some of our agency heads told the senate committee that opening the skies is the way to go. It’s also important to note that Japan, India, Australia, Switzerland and EU with bigger economy and obviously stronger aviation industry, signed the open skies after us after using strong negotiating tactics that ensured commercial valves were sealed for their carriers. The Philippines government through its central bank introduced financial instruments that made transfer of ticket sales less flexible; the foreign airlines grumbled and reduced frequencies while on the other hand San Miguel Inc is adding a billion dollar investment to its flag carrier, Philippines Airlines, for the purchase of a hundred aircrafts. This country has CAT 2 certification and flight restriction into Europe, yet they were able to protect their flag carrier to attract such investment. The tonic here is commercial protection rather than enriching BASA fund. A new national carrier from the scratch will require protection and route exclusivity which is a requisite subsidy, for it to survive the first decade. We will shackle our present flag carriers for the new carrier to survive, if it will even survive. A regulatory consolidation process like the Chinese and Thai government have done will allow a viable national carrier or carriers that will have a functioning board to evolve naturally while funds meant for this risky business that will probably come from some 6000 pounds gorillas (a term used for sub-optimal investors), who will make government stand as guarantors can be invested in the consolidated carriers.

WHY WE HAVE HIGH FARES {Let look inwards}

Presentation by Olumide Ohunayo Director Research & Strategy Zenith Travel & Tours The Chairman Senate Committee on Aviation Distinguished members of the Committee Distinguished Participants and Stakeholders This presentation is from our organisation Zenith Travel & Tours with warm regards from the CEO Ayo Olonilua and other members of his team. We need to look at the issue from the following perspectives: Regulations: Administration & Implementation. Supply: Inadequacy of Nigerian Competitors. Demand: Public Travel Expenditure. REGULATIONS: An Airline Protection Unit should be set up in the NCAA to protect our carriers. They should participate in BASA, SLOT and other competitive issues. The unit should liaise regularly with the recently establish economic protection department of the CBN, to monitor revenue transfer by foreign carriers while ensuring strong competitive regulations. A company with significant market power and dominant position operating in a jurisdiction without standard competition law rules and a competition authority can in effect engage in any anti-competitive practice without fear, sadly Nigeria is one of those jurisdictions. We are giving ultimatums and running from one public hearing hall to another when the British anti-trust body called Office of the fair trade (OFT) has fined and collected the fines from BA and VAA for the same offence committed in Nigeria. The senate should expedite action on the anti-trust law and the establishment of a complimenting body, the document is presently, gathering cobwebs somewhere in the hallowed chambers. The Fly Nigeria Act should also be looked into by the legislative arm of government. It’s a critical market bailout law employed by countries to keep public funds within the economy and shore up market capacity for home grown carriers. It will ginger competition and bring down fares. Air Nigeria is in IATA clearing house which has given them commercial leverage with other foreign carriers .We can start the act with charter flights and point to point flight rather than ignore it in totality. Financial Instruments: the CBN’s newly created economic protection unit should consider introducing policies that will discourage ferrying of all funds generated by foreign carriers. That policy will be a negotiating instrument if it is well implemented. This may sound draconian but what can be more draconian if it cost Nigerians twice the fare offered to our Ghanaian counterpart. The CBN can talk to their counterpart in Venezuela and the Philippines, when they implemented this policy the foreign carriers buckled. The ministry of Aviation should also begin the process of reviewing the bilateral air services agreement [BASA] , these agreement are not only skewed in favour of the foreign carriers, they inherently do not protect our carriers principally at airports with slot allocation issues, considering the ease at which we offer multiple entries. We need to review the Nigerian Civil Aviation Act: the recent decision of the administrative panel set up by NCAA to review decisions taken against the British Carriers with respect to Passenger fuel Surcharge is another sour remainder of the irritating cease and desist order. Alleged High Cost of Operation in Nigeria: When the cost of operation is high in a country or to a particular airport in that country, the options open to airlines world over is to reduce frequencies, capacity, close their bases or stop operations pending review of those cost. Also, IATA an international body responsible for coordinating commercial activities of the industry usually issue alerts and advice countries with such problems to quickly make amends or review. Nigeria has not gotten that alert. Rather the foreign carriers have been increasing capacities, frequencies and points of entry yet they cling to cost of operations as an excuse for high fares. The A380 is the biggest passenger aircraft in world; it is not operating into Nigeria because we do not have facilities to handle it. The new B747-8 which is second biggest aircraft will be operating into Nigeria very soon through a foreign airline, which shows how juicy the Nigerian routes can be. We need to facilitate competition and must ensure that facilities and legislations provided are not diverted or given to non scheduled operators whose appearance, equipment and ownership are opaque. We should not be deceived into increasing frequencies for the foreign carriers as encapsulated by BA country manager; rather we must empower our carriers and fast track the national carrier project without recourse to public funds. SUPPLY: LACK OF COMPETITION: Government intervention in commercial aviation is usually built on the following pillars: Tax policies. Infrastructure provision. Civil and Labour Regulations. Aviation Security. Protection and Encouragement of domestic carriers in a competitive environment The lack of protection which is one of the pillars has shackled our carriers’ ability to compete on the international route and has also made them unattractive to foreign investors. Government should urgently consider a regulatory consolidation regime; reduce duties paid on aircrafts, spares and other critical operational needs. Low interest loans should also be considered for these carriers, while aviation fuel which is a major cost component of the industry though de-regulated needs to be guided as obtained in some countries like Argentina or expanded to incorporate airline participation. [India recently gave approval to their carriers] Who should benefit and the conditions? Airlines with active AOC’s. Schedule airline operators. Submission of a verifiable business plan. Submission of a verifiable financial statement. Strict compliance and monitoring by the regulatory or appointed agencies. Distinct separation of passenger and corporate jets. DEMAND: Public Travel Expenditure: We need to address the high propensity to travel at all cost for the most rudimentary reasons; therefore we should reduce public travel expenditure in line with present day realities and as a palliative support to the fuel subsidy removal. We should place a ceiling on fares approved for public officials by warehousing public travel. We should also plan our travel well ahead with requisite approval given on time. Our orientation of having retreats, capacity building over sight and other Social Programmes that are non essential outside the country should be reduced or completely discarded. In conclusion the foreign carriers are guilty and have over the years exploited Nigerians, legislating or forcing it down their throat will be give temporal relief, to have an enduring relief we need to look inwards, or else will be aiding and abetting the clandestine plan of making Accra the hub West Africa.

FAAN /MAEVIS DEAL:PUBLIC OR CORPORATE INTEREST

FAAN/MAEVIS DEAL: PUBLIC OR CORPORATE INTEREST ?

The commando takeover of MAEVIS facilities and forceful termination of the agreement despite having a restraining court order is a tragic Nollywood presentation that will surely damage our reputation in the international investors’ forum.

In my article titled “The Rumored Cancellation”, written and published sometime in the first quarter of 2011, I advised both parties to seek re-negotiation rather than cancellation, because that option usually leads to prolonged litigation, freezing of bank accounts and assets as witnessed in the past.

It started with Pan Africa Express, Sanderton a while ago, Nigeria Aviation Handling Company (NAHCO) thereafter and now MAEVIS, the current victim. Going by the press briefing of FAAN MD, they are already preparing to bulldoze other organisations based on the principle of sub-optimal agreement given as bazaar by the Federal Government through its appointees in FAAN and the Ministry.
The MD of FAAN has also forwarded the MAEVIS file to EFCC and ICPC, I sincerely hope the names of the FAAN MD, Director of Commercial, Head Legal and the Minister’s SA at that time were attached to the petition. These people and their backers in the ministry turned a blind to anti public enhancement fee that is principally used for settling the “settlables”.

Going down memory lane, in 1993 NAHCO, FAAN and Spring Fountain the purveyor of MAEVIS were to jointly start a domestic handling company, but after making necessary financial contributions, the deal fell flat and refunds were demanded in a typical Nigerian ding-dong movement between the parties.

NAHCO again under Musa Agboneni, Chris Hassan and AGM Ops Mr. Olu Afolabi sometime in 1995 introduced computerised handling and check-in procedure at MMIA. In their quest to improve and update the facilities, they got a technical partner NATHECH and a North American company ARNIC Systems to assist and ensure the mission is accomplished.
NAHCO invited FAAN and SAHCOL (the latter had her vision blinded by the ill fated Nigeria Airways at that period in time) to come on board with requisite moral and financial contributions. These organisations failed to catch the vision and consequently backed out.

NAHCO in 2003, went ahead to provide the Airport Operations Management System, investing a lot of funds, while also refurbishing all the check-in counters at the MMIA. Their request to include the flight information display system (FIDS) was flatly turned down by FAAN.

Later, SAHCOL became an independent entity with a clear vision of participating and competing in the provision of ground handling services. They petitioned the ministry, alleging that NAHCO was being favoured and given undue advantage at the MMIA.

NAHCO responded by purchasing additional equipment worth $360,000 to enable SAHCOL key into the programme seamlessly. When SAHCOL was asked to pay, they backed out of the deal, again. Thereafter NAHCO went ahead with the processes and system unperturbed, though with a major hitch, the exclusion of non NAHCO passengers.

In 2007, the agreement with MAEVIS was signed to the surprise of industry watchers because MAEVIS won the deal over and above other experienced organisations that applied for the contract; organisations such as SITA, NAHCO-ARNIC etc.

The Company went to work investing and providing services that improved facilitation for passengers and airlines, while also capturing and generating revenue for FAAN before the bubble burst in 2010.

It has been a cat and mouse game ever since, MAEVIS was charging $1.40cent per passenger and the contentious 35% enhancement fee from revenue generated, SITA will be charging the same $1.40cent without enhancement, which is a better deal, while NAHCO was charging below $1 per passenger for the same services.

The MAEVIS/FAAN case is in court. While watching the drama in the legal and public opinion court, we need to be reminded that the equipment NAHCO used before they were forced to move out for the MAEVIS deal are still lying somewhere in the same airport that MAEVIS equipment are lying in right now. Peradventure, SITA’s equipment suffers the same fate this will increase the computerised carcass inventory at MMIA.

Questions that keep recurring in our PPP or is it concession agreements are: Why do we make the same mistake always? How did SITA win this contract? Was it through an open and transparent bidding process? Did SITA deal with FAAN directly, or through their agents which may have hiked the total cost of the deal? When will the toothless Infrastructure Concession Regulatory Commission be able to bark and bite?

MAEVIS was absolutely right in saying enhancement fee was entrenched in most FAAN domiciled concession agreements, so the MD FAAN must also be perfectly right to have promised to review those sub-optimal agreements and for boldly aligning with public interest in contrast to MAEVIS’ position of aligning with corporate interest, which must have necessitated their refusal to renegotiate or is it resort to legal delay tactics.

When the legal processes are completed, I sincerely hope the BASA fund designated for critical safety and infrastructural projects, which is being diverted to offset Government liabilities of late will be sufficient enough to clear liabilities arising from sub optimum agreements.
Concession is the way forward and must be accompanied by transparent, robust and independent economic regulations supported by effective industry consultations.

This is what the concessionaire and concessionee in this soap opera lacked from the beginning when they started their romance in 1993, they should look back and ensure the problem is settled amicably considering MAEVIS have invested a lot resources.

CONSUMER PROTECTION:BEFORE THE BILL OF RIGHT

The industry is gearing up to receive the bill of right as espoused by the NCAA. This bill should whip our airlines in line on issues related to services provided to passengers. The bill is expected to address the perennial problems of delays, cancellations, refunds, hidden charges e.t.c
Stakeholders and passengers are eagerly awaiting this bill, the airlines just like their counterpart world over usually are apprehensive and would work against the bill. The DG’s pronouncement on the bill has made tongues to wag. it is important to look at other issues outside the control of the airlines that are contributing to the present operational delays and associated issues. These issues are pertinent and should be addressed by the government and relevant agencies before making the bill an act.
The remodeling of 12 major airports at almost the same time has reduced operational capacity at these airports. The airlines are made to operate from make shift structures or often times wake up to meet alien procedures that usually slows down the facilitation process.
The aluminum graveyard at the GAT terminal where dead and abandoned aircrafts are parked, has made parking difficult for operational aircrafts and increased the incidence of aircraft wings touching each other or the tail of another aircraft.
Private jets used by some governors are also parked at this terminal which increases the operational constraints. Aircrafts taxing to park are made to wait while marshals struggle to get a convenient space. Delta and Imo state government in particular need to be notified.
The boarding gate at Abuja airport is grossly inadequate while the buses provided as an alternate, to ferry passengers from the terminal to the airside are unfriendly to the elderly and the physically challenged passengers.
The epileptic screening machines at our airports is another sore thumb that creates operational hazards for our airlines, their efficiency is ruptured by the equally epileptic power supply.
The Public Address System provided at the government controlled airports is barely audible with clarity problems, efforts made by some airlines to supplement with portable address system are usually resisted by FAAN management.
The presidential movement that closes the airspace for between 30 to 45 mins needs to be addressed, it is understandable that NAMA cannot come out to complain but rather be seen defending and verbally reducing the time used for such movement. It is important to remind all stake holders that the issue is a recurring decimal, the presidency, relevant security bodies and civil aviation authorities need to work out an efficient time management.
It is commendable to see NAMA take over the control of runway lighting, because some of our airports don’t have this critical runway equipment, the airlines are forced to run a clumsy day light operation that has reduced frequencies and capacities that would have corrected some noticeable operational challenges. The other challenges are the NOTAM at Abuja airport that recently necessitated the order of the NCAA that any take off after 9pm should not be permitted and the lack of runway light on 19L, which is the domestic runway in Lagos. These airports are the domestic hub of airline operations and can effectively slow down the entire network of scheduled operators.
NCAA inspectors need to improve and fast track responses and procedures to issues related to aircraft incidences and AOGs. Aircrafts are delayed at off line airports due to delayed or non availability of inspectors to inspect and certify aircraft for ferry.
Aviation fuel is important to airline profitability and of late aircraft delay, therefore the government with the NCAA driving this push must address this issue quickly and decisively. The Indian government has just authorised its carriers to import jet A1 directly to bring down cost and ensure availability while the Argentine government this week ordered the major oil companies to put a price cap on fuel sold to aircrafts registered in the country. The report went further that the cost of a liter of jet A1 must not exceed that of gasoline by 2.7% ,using the rate of the nearest filling station. If that policy is to be applied here, using the present N97 per liter for fuel that will translate to about N100 per liter for jet A1, this will be convenient for our operators. The Argentine anti-trust commission report said that in the USA the difference between petrol and Jet A1 is not more than 2.1% and this should be reflected in the Argentine market. Then we may ask where is the Nigerian anti-trust commission? When will we start protecting consumers in Nigeria using requisite institutions and laws?
Quite naturally, this bill will attract fines and sanctions to recalcitrant domestic carriers, will this bill or a similar one be replicated on foreign airlines who hide under the archaic Cease and Desist Order?

RE: BA-VAA PANEL CEASE AND DESIST ORDER

The report of the administrative panel set up by the Nigeria Civil Aviation Authority (NCAA) to review decisions taken by the regulator with respect to fines imposed on the British carriers for improper conduct wasn’t pleasant to our hearing but fair.

The panelist in their findings concluded that, these carriers colluded, cooperated and coordinated in periodically raising and maintaining the passenger fuel surcharge (PFS). The PFS was used to deprive the NCAA, Federal Government and travel agencies, statutory revenue and commission from base fare while Nigerian passengers were unfairly exploited.

The panelist also unanimously agree that these carriers had a collusive arrangement which undermined the principle of fair pricing and the NCAA was within its regulatory authority and indeed has substantiated its findings. Sadly, the regulator’s hand was tied by Act No 49, of 1999, that was used to establish the authority with a limitation to ask exploiters to Cease and Desist only. Simply put, the fines imposed by NCAA are not backed by law.

The absence of an anti- trust body and competition laws in the country is retrogressive to the development of the industry and other sectors of the economy, the legislative arm need to do something urgently.

A company with significant market power and dominant position operating in a jurisdiction without standard competition law rules and an overarching competition authority can in effect engage in any anti-competitive practice without fear, unfortunately, Nigeria is one of those jurisdictions.

An economy like Nigeria is now overdue for a competition regime: a dedicated law and a competent authority to enforce it judiciously. A competition regime will protect the interests of millions of consumers as well as create a level playing field for all kinds of businesses to flourish. Crucially, it also provides businesses with the opportunity to compete on price and quality, in an open market and on a level playing field without anti-competitive restraints.

The benefit of putting one’s house in order is that, when you speak, you speak with authority and you command respect. Once your house is in order, who will disrespect your authority or decision.

The NCAA should go home with the words Dr Gbadebo-Smith a member of that panel, “that PFS should have been subject to taxation, these airlines in my view owes taxes on that segment of its ticket cost and NCAA is correct in insisting they pay taxes, the means of recovering the taxes is not within the remit of the panel”.

NCAA is authorise to get these taxes from the carriers, therefore the DG and his team should proceed. Also the industry should gear up and start the process of updating the civil aviation laws that will trash archaic orders such as cease and desist.

For BA and VAA, exploiting Nigerians through the weakness of our laws is not right and just. They should make amends and thank their stars we were generous enough to give a Cease and Desist order, in other climes the fines are complemented with jail terms for airline managers who hold sensitive positions during that period.

AERO: THE UNENDING COUNTER CHAOS

In my article, “Challenges Before the Industry in 2012” I highlighted the issue of regulations that will protect passengers before, during and after a flight, that issue has come to the front burner now due to the recurring and concurrent chaos at Aero Contractors check in and booking counters in some cities in the country.

Aero needs to urgently find solution to this problem which usually emanates from delays, cancellation, overbooking and bumping of passengers. We appreciate the boldness and innovation of starting and retaining low and very attractive online fares when other carriers backed out due to the ever increasing Jet A1 price that was deregulated by Government, but secretly regulated by oil marketers, who recently went for each other’s jugular over adulteration and excessive profiteering.

On the 3rd of January 2012, a passenger with a baby was booked on Aero’s early morning LOS – ABV flight, she got a text rebooking her for the 6pm same day flight, right at the checking in counter. To her chagrin, the flight did not depart till 2300 HRS. She was left with the menace and risk of leaving Abuja airport in the early hours of the next morning at great risk and at a cost higher than the airfare.

On Saturday, 14th of January at their counter in MM2, which was a day after the five day strike, with very low passenger turn out at the Domestic Airport, there was little or no activity at Aero Check-in-Counter, but the Booking Counter was complete bedlam with passengers throwing fisticuffs. The chaos emanated as usual from refund, re-booking and disregard for the queuing system.

Disregard for the queuing system is a norm in the industry, where egress for operational and airline staff are used by touts and other airline staff to beat the queue in their bid to assist passengers or favoured clients at a fee. This is usually done with the support of some airline staff and duty supervisors.

Aero is not alone, almost all the domestic airlines are guilty of crimes against fare paying passengers and really need to dig deep and begin to reverse the ugly trend. Enugu bound passengers were worst hit during this period due to frequent cancellation of flights to the airport.

It cannot be attributed to the airlines or weather, but the immediate past Minister of Aviation who hastily upgraded that airport to an international airport while also commissioning it for visual operations only, due to lack of necessary and required facilities.

I was also taken aback when I saw Benin bound passengers groaning after waiting for 5hrs for a 35 minute flight (or 4hrs by road). It is more painful when you understand that the LOS-BNI fares are high and not commensurate with flight distance, the Deputy Speaker of Edo State House of Assembly raised an alarm on the fare sometime ago. This is domestic discriminatory fares that will only stop if we strengthen existing and encourage new low fare operators.

Aero should dig deep and begin to weave solutions to the counter problem just like they did when they introduced free seating with its accompanying cabin commotion. They should consider setting up a low fare carrier to nurture its budding online discount passenger clientele or in the interim increase frequencies by having more night flights. Its on-line portal should be updated to provide more options and as much as possible support passenger request rather than having to clog the airport counters for requests that can be treated electronically.

Management should weigh its options of either retaining its strong oil and associated industry high yield passengers and ultra loyalist of its unblemished safety records or the new facebook generation that monitors and follows its online fares assiduously.

NCAA should introduce a monthly publication of delayed departure, lost luggage, complaints etc for all domestic carriers. This will make them very conscious of their responsibilities leading to better service. These publications should go hand in hand with the present diplomatic overtures.

Ibadan Airport: The Mystery Cow

Ibadan airport is one of the federal government owned airports in the south western part of Nigeria. The airport with large expanse of land has been poached regularly by the villagers and the air force authority; some reasons adduced for this action are long neglect of facilities, poor funding or non release of operational allocation, under utilisation and most importantly the lack of fencing and support from its host- the Oyo State Government.

The staff quarters are derelict while facilities in and around the airport itself are begging for overhaul or outright replacement. It’s in this sorry state that, the runway safety was challenged by a mysterious cow whose dung was the only evidence.

The airport manager and his team rolled up their sleeves to get the mystery cow, after searching for days; they had to call the Nigerian police to join the search team, with a shoot at sight mandate.

The police did not disappoint, just like the boko haram issue, they successfully located the cow in his resting place, fired a volley of bullets that could not produce carcass or blood stained leaves, as expected the usual nauseating rhymes of the police was flown again -the cow escaped with serious injuries later the story changed to the ridiculous. It’s a mystery cow that must be appeased spiritually, despite wasting tax payers’ bullet and the inevitable mobilisation fee.

The manager became restless knowing the safety implications of having a spirit filled and still wandering cow on the runway of an airport that is gradually recovering commercial flights after years of abandonment, without a carcass and the dung littering the runway daily before dawn.

He and his team invited local hunters, provided official vehicle, the only serviceable vehicle anyway for the mission. The hunters armed with shakabula (local gun) were able to find the well fed cow without injuries resting under a parked aircraft.

They carefully guided the cow from the aircraft before delivering the fatal shot. The cow did not go down without fighting, it went straight for the airport manager's official vehicle conveying the hunters and inflicting severe wreckage before finally giving up the ghost. You may ask what happened to the carcass after afterwards. Check Molete meat market.

We are thanking God today because it was only the FAAN vehicle that was damaged, what would have happened, if that attack was on Associated Airlines Embraer 120, Overland Airways Beech craft or Oyo State subsidised Arik Dash 8 flight that was either landing or taking off with the mystery cow on the runway?

These carriers operate props to this airport with some other charter flights that have consistently made the airport operational after long period of non operation. Our hard and well earned new safety records and certification would have been dented; happily the Ibadan FAAN team responded appropriately, un-mindful of the disappointing, conventional security.

Though FAAN has commenced work on the perimeter fencing at the airport, the project is slow and quality of work is not encouraging, considering that some part of the recently erected fence has cracks while some other part caved in during the last rainy season.

It is exciting to hear that the new management has been releasing allocation to the airports on time and regularly unlike in the past, they should also consider looking into the backlogs that have made their airport managers chronic debtors.

Also the unutilised airport land cannot continue to lie fallow. FAAN should begin to think outside the box or the alternative will be the continuous encroachment. Also is it true that some investors are willing to start a hospitality firm around Ibadan airport? if it is true then, the commercial department of FAAN should dust up the file and process the application.