Aviation bailout and Senate’s strange oversight
To imply that plane crashes might be imminent should the Federal Government continue to ignore heavy stimulus packages for the private operators is itself injurious than helpful to the aviation industry. Beyond the controversial alarm, the lawmakers need to be forthright in addressing financial concerns of the critical sector. The right approach is a comprehensive forensic audit and making both regulators and operators play strictly by the rules.
Chairman of the Senate Committee on Aviation, Smart Adeyemi, last week addressed correspondents to make the case for a hefty bailout for local airlines. To emphasise the urgency, Adeyemi reportedly alleged that airlines were cutting corners just to survive the devastating effects of the COVID-19 pandemic. He added that except the Federal Government took an immediate step to properly support the airlines with a bailout beyond the N4 billion initially proposed, and avail them of foreign exchange among other palliatives, aircraft might start falling off the sky.
The lawmaker’s exposé, which has not been substantiated, followed the Aviation Minister’s earlier disclosure that the local airlines shall be entitled to only N4 billion COVID-19 bailout fund. That was contrary to the N27 billion earlier penciled for the entire aviation sector by the National Economic Council. Clearly, given months of inactivity due to lockdown, airplanes on the ground, maintenance requirements, unmet financial obligations, cash burnout, and low patronage since flight resumption, the airlines will need more considerable resources to rebound. And citing the global trend of governments’ financial support to airlines, the National Assembly has demanded at least N50 billion worth of stimulus package for local airlines.
Adeyemi’s disclosure and conclusion were grim as he made damning allegations that are alien to modern civil aviation, which prides itself as the most regulated industry in the world. Such disturbing accounts from the hallowed chamber can only elicit fear, if not panic in both air travellers and international partners of the local sector. For instance, insurance covers are determined based on the perceived risk the sector poses. Insecurity in the country has already earned Nigerian aviation a place among the high-risk areas. Wild allegations of operators cutting corners can only push the rating lower.
Good enough, operators under the aegis of Airline Operators of Nigeria (AON) have disowned the allegation. The Nigerian Civil Aviation Authority (NCAA) that should have been made answerable to such matters, has also said that no operator was in breach of its extant rules, buttressing that, contrary to the warning, airlines were not ‘‘cutting corners.’’
Flying the kite of airline entrepreneurs angling for more cash flow, or simply throwing more money at the local aviation problem has never worked for the industry. In 2011, the Central Bank of Nigeria (CBN) released N120 billion aviation intervention largesse at operators at six per cent interest rate. A flamboyant entrepreneur got a huge chunk of the loan at just two per cent interest rate, to acquire a promising airline, renamed it, and soon shut down its operations. The airline didn’t fly and the debt that emanated in the process remains a public burden.
Ideally, the Senate should demand more financial discipline as well as transparency from the operators and hands-on regulatory functions from the aviation agencies. It is unacceptable that local airlines owe regulatory agencies N22 billion from unremitted Passengers Service Charges (PSC), as recently disclosed by Aviation Minister, Hadi Sirika. It appears that the operators are just as guilty as the regulatory framework that allowed such debts to accumulate. The Senate should be concerned with the quality of regulatory oversight from the NCAA and the supervising Ministry of Aviation.
The NCAA is the autonomous apex regulatory body for aviation in the country. The Civil Aviation Act 2006 empowers the Authority to regulate aviation safety without political interference, carry out oversight functions of airports, airspace, meteorological services, as well as economic regulations of the industry. The same rule book mandates NCAA to approve the operations of all airlines, following satisfaction with their business plans, equipment, and development plan.
Part IX, Section 30, Subsections 4(b) & (c) of CAA, 2006 mandates the Airline Financial Health Unit to carry out periodic evaluation and analysis of the operations of all Nigerian registered airlines in order to determine their financial capability to carry out safe flight operations. Therefore, if the local airlines are in financial difficulties, incur heavy losses, or are in distress, then NCAA should know, have a credible explanation and be in a better position to proffer sustainable solutions.
Additionally, the Senate Committee can discharge its oversight function by engaging the NCAA and Ministry of Aviation on why the sector has remained moribund without any effort to improve on the toxic business environment that has been inhibiting investments and making it hard for airlines to survive beyond five years. How come multiple taxations of 37 sundry charges and decrepit infrastructure is still hurting operators without respite? With the majority of the local airports operating only daytime and aircraft more on the ground than in the air, it is impossible for operators to break even.
Bailout without a forensic audit or airlines opening up for audit is preposterous and suggestive of the fixated mind of the political class. In the interest of public good and financial prudence, especially at a time of economic recession, the National Assembly can do more to sustain the industry by demanding strict accounting procedures, understanding guiding rules, and seeking reforms where necessary.
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