Airliners bicker over N4b bailout sharing formula

Source: Guardian

Some airline operators have expressed displeasure over the sharing formula adopted for the distribution of N4 billion aviation bailout funds, saying it skewed the largesse in favour of few airlines.

The complainants, who operate smaller capacity, were displeased with the ratio 70:30 adopted between the schedule and non-scheduled carriers.

As of yesterday, the likes of Air Peace, Azman, Arik, Aero Contractors, Overland, and Dana Air had been listed as the biggest beneficiaries.

The Federal Government had, last week, shared the sum of N4 billion bailout funds among a total of 18 scheduled and non-scheduled carriers.

 

The special intervention was thrown open to all airlines with a valid Air Operating Certificate (AOC) and distributed according to the size of the carrier. The parameters, however, made some ‘dead’ airlines beneficiaries of the COVID-19 stimulus package.

An operator, yesterday, accused the executives of the Airline Operators of Nigeria (AON) of “making themselves” the biggest beneficiaries through the choice of parameters.

 

“I think we are all in these harsh realities together. It didn’t make any sense to some of us that we cannot get an equitable share of the palliative,” he said.

 

It was gathered that the AON Board of Trustees (BOT) and the executive earlier had a heated argument over the sharing of N3 billion among six scheduled operators out of the N4 billion released to the carriers, while the remaining N1 billion goes to over 10 charter operators.

 

The Chief Executive Officer of Skypower Express Airways, a charter operator, Capt. Mohammed Joji, however, expressed gratitude to the Federal Government, especially the minister of aviation and Director-General of the Nigerian Civil Aviation Authority (NCAA), for “bringing relief to the industry”.

Joji said the distributed sum was instrumental in offsetting salary backlog and pending insurance premiums.

“We are very grateful for the intervention. The minister and DG NCAA tried for us,” he said. Another of the beneficiaries said the intervention was a drop in the ocean of devastating effects of the pandemic on the air travel business.

 

Though there is no consensus on how much was lost, estimates ranged the industry loss between N360b and N500b. In three months of lockdown, no fewer than 120 airplanes were parked, not yielding revenue, yet incurring maintenance cost.

 

The Chief Operating Officer of one of the airlines told The Guardian that without the heavy cost of maintenance, the airlines could have ignored the Federal Government’s bailout plan.

 

“The pandemic lockdown was an unusual development that modern aviation did not foresee. That the whole world would be on lockdown for months was unthinkable. Yet, it came. Airplanes that were programmed to be in the air 20 out of 24 hours a-day started sitting on the apron. That was devastating and huge losses to say the least. Someone has to bear the brunt, which no operator can afford. That is the rationale behind global requests for governments’ support so that aviation will not die.

“In our case, C-check maintenance costs as much as $2 million per airplane because we have to fly them overseas. Most of the planes grounded during the lockdown are already due for C-checks. Think about it, the so-called N4 billion bailout can only repair four airplanes at the cost $2 million each. Isn’t that a drop in the ocean?

“We now see airlines closing routes all over the place, while some carriers have not even come back since local flight services resumed. Is that normal? I think the government needs to get serious with the plan to save the sector from imminent collapse. We are not asking for free money but a good loan deal that will support airlines through a mandatory maintenance schedule, restart and recovery process,” he said.

 

IATA’s Director General and Chief Executive Officer (CEO), Alexandre de Juniac, earlier said that COVID-19 had devastated the balance sheets of member airlines and “we need continuing government support to enable the aviation industry to restart and rebuild connectivity.”

 

Records showed that governments have already provided $173 billion to airlines, but many programmes are running out as the COVID-19 crisis continues far longer than was anticipated.

“The $173 billion in financial support has saved countless jobs and averted mass bankruptcies. This was an investment in recovery—not just for airlines but for the economy as a whole. Every aviation job supports 29 others. A full global recovery from this crisis will be significantly compromised without the economic catalyst of aviation,” de Juniac said.

 

In response to the losses incurred during the lockdown, the Federal Government had in May hinted of a plan to bail out airlines prior to restart. Flight operations resumed but nothing came in the form of a bailout.

 

Defending the Ministry of Aviation’s 2021 budget at the Senate’s panel in November, the minister, Hadi Sirika, disclosed that the bailout of N5 billion was in the offing for aviation.

 

The sum was a far-cry in the estimate of both the operators and the host lawmakers. The Senate concluded that airlines should get as much as N50 billion for economic and safety reasons.

 

In-between the back and forth, the financial and operational challenges of airlines worsened. As an industry that depends on foreign exchange 100 per cent, though earns revenue in weak Naira (N500 to $1), keeping a respectable fleet of healthy planes became the major headache of operators; causing massive disruption and spike in air fares during the festive season.

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