Sunday, 21 August 2016

Exit of foreign airlines

Written by the Editorial board of The Guardian Newspaper

Frustrated by the low patronage occasioned by scarcity of foreign exchange and biting economic recession in Nigeria, no fewer than 14 foreign airlines have closed shop to forestall further losses.Of course, the airlines are not the only companies in such a mess in the aviation sector, operators of travel agencies, hotels and providers of other services are also facing the same hardship.

There are fears that more companies would exit the country except the Federal Government addresses the problem to reduce the forex policy’s impact on the airlines and, indeed, the travel industry as a whole. An enabling environment thus needs to be created for the aviation and tourism industry to flourish.

Already, the airlines have reportedly lost a whopping N64 billion in the wake of the new forex policy of the Central Bank of Nigeria (CBN), a development, which has exerted more pressure on the economy, as thousands of citizens have lost their jobs or means of livelihood. National Association of Nigeria Travel Agencies (NANTA) said the new forex policy and economic crunch came with enormous negative effect on travel business.

At an Aviation Round Table (ART) in Lagos, the other day, it was said that travel agencies that sold about $1.4 billion worth of flight tickets in 2015 already recorded huge losses with the departure of the airlines, noting that some of the association’s members were considering relocating to neighbouring countries where policies were more relaxed.

The operators also bemoaned the massive devaluation of the naira, which has raised the cost of flying to astronomical levels.After the devaluation, the accumulated $800 million from airlines’ ticket sales when the exchange rate was N197 to $1, was released and taken out of the country at the new rate of N320 to $1, with attendant huge losses.For every $1 million repatriated since the new policy began, the airlines have lost no less than N80 million with some airlines reportedly losing up to 50 per cent of their funds to the forex policy.

Last year, government introduced a fiscal policy through the CBN, restricting access to foreign exchange and funds transfer out of the country. Airline funds then got stuck as a result of the policy.The International Air Transport Association (IATA) has estimated that no less than $600 million belonging to foreign airlines is now stuck in Nigeria and appealed to the government to ensure the immediate release of such funds.

When IATA intervened, the estimate was that Delta and United Airlines both America-owned, had up to $180 million hanging in Nigeria while Air France-KLM had over $150 million. British Airways had about $100 million while Iberia, which had already withdrawn had $5 million of its funds trapped.

The travel and airline industry is, no doubt, among the hardest hit by the current forex regime. The burden has, of course, been passed on to air travellers, who now pay exorbitant fares. An economy ticket from Lagos to Los Angeles that cost about N300, 000 before the devaluation has recorded a 100% increase and now costs over N600, 000.

The increase is the same on all international routes. Apart from the airlines, no industry is spared. The country is certainly in crisis and the leadership should do something about it.

It is, therefore, pertinent to ask what the Aviation Ministry is doing about the pains of citizens affected by this. People still have to travel, however less frequently, and they have interests that should be protected. Why haven’t the Ministers of Aviation, Commerce and Transportation engaged all stakeholders either with a new view to explaining the situation or ameliorating it?

Such failure on the part of the Ministries has left both the airlines and passengers without any comfort. Certainly while a period of sacrifice may be understandable given the poor state of the economy, government ought to engage with different sectors or businesses and work out how to deal with this critical problem.
As things stand, this period should be used to encourage more Nigerian airlines to operate on the international routes that have been left for the foreign airlines, leading to huge forex flight from Nigeria. Now, only Arik and Medview Airlines operate on international routes, and this is not good enough.

Last year, Nigerians reportedly spent $5.6 billion on flights. This is a huge amount of money that should be paid to Nigerian companies instead of foreign airlines. This is the time for efforts to be concentrated in forging prosperity out of adversity.

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