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Ripples over aviation bail out disbursement formula

AStorm is gathering in the aviation sector following the release of bail out funds to operators and players in the industry. The funds – N4 billion – was released by the Federal Government as palliatives expected to cushion losses incurred since the outbreak of coronavirus pandemic.

Though experts had criticised the package as a paltry given the huge losses incurred by airlines ground handling firms, aviation fuel suppliers and others, the decision by the government to make good its promise has, however, received commendation from watchers of the sector.

Prior to the release of the huge cash, the Federal Government had set up a committee consisting head of aviation agencies, officials of the Ministry of Aviation, the Central Bank of Nigeria (CBN) and representatives of the umbrella body of indigenous carriers – Airline Operators of Nigeria (AON) – to work out the template for disbursement.

But, things fell apart two weeks ago when operators lashed at one another when facts emerged on the breakdown of figures allocated to operators. According to regulatory sources, out of the N4 billion released by the government, scheduled operators got a lion’s share  compared to their non-scheduled counterparts.

According to a document obtained by our correspondent, ground handling firms, scheduled and non-scheduled airline operators; the National Association of Travel Agencies, aviation fuel marketers as well as airport car hire services partook in the sharing of the fund. Scheduled operators received N3 billion with five per cent deduction for the Federal Airports Authority of Nigeria (FAAN), the Nigeria Airspace Management Agency (NAMA) and Nigeria Civil Aviation Authority (NCAA).

The deductions stand at 50 per cent for FAAN at N75million; NAMA 25 per cent at N37.5million and the NCAA also at 25 per cent for N37.5million. The total deduction from the share of scheduled operators stood at N150million, thereby leaving the scheduled operators with N2.85billion.

Non-scheduled operators received a total amount of N1billion with deductions amounting to N950million to aviation agencies, including FAAN, NAMA and NCAA.

Ground handling firms, aviation fuel marketers and catering services got N233.33million each.

The National Association of Travel Agencies received N196million with  N4million deduction.

Airport Car Hire Association of Nigeria received N100million. Some airlines with valid Air operators Certificate (AOC) alleged that they were sidestepped in the disbursement of the funds. Their grouse is hinged on the fact that they meticulously followed the process and submitted their request for the funds only to discover that a controversial 70-30 sharing formula was allegedly adopted.

An operator told The Nation that the AON Board of Trustees (BoT) and the executive members disagreed over the sharing of N3 billion to some scheduled operators out of the N4 billion released.

Investigations have shown that some charter operators, including those who have valid AOC, were yet to get anything from the funds and seem to be amiss as to what is actually happening.

Director of Press, Ministry of Aviation, James Odaudu  confirmed that the bailout had been disbursed and that it would go to airlines with functional AOCs but that he was not aware of the other details.

He said: ”What I can confirm at this time is that it was released to individual airlines.The consideration is for individual airlines and airlines that have AOC.”

On whether charters were included, he said: ”I can’t confirm that but charter operators are also airlines. Let me confirm.”

Speaking on the development, a source said the process could have been handled more professionally to avoid the controversies it is generating among airlines as a list of qualified candidates should have been put out by the ministry.

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The source said such a list should include persons who were in charge rather than shrouding the process in secrecy.

Some airline operators have expressed displeasure over the sharing formula adopted for the distribution of bailout funds, saying it  skewed the cash 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.

Air Peace, Azman, Arik, Aero Contractors, Overland, and Dana Air were listed as the biggest beneficiaries. The Federal Government had, last week, shared N4 billion bailout funds among 18 scheduled and non-scheduled carriers.

The special intervention was thrown open to all airlines with a valid 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 accused the executives of the 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 BoT and the executive earlier had a heated argument over their share among six scheduled operators, out of the amount released to the carriers, while the balance went 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 from N360billion to N500billion. In three months of lockdown, no fewer than 120 airplanes were parked, not yielding revenue, yet incurring maintenance costs.

The Chief Operating Officer of one of the airlines, who refused to be named, said without the heavy costs 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.

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In an interview, Group Managing Director, Nigerian Aviation Handling Company (NAHCO) Plc , Mrs Olatokunbo Fagbemi , who commended the government for the bailout said ground handling firms looked forward to more. She said: “ Yes, we were given about N70 million but if you look at how much we lost, it is not much but anything that is given is something that we are grateful for because it is better to have something than you have nothing.

“But like Oliver Twist, as we are thanking the ministry and the Federal Government, Central Bank of Nigeria (CBN) and the Minister of Finance, we are also hopeful that some more as we have been told will be given to the ground handling companies,”

On his part, Chairman of Air Peace, Mr Allen Onyema Mr Allen Onyema said palliatives offered by the government would not solve the problems local carriers were grappling with as it only a temporary relief.

Onyema, who is AON Vice Chairman, said even if the government had given N10billion each airline, it would only amount to a tip of the iceberg because the funds would be depleted within a short while.

In a telephone interview, he told The Nation that the major clamour by indigenous carriers was for the government to remove import duty on aircraft and spare parts as well as the abolition of Value Added Tax (VAT) on domestic tickets to reduce the huge cost and charges  operators were subjected to.

He said as much as the AON had engaged the Federal Government and the Ministry of Aviation on ways of assisting indigenous carriers, it is imperative for operators to devise an appropriate strategy to get the sector out of the woods.

Onyema said the AON leadership had reached an agreement with aviation agencies on how to recover the huge debts owed by local carriers, even as a repayment plan had been worked out to stop closure of airlines’ counters and other punitive measures.

He said rather than thinking of ways to reach out to the government, previous executives of the umbrella body of local carriers had engaged in scathing criticism of the government to cover up their indebtedness.

Onyema said the AON executive would not be dragged into controversies on how the bail out was disbursed because there is a template designed by the Minister for doing so.

He claimed that no carrier was sidetracked in the disbursement of the funds, saying some operators were raising false alarm. He said: “I do not want to be dragged into the politics of how bail out funds were decided. The government had criteria that it used. It was not the job of Airline Operators of Nigeria. Anybody alleging that some airlines did not get whatever amount should feel free to ask such airlines.

“The new leadership of AON has been engaging the government constructively on how to fix problems of the industry to create a more enabling environment for airlines to do their business. The era of AON engaging in blind fight with the government is over. If airlines owe aviation agencies, they should approach such agencies on a repayment plan. That should be the new thinking.”

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