September 05, (THEWILL) – Stakeholders in the Nigerian aviation industry have said that implementation of the safety threshold handling rates as agitated for by the Aviation Ground Handling Association of Nigeria (AGHAN), the umbrella body of ground handling companies in Nigeria, is capable of turning around the economy, ANTHONY AWUNORwrites
Ground handling operations are a critical aspect of the global aviation industry. Their contributions to the safety, security and economic development of the global aviation industry cannot be over-emphasised. The sub-sector, which hardly gets recognition, is pivotal to the retention of safety and security in the aviation industry. While most aviation countries around the world have come to realise its importance, the same cannot be said of Nigeria where the sub-sector is constantly relegated to the background in government policies and roadmap for the entire sector.
The Federal Government, through the Ministry of Aviation, has in recent time initiated and implemented numerous waivers, such as the customs duties on aircraft acquisition and spare and procurement, easy access to foreign exchange and removal of Value Added Tax (VAT) for the airline sub-sector, but, regrettably, the same cannot be said of ground handling companies that continue to groan in a stifling operating environment like Nigeria. The ground handling companies, no doubt, have contributed materially to the growth of the sector in Nigeria. This has been done in the interest of the nation, but this effort is yet to be adequately balanced with economic returns, especially over the last two decades.
The country is not deriving optimal economic benefits from international civil aviation, despite the obvious fact that the Nigerian aviation market is a force to reckon with in Africa because of the size of the economy, population and the purchasing power of the middle class.
As it is today, the ground handling companies; Skyway Aviation Handling Company (SAHCO) Plc, Nigerian Aviation Handling Company (NAHCO) Plc, Swissport Handling Company and Precision Aviation Handling Company Limited (PAHCOL) are surviving on very low operating profits.
They cannot afford to invest in innovative technology and modern equipment, recruit/retain quality manpower, pay living wages to staff and carry out efficient training for required numbers of technical and airside personnel as they would have wanted to do. Players in the sector recently warned that if these continue unrestricted, safety procedures may become a reactive exercise, instead of a proactive measure. They observed that while the ground handling companies are fully committed to providing safe and secure operations, diminishing revenues due to low tariffs combined with increasing cost of doing business would continue to put material pressure on safety and security, as well as the long term sustainability of the ground handling companies.
The last time the ground handling tariff was reviewed in Nigeria was in 1999. At the time, a dollar was about N22 and a return economy ticket to London from Lagos was less than N50,000. Today, the high inflation rate and cost of living index have rubbished the stagnant handling rates. Players in the sector said that for the ground handling companies to continue in business, there should be a safety threshold handling rate that is not primarily for profit making, but for sustainability of the business.
Available statistics indicate that the Federal Government and the handling companies are losing an estimated $28,350,000 (about N14, 175 billion) annually to inappropriate handling rates. Further investigation indicated that no fewer than 45 narrow body aircraft on regional and international routes, which include Boeing B737, Airbus A320, ER 135 and ATR aircraft, are handled daily at the nation’s international airports by the ground handling companies.
For a wide body aircraft like the B767, A330, B777 and B747, at least 20 flights are handled daily by the ground handling companies.
Dr Sam Oduselu, the Pioneer Chief Executive Officer (CEO) of Accident Investigation Bureau (AIB) in an interview declared that the rates by ground handling companies were due for a review both locally and internationally.
Oduselu said the outbreak of the COVID-19 pandemic had further worsened the operating environment for the sector, but he noted that the ground handling companies were adversely affected with the challenge, having remained stagnant in its rates for over 22 years, despite the rise in equipment and fall of the naira against major currencies.
He lamented that the handling rates in Nigeria remained the cheapest in Africa, in spite of the acquisition of state-of-the-art equipment by the handling companies.
“You will see that the rates here are the cheapest and with such a ridiculous rate regime, it will be difficult for handling companies to survive if we continue to operate under this regime,” he said.
Aside from the loss to the handling companies, he also explained that the Federal Government was suffering economic revenue as over 50 per cent it ought to earn through the sub-sector were lost. He added, “If you look at it, the Nigerian Civil Aviation Authority (NCAA) is the policeman of the industry. Even with the deregulation of the sub-sector, I think it becomes expedient and extremely important for the regulatory agency to intervene and ensure the commencement of new handling rates.
“The operators too should try to go through the aviation committees of the Senate and the House of Representatives so that whatever it is that they are getting will be backed up by the law and it will be part of the regulation in the industry. Just as you know, there is no Nigeria aviation, but a global aviation industry. For you to talk of profit, you must first of all have the machinery that you need to do the job and with what they are charging now, they won’t be able to have all that.”
Mr Basil Agboarumi, the Managing Director of SAHCO Plc, said that unlike the past when the two leading ground handling companies were owned by the government and a consortium of airlines, the companies were now owned 100 per cent by investors and shareholders, with expected profit at the end of each year. He lamented that with the current rates charged by the handling companies, there was no way investors could take appreciable dividends of their investments at the end of each year.
Although, he agreed that the sub-sector was deregulated, which gives handling companies the leeway to charge any rates they deemed good for their businesses, but noted that the NCAA in collaboration with the handling companies could set up a safety threshold handling rates for operators, which each could not go below.
He also regretted that inflation in the country had further dealt a huge blow to the operating environment, stressing that the value of naira had further collapsed in the international market.
“The fact is that inflation is coming in and it’s not helping us to do our business. Like the Aviation Ground Handling Association of Nigeria (AGHAN) has always said, even the International Civil Aviation Organisation (ICAO) has told you the steps to take before you effect any change in prices. We are law abiding business people, so we have to follow the processes and procedures. We are engaging with the public and we are educating the people. We have been in some circle whereby some of the airlines said publicly that a review of the handling rate was unavoidable.
“Between 2020 and now, we have seen a major leap in terms of the forex that used to be N350 to now over N500 to a dollar and we are a heavy consumer of forex. Nobody wants to hear if there is a failure in ground handling services. So, we have the duty to provide not just ground handling services, but also the best ground handling services that can compete with any other in the world. To do that, we need the right equipment. Ground handling equipment, personnel and certification are changing. So, we have to change with developments around the world. In fact, you have to pay the right salaries and remuneration to attract and retain your best hands.”
Mrs Olatokunbo Fagbemi, the Group Managing Director, NAHCO Plc, said the major challenges facing the ground handling company were static and declining rates, while foreign exchange and cost of living index had continued to climb up.
She, however, said that despite the poor handling rates, NAHCO, for instance, had unswervingly continued to invest in modern equipment to improve its services.
For instance, Fagbemi said that a few weeks ago the company took delivery of dollies Aircraft Cooling System (ACU) and aircraft Ground Power Unit (GPU) from Bombelli in Italy, while tow tractors are being expected in September. She said these were tailored towards sustaining safety and security of equipment and the flying public, which she vowed that the company would not compromise at any time.
“In moving forward, we have to invest in our Ground Support Equipment (GSE), facilities and our people. We have done this and we will continue to do it, but within these astronomical changes that have not been matched with the recent changes, we need to review our rates.
“Can we continue to do that and survive as an organisation? The answer is no. Can we continue to offer the same level of services that we have been offering? The answer is no. We have done a five-year plan of where we need to invest; we will continue to do this. We know where the challenges are,” she said.
About the Author
Anthony Awunor, is a business correspondent who holds a Bachelor of Arts Degree in Linguistics (UNILAG). He is also an alumnus of the Nigerian College of Aviation Technology (NCAT), Zaria Kaduna State. He lives in Lagos.
