FG to raise airlines’ capital base to N2bn

The Federal Government may ask domestic airlines to recapitalise in view of the financial dire straits the operators have found themselves. Experts confirmed that the nation’s carriers are weak and lack the capacity to operate profitably, hence the need for them to become healthy is imperative through recapitalisation.
A presidency source confided in New Telegraph that the government was planning to raise the capitalisation base for Nigerian operators to between N1.5 billion and N2 billion in view of the devaluation of the naira and based on the high capital intensive nature of airline business.
This is not the first attempt by the Federal Government to review the capital base of airlines as it had in 2004 through the then Minister of Aviation, Mallam Isa Yuguda, given indigenous airlines designated to operate along the West Coast and on international routes 24 months to recapitalise to the tune of N500 million and N1 billion respectively. Yuguda said the increase in the capital base of airlines was in line with international requirements for airlines flying international routes.
The policy then helped to weed out those operators described as very weak, while serious one continued with their services after they met the condition.
Chairman, Committee on Aeronautical and Non-Aeronautical and Passenger Charges in Nigeria, Mr. Ahonsi Unuigbe, told New Telegraph at the launch of Aviation Commits Initiative that inappropriate business model of most domestic airlines has done incalculable damage to them. According to him, the minimum capitalisation requirement for domestic airlines is only N500 million ($2 million), which at today’s exchange rate, barely covers the cost of effectively operating and maintaining one aircraft and therefore does not ensure a fleet size that allows for economy of scale.
Ahonsi, whose committee was set up by the Minister of Aviation, Mr. Osita Chidoka, to look for ways to cut down multiple charges imposed on Nigerian airlines said the report submitted to Chidoka a month ago looked at also a prevalence of inaccurate computation of statutory charges and non-remittance of the passenger charges collected by airlines to appropriate aviation authorities.
According to him, “From the tickets analysed, some airline operators deliberately charge as high as nine per cent of base fare as Ticket Sales Charge (TSA) as against the statutory five per cent, expected to be remitted to the government through the Nigerian Civil Aviation Authority (NCAA). “One has to wonder the motivation for this act, and if the statutory charge in question will be appropriately remitted to the relevant government agency or rather constitute part of the profitability of such airlines at the expense of both the passengers and government,” he stated.
Unuigbe added that there is also a prevalence of poor service to passengers in the face of non-enforcement of the passenger bill of rights, which entitles passengers to several means of redress, in the event of any infraction.
He stated that the committee identified some of the factors responsible for the disparity in the aeronautical and passenger charges across countries and regions to include inadequate state of support infrastructure; size of airspace; macro-economic environment; continuous changes in government policies and political interference.
Others are absence of a national carrier; inadequate business models and absence of transparency among stakeholders. According to him, in the light of the findings, the committee articulated in the report, far-reaching recommendations to address these issues holistically.
He commended the minister on the laudable initiative as we well as all his other creative and commendable efforts at repositioning the industry to becoming a major aviation hub in Africa and for having the political will to pursue the much needed reform in the sector.
Source:newtelegraphonline.com