As Accountable Manager/CEO of Dana Airline Limited, Mr. Obi Mbanuzuo bears the enormous task of ensuring the safe operation of every aircraft in the airline’s fleet and to return profit to shareholders. In this interview with Daily Sun in the airline’s head office in Lagos, Mbanuzuo highlights some of the challenges the airline has faced in its 10-year operational history in Nigeria.
According to him, staying on the path of profitability has remained an Herculian task for the local airline industry due to the absence of requisite infrastructure and the multiplicity of taxes paid to various service providers and regulatory agencies in the industry.
The Dana Airline boss, while seeking for the harmonisation of these taxes, however, bemoaned the absence of transparency and accountability by the various government agencies benefiting from the multiple taxes/charges paid by local airlines yearly.
“We are glad to fund them but there must be accountability. They have to show us what they are doing with our money. Yes, an audit is one of those things we will like to see done,” Mbanuzuo said.
National carrier project
To be honest with you, I am not worried about the idea of a national carrier coming in to challenge the local airlines. We don’t mind if another airline is coming; after all, more private airlines are coming. But I am perplexed because we don’t understand so many things about it. For the national carrier, we were told that it would be privately driven and that it will start flying in December 2018. But on the average, all
the airlines flying currently in Nigeria took about 18 months to prepare their entry. But we are now hearing that if everything is done properly it can take the national carrier 90 days to get an AOC (Air Operating Certificate) to operate in Nigeria. But what we are asking is, “who is behind the national airline?” We are hearing Qatar Airline. If that is the case, the next question to ask is, “is Qatar coming to lose money or are they coming to make money?” Now, will there be any special benefits that Qatar Airline will get that other operating airlines will not get? Those are the questions we will like to get answers to. Because it matters a lot for the airlines if a level playing field is created for the local airlines by the coming of the national carrier.
There are certain things we lack now in the industry whereby if the national carrier comes, they will lobby to get those things in place or removed for them. But it shouldn’t be removed for them alone; the local airlines should also benefit from such things. If that is the case, we are happy with the idea of a national carrier.
There are actually two major (monetary) items that local airlines are demanding that the Federal Government should remove to boost the growth of the local airline industry – the Value Added Tax (VAT) and the Ticket Sales Charge (TSC). There are no doubts other issues are plaguing domestic airlines, but these two appear to be of major concern to operators.
Let me start with the 5 percent TSC paid to the Nigerian Civil Aviation Authority (NCAA). Historically, the TSC came about because of the need to have some form of financial autonomy for NCAA as regulator. There was this fear about the man that pays the piper dictating the tune to him. So it became imperative that NCAA had to find an alternative source of funding outside the government to enjoy its independence. That was how it was agreed that NCAA had to take 5 per cent out of the money paid by passengers on every ticket sold by an airline. So it was a case of the Nigerian regulator finding a means of being self-financed, which is the standard practice worldwide. In those days when this policy came into existence, the airlines were very few and the passengers were also very few. But then, the 5 per cent TSC was also to be shared with other government parastatals like the Nigerian Airspace Management Agency (NAMA), the Nigerian Meteorological Agency (NIMET), Nigerian College of Aviation Technology (NCAT) and recently, the Accident Investigation Bureau (AIB). And so NCAA was made as the warehousing agent for that 5 per cent that other agencies also drew from.
But I must add that we the airlines are not convinced that NAMA and NIMET should draw from the TSC since we are also paying them for the services they render to us. It amounts to multiple charges for NAMA to go ahead and impose its own new navigational and over-flying charges on airlines even while it was also drawing from the 5 per cent we pay to NCAA. So the argument is that maybe the 5 per cent passenger charge was right say 15 years ago, but in terms of the present day worldwide practice, it is no longer practicable because it distorts the market. Why does it distort the market? I tell you it does because currently, airlines operating in Nigeria are not given the incentives to charge more or less on passenger fares. Because we are currently not competing on products or service, but we are competing on price. You sell a ticket for N20,000, I also sell a ticket for N20,000. So if I sell a ticket for N20,000 to a passenger, that means 5 per cent of that amount will go to NCAA. That, therefore, means that if, for instance, I bring in the best aircraft in the world today to Nigeria and also bring in the best services in the world to Nigeria, can I sell that service for N50,000 to a passenger? Maybe I could! But then, I also have to pay 5 per cent of that amount to NCAA. And that means my liability is also rising. So I am not incentivised to bring in the best aircraft and services with a view to increasing fares. And you also have to consider that that 5 per cent TSC is skewed in such a way that some people are drawing from it that we already feel they shouldn’t be drawing out of it because we are paying them.
So what we are saying is that the TSC is no longer what we need in Nigeria because it is acting as a disincentive to local airlines in particular. Aviation in Nigeria is a very complicated business. The local airlines are weak because they are not making enough money. Ghana, just few years ago, shifted to per passenger charge and that is what we want because that is what is currently obtainable world over so that an airline can charge more or less per passenger even while supporting the financial autonomy of the regulator.
What’s per passenger charge
What is obtainable in per passenger charge is that the regulator fixes an amount like N500 on each passenger that flies on an aircraft. The figure is fixed. So this doesn’t depend on how much the airline decides to sell its tickets to its passengers because airlines, for various reasons, can decide to sell higher or lower. The NCAA, therefore, will not be taking TSC based on a percentage of the fare on a ticket the airline sells. Yes, there is the usual talk of the impact of inflation on earnings. But what is usually done is for airlines and regulators to sit down and address such issues. Look, the airlines have to grow and for that to happen they must earn money and make profit. But because of this 5 per cent charge they can’t; the 5 per cent is like an overcharge that weighs down on the airline. In fact, there is so much money already with these aviation agencies and that is why they don’t collapse. You hear of N6 billion corruption case in a particular aviation agency and it doesn’t collapse?
So at this stage, what we want is for us to sit down and talk with these government agencies and know how much they make. We are glad to fund them but there must be accountability. What we have now is a situation where NCAA is benefiting for doing nothing. There is problem in the system and you know why? These agencies have been operating without a board. They have also not been audited nor have they published an audited account for the public to see for more than three to five years. If they do, then we will know some of the things they are doing and not doing; they will be made to sit up. They have to show us what they are doing with our money. Yes, an audit is one of those things we will like to see done.
Nigeria no doubt takes pride in acting like the big brother to other African countries. Whenever things go wrong, Nigeria steps in to assist. But from the local airline point of view, we know that some of the things we do as a country do not favour us. For instance, we know that we have the biggest market in Africa in terms of passenger traffic. And a lot of foreign airlines come into Nigeria because they know how important the Nigerian market is for them. But I think that a lot of policies we are implementing in Nigeria are hurting the local airline industry like the Yamoussoukro Decision, which liberalised the continent’s aviation market for 54 countries. In essence, if you look at the European market, the German Lufthansa Airline can decide it wants to fly from Dublin, Ireland to Paris, France, which is nowhere close to their base in Frankfurt, Germany, and all they need to do is to sit down and discuss and agree on the slots with the countries involved and no one will be complaining.
The Yamoussoukro Decision was meant to do the same thing for Africa whereby a Nigerian airline can fly from Accra, Ghana, to Dakar, Senegal, without any hitches. But I can tell you that Nigerian airlines are not finding it easy to do that. While our government would make things easy for other African countries to fly into Nigeria, they don’t do the same for us. Ghana is the only exception. But the other countries will do everything to frustrate the Nigerian airline because they are seeking ways to protect their own airline. Some will impose higher charges on you to scare you away. So you now find a situation where the Nigerian government will be granting multiple entry points to international airlines like Ethiopian Airline without caring if it hurts the local airlines. But we are saying “No!” to this kind of policy.