CHAPTER ONE
INTRODUCTION
1.1 Background To The Study
Air transportation in Nigeria like other African countries was a child of necessity during the British colonial rule as the need to reach out to other colonies including Nigeria by the British government became imperative. Nigeria just as other African countries created its government-owned national carrier to serve air transportation need of the country as well as that of other continental and intercontinental countries.
Being statutorily the national carrier and sole domestic passenger carrier (Daramola, 2007), the airline had an overwhelming competitive advantaged position conferred on it by statute and commercial monopoly (George, 1990), and had its fair share of the air transportation market both at the national and international level; and flourished at some point as a reliable airline with the best of manpower support. However, that momentum could not be sustained over a long period of time as it soon began to have challenges which led to its demise.
The Nigerian Government, after the demise of the national carrier in 2004, has been toiling with the idea of a new national carrier. There seem to be incongruence as to the relevance or otherwise of another national carrier. More so, as some think it is out of vogue, others feel that the issues which led to the demise of NAL if not properly addressed may also lead to the failure of a new one.
Aviation sector plays a vital role in facilitating economic growth and development, and provides numerous economic and social benefits. The air transport (aviation) industry consists of activities that directly involve transporting people and goods by air, which includes airlines, airports and general aviation services. Some of the main economic impact of aviation arises from its ability to generate employment opportunities, wealth and effectively supporting global businesses and tourism and offers countries, especially developing ones, the opportunity to facilitate trade and enable linkages in the global supply chain. According to Air Transport Action Group (ATAG, 2014) the global economic impact of aviation (direct, indirect, induced and catalytic) is around $2.7 trillion, equivalent to 3.5% of the world’s gross domestic product (GDP) and the aviation industry generates 62.7 million jobs around the world. This suggests that aviation forms a very significant part of the global economy through generating jobs directly and indirectly and providing a transportation platform for global businesses to grow. In addition, it has catalytic effects in areas such as trade, tourism and consumer welfare. Therefore, its role in facilitating economic growth in developed and developing countries cannot be overemphasized.
The aviation industry generated 6.9 million jobs and $80.5 billion in GDP in Africa (ATAG, 2014). During the 2010-2015 period, Africa was declared the third-fastest growing region in the aviation world (Armoo, 2015). Globally, including the tourism impacts, Africa accounts for 12% of the jobs and 3% of the GDP supported by the aviation industry in 2012. From 2011 to 2012, African airports witnessed a 7% growth in passengers handled and of the top 20 African airports, three (3) are based in South Africa, and another three (3) in Egypt, making these two countries the biggest air transport markets in African continent. The aforementioned statistics suggest the enormous economic benefits of aviation in terms of employment and contribution to GDP of African countries’ economy, and hence provides an added incentive for African governments to reformthe sector to make it more efficient and responsive to travelers’ requirements.
On the contrary, the aviation industry in sub-Saharan Africa has been described as comparatively small and young by the International Civil Aviation Organisation (ICAO). Africa has been riddled with poor safety records and a lack of liberalized skies within the continent despite the efforts of Yamoussoukro Decision of 1999 to liberalize international air travel within Africa. Also, widespread political instability has not helped with the industry’s growth. Despite these challenges, there are many prospects and opportunities that would abound should the continent overcome these challenges. The imminent emergence of the middle-class income earners in the continent can only help boost the aviation industry. In light of the forgoing, this paper is set up to uncover the collapse of the indigeneous airlines in Nigeria
1.2 STATEMENT OF THE PROBLEMS
The aviation industry in Nigeria has been facing a lot of challenges since its inception in 1920. These challenges range from poor safety and security measures, inadequate funding and resources, obsolete and inadequate airport infrastructure, inadequate skilled manpower,lack of enabling and regulatory frameworks, distance and limited connectivity, and to high cost of operations and maintenance.
Safety and security challenges: Safety is one of the most pressing challenge facing the aviation sector in Nigeria. There have been a series of many plane crashes and near collisions and emergence landings in Nigeria over the last two (2) decades. The first plane crash in Nigeria was on November 20, 1969 when Nigeria Airways BAC VC 10 crashes on landing killing 87 on board and the second one on January 22, 1975 when Royal Jordanian Airlines flight 707 carrying 171 Nigerian Muslims returning from Mecca and 5 crew men died in the crash in Kano, Nigeria. Since then, there have been many other crashes and emergency landings in the country. The frequency of plane crashes stems largely from inconsistency in the implementation and enforcement of internationally accepted safety standards and practices in the country. These include inadequate infrastructure, use of obsolete airport facilities, human error, poor emergency response guidelines, procedures and capabilities to combat air among others.
Inadequate funding and resources: A major impediment to Aviation development in Africa in general and Nigeria in particular is the issue of funding. Most African governments run huge debt portfolios which makes increased borrowing to fund aviation development low on their priority. 33 out of the 40 Countries classified as highly indebted poor countries (HIPC) are in Africa. Aviation business is highly capital intensive and requires huge amount of investment in aircraft, spare parts and other infrastructure requiring massive capital outlay(Chattopadhyay, 2015).The capital expenditure is not only limited to equipment alone but to the training of requisite manpower such as pilots, cabin attendants, engineers, store-keepers.
Obsolete and inadequate airport infrastructure: The air transport industry in African countries, Nigeria included faces various challenges including poor airport infrastructures, lack of physical and human resources, limited connectivity, and lack of transit facilities. Although substantial progress has been made during the past decade, Africa still lags behind other regions in terms of “soft” and “hard” infrastructure.Many airports in Nigeria are in a state ofcomplete disrepair, lacking basic infrastructure such as adequate runway capacities and terminal facilities are often lacking at major airports in the country (Phillips, 2015).
Inadequate skilled manpower: For the past several years a major obstacle in Africa’s inability to meet its safety oversight functions in aviation industry is the lack of requisite competent manpower(Pam, 2013). According to the World Bank, Africa will find it very challenging to produce the number of development professionals needed to sustain economic growth in the aviation sector without a serious change in the continent educational and labour policies. A conservative estimate from Boeing in 2012 dictates that Africa needs to provide an additional 725 pilots and 810 aircraft engineers every year for the next 20 years to be able to man its aviation sector planned capacity. Nigeria’s’ population is 18% of Africa’s, and thus, this means that the country is expected to provide the appropriate 18% of the manpower. Failing to meet this target means Africa will have to mitigate the shortfall by employing expatriates. These will eventually repatriated both the acquired skills and revenue back to their home countries to the detriment of this continent. Nigerian Civil Aviation Authority (NCAA) has recently reported that most Nigerian airlines prefer employing foreign pilots, to the detriment of local pilots who are often also well qualified.
Lack of enabling and regulatory frameworks:The existence of growth-hindering policies and regulations, such as multiple taxation and poor consumer protection laws, have been major challenges to the Aviation sector in Nigeria (Phillips, 2015). The bottom line of the problems facing Aviation Industry in Africa in general and Nigeria in particular lies in the variance between policy formulation and the government’s political will to implement such policy(Omoleke, 2012).
Another major concern in the Nigerian aviation legal framework is the rigidcontrol of the supervising Ministry. Nigeria Aviation Management Agency (NAMA) for instance, is under the supervision of Ministry of Aviation as far as its functions and responsibilities are concerned, even though by law, it is a corporate body which can sue and be sued on its corporate name. Again, this is one of the problems generally militating against efficient delivery of social services by the State-owned enterprises. This assertion lends credence to Omoleke (2008) when he remarked that the Agencies, Commissions, Corporations and other parastatals are not given free hand to operate their organizations, instead, they are tied to the whims and caprices of the supervising Ministries. He added that such government policy tends to frustrate and kill the managerial initiatives of the Chief Executives of such Enterprises.
High cost of operations and maintenance: There are so many costs incurred in aviation business, among which, cost of aviation fuel is the highest expenditure item for airline carriers. For instance, in 2008, based on a sample of 45 major global airlines, fuel represented 32.3% of the total operating costs (IATA, 2010). In Africa, aviation fuel is about 20% more expensive, when compared with other continents according to 2015 Annual Review of International Air Travel Authority. Also in Nigeria, experts say the high cost of aviation fuel also known as JET A1, cost airlines operating in the country about 40 per cent of their income, adding that the high cost of aviation fuel has not only make the cost of operation high, ithas also make it impossible for local airlines to break even.In a widely circulated publication the NCAA reported that Nigerian airlines spend about USD$16.3 million every year on pilot recurrent simulator training. Approximately 70% of this cost is expended on acquisition of relevant visas, flight tickets, subsistence allowances, hotel accommodation and other sundry expenses.
Other challenges facing airlines are multiple entries granted to well-funded and efficiently managed international airlines by the Federal Government Nigeria through the Ministry of Aviation, poor management, lack of enough aircrafts in their fleet to operate their scheduled routes, lack of maintenance facilities in the country where domestic airlines can carry out major checks such as C and D instead of taking their aircraft abroad, inability to access funds for expansion of their airlines, double digit interest rate paid on loans from financial institutions, lack of feasibility study before embarking on airline business, lack of financial discipline, management indiscipline, introducing chargesthat cannot be explained and government policies, which often a time somersault thereby affecting the operations of airlines.
1.3 Aims and Objectives of the Study
The main thrust of this paper is on the Collapse Of Indigenous Airlines In Nigeria 1990-2018
The specific objectives are thus:
1 to investigate the root causes of the collapse of Nigerian Airline
2 to analyze the socio-economic impact of the Nigerian airline
- to examine the implication for the collapse of the Nigerian airline
4 to investigate the Current State of the Nigerian Aviation Industry
1.4 Significance of the Study
It is hoped that this study, while serving as a reference material for esearchers, will equally elicit intellectual debate and contributions for solving the controversies generated by the issue of collapse of the Nigerian airline.
1.5 Scope of the Study
This work is on The Collapse Of Indigenous Airlines In Nigeria, it was restricted to the period of 1990-2018.
1.6 Research Questions
- What are the root causes of the collapse of Nigerian Airline?
- What are the socio-economic impact of the Nigerian airline?
- What are the implication for the collapse of the Nigerian airline?
- What are the Current State of the Nigerian Aviation Industry
1.7 Operational Definition of Terms
NCAA : Nigerian Civil Aviation Authority (NCAA) is the regulatory body for aviation in Nigeria
Aviation: Aviation means all forms of flying, as well as what aircraft is actually used for. It is divided into two principal areas – military aviation and civil aviation. While military aviation deals with the use of aircraft by military forces, either as a weapon or as a platform from which other weapons are launched; civil aviation deals with the organisation and use of aircraft for commercial transportation.
Air Traffic Control (ATC): Air Traffic Control, a function performed by NCAA, involves keeping surveillance on aircraft from one airport to another.