What FG should do, by experts
Ghana appears to be leading in the race for the aviation hub in the West African region, despite Nigeria’s comparative advantage.Whereas both West African neighbours currently parade the “ease of doing business” initiatives of their governments, Ghana is making more progress with specific policies that are attracting more international airlines to Kotoka International Airport in Accra.
Experts are unanimous on the comparative advantages Nigeria has over Ghana in terms of passenger traffic, local airlines and infrastructure, among others. They are, however, concerned that the dormant state of the Nigerian aviation sector would adversely affect the economy.
Specifically, with foreign airlines fueling in Ghana and routing through the country, after picking passengers in Nigeria, ancillary revenues that would have gone to hotels and aviation agencies in Nigeria are now being made in Ghana. To reverse the trend, the experts called for aviation specific policies to stimulate activities in the sector and enhance growth for larger economic development.
Recall that the Ghanaian government over a year ago mapped out plans to ease means of doing business and attract foreign airlines to Accra. In partnership with the International Air Transport Association (IATA), the government slashed the price of aviation fuel by 20 per cent, remodelled the old Kotoka International terminal and subsequently removed Value Added Tax (VAT).
Today, several airlines operating on the West African coast find aviation fuel in Accra cheaper. South African Airways, for instance, now routes through the airport for direct flights to Dallas and Washington, in the United States. Meanwhile, on board these flights are over 50 per cent passengers from Nigeria.
The Local Operating Officer of one of the foreign airlines told The Guardian that the Ghana Aviation Authority (GAA) had gone steps ahead with the open doors and trade liberalisation policies.
“That is why everyone is finding Ghana attractive. Even our passengers find the Kotoka Airport more accommodating than what we have in Nigeria.“We have to give credit to the Federal Government with the new policy. To be honest, Nigeria is a very strategic traffic hub after South Africa, but still has a long way to go. I said that with all sense of responsibility as a Nigerian.Unfortunately, aviation business is high capital intensive with very little margin for profit. So, it is not done by sentiment. If the condition in Accra supports my business plan, why wouldn’t I go there?” the top official said on condition of anonymity.
Indeed, Nigeria commands many advantages to compete with established African hubs like Johannesburg (South Africa), Nairobi (Kenya) and Addis Ababa (Ethiopia) for the African air travel market.
For instance, Nigeria sits at the trigger point of the continent and the shortcut (about six-hour travel time) to the rest of the world. With 170 million plus population, internal movement of about 15 million passengers (just eight per cent of the population) is second highest after South Africa. Besides, no other country can boast of eight local carriers like Nigeria, airports as many as 26 scattered across the country and being the sixth largest producer of crude oil (for JetA1) in the world.
The Chairman of the Airline Operators of Nigeria (AON), Capt. Nogie Meggison, said there was no doubt about the huge potential at the disposal of the country, but this would continue to be potential until Federal Government comes up with a deliberate economic policy to help grow the aviation subsector.
Meggison said: “There is an urgent need for a deliberate economic policy that will eliminate the many challenges that adversely affect the sector in a bid to guarantee survival of domestic airlines in the country and to make Nigeria the hub for Africa.
“Following the air crashes of 2005/06, the Federal Government came up with a policy to ensure air safety in Nigeria. As a result of that singular action, today Nigeria has an excellent safety record of 93 per cent between 2006 and 2017. The country also secured the Category 1 Status and most of the scheduled airlines are currently IOSA-certified as a strong testimony of the country’s commitment to air safety.
“However, safety and economic policy go hand-in-hand. Where there is no financial profit for airlines, safety would be compromised. A clear economic policy for the survival of domestic airlines is very critical at this time. Absence of it has resulted over the years in the death of over 25 airlines in 30 years. Safety and financial economic policy must go hand-in-hand; as airline investors are in the business of aviation for the profit and can’t make profit without safety or have a safe airline without profit,” he said.
The airline operators said they could compete on the regional and international fronts but the Federal Government must provide an enabling environment that specifically addresses the crippling effect of multiple taxation, VAT and navigation aids, among others.
Specifically, they recommended the removal of VAT; review of the five per cent Ticket Sales Charge (TSC) to a flat rate (in line with the global best practice); and harmonisation of over 35 multiple charges which add a huge burden on airlines.
Others challenges identified are poor navigational and landing aids that limit operations to daylight for most; high cost and epileptic supply of JetA1; obsolete infrastructure that hamper the ease of doing business; and lack of consultations with airlines before the introduction of new charges and policies, among others.
IATA recently conducted a quick impact analysis of a potential removal of the domestic VAT of five per cent. “Using an average domestic airfare, it would reduce the ticket price by 4.39 per cent, which would mean a boost in domestic air traffic of 3.51 per cent or around 133,000 passengers a year together with the multiplier effect of additional turnover of revenue from other indirect businesses. For instance, the more landing and parking fees for the airports, hoteliers, car hire and airline support services, the more the spending to jump-start the economy out of recession.
“This growth in demand for domestic air travel and making Nigeria the hub for Africa can easily make aviation the fourth contributor to the economy and a major contributor to the GDP as well as create 200,000 new jobs for our youths through its direct and indirect link (airlines, airports, ground handlers and catering companies) and will increase revenues also for FAAN, NCAA and NAMA. This is a step that Ghana took recently and the benefits are there for all to see today as Accra is now the hub for West Africa,” Meggison said.The Chief Executive Officer of Air Peace, Allen Onyema, commended the Federal Government for the ease of doing business plan in the aviation business sector. But he urged the government to do more.