Ripples over aviation bail out disbursement formula

 Ripples over aviation bail out disbursement formula

After many months of agitation, the Federal Government made good its plan by releasing bail out funds to airlines. Among the beneficiaries are:  ground handling companies, travel agencies and other players in the aviation sector. But, it was not without acrimony as the development has triggered allegations of skewed sharing formula writes KELVIN OSA- OKUNBOR.

Storm is gathering in the aviation sector following the recent release of bail out funds to operators and players in the industry. The funds - N4 billion was released by the Federal Government as palliatives expected to cushion losses incurred since the outbreak of Corona Virus pandemic. Though experts had criticized the N4 billion packages as a paltry sum given the huge losses incurred by airlines. Ground handling companies, aviation fuel suppliers and others, the decision by the government to make good its promise has, however, received commendation from watchers of the sector. Prior to the release of the funds, the Federal Government had set up a committee consisting head of Aviation Agencies, officials of The Ministry of Aviation, The Central Bank of Nigeria and representatives of the umbrella body of indigenous carriers - Airline Operators of Nigeria (AON) to work out the template for disbursement. But, things fell apart two weeks ago when operators lashed at one another when  facts emerged on the breakdown of figures allocated to respective operators. According to regulatory sources, out of the N4 billion released by the government, scheduled operators got a lion's share of the funds compared to their non-scheduled counterparts. A source hinted that N4, 995,999,999.90 was disbursed to the aviation industry. According to a document obtained by our correspondent, ground handling companies, scheduled and non-scheduled airline operators; the National Association of Travel Agencies, aviation fuel marketers as well as airport car hire services partook from the fund. Scheduled operators received N3 billion  with five per cent deduction for the Federal Airports Authority of Nigeria, the Nigeria Airspace Management Agency and Nigeria Civil Aviation Authority.

The deductions stand at 50 per cent for Federal Airports Authority of Nigeria (FAAN) at N75m; NAMA 25 per cent at N37.5m and the NCAA also at 25 per cent for N37.5m. The total deduction from the share of scheduled operators stood at N150m thereby leaving the scheduled operators with N2.85bn.

Non-scheduled operators received a total amount of N1bn with a total deduction of N950m to aviation agencies including FAAN, NAMA and NCAA.

Ground handling companies, aviation fuel marketers and catering services got N233.33m each.

The National Association of Travel Agencies received a total of N196m with  N4m deduction.

Airport Car Hire Association of Nigeria received from the ministry, N100m.Some airlines with valid Air operators Certificate (AOC) are alleging that they have been sidestepped in the disbursement of the funds. Their grouse is hinged on the fact that they meticulously followed the process and submitted their request for the funds only to discover that a controversial 70-30 sharing formula was allegedly adopted.

An operator who confided in The Nation that the AON Board of Trustees (BOT) and the executive members disagreed over the sharing of N3 billion to some scheduled operators out of the N4 billion released.

Investigations reveal that some charter operators including who have valid AOC were yet to get anything from the funds and seem to be amiss as to what is actually happening.

Director of Press, Ministry of Aviation, James Odaudu who spoke on the matter  explained  the Ministry’s position stating that the bailout has been disbursed and it will go to airlines with functioning AOCs but is not aware of the finer details.

He said in a telephone conversation,” What I can confirm at this time is that it was released to individual airlines, the consideration is for individual airlines and airlines that have AOC . On whether charters were included he said,” I can’t confirm that but charter operators are also airlines let me confirm.”

Speaking on the development, a source said the process could have been handled more professionally to avoid the controversies it is generating among airlines as a list of qualified candidates should have been put out by the Ministry of Aviation. The source said such a list should include persons who were   in charge rather than shrouding the process in secrecy. Some airline operators have expressed displeasure over the sharing formula adopted for the distribution of N4 billion aviation bailout funds, saying it skewed the largess  in favour of few airlines.

The complainants, who operate smaller capacity, were displeased with the ratio 70:30 adopted between the schedule and non-scheduled carriers.

 Air Peace, Azman, Arik, Aero Contractors, Overland, and Dana Air were listed as the biggest beneficiaries. The Federal Government had, last week, shared the sum of N4 billion bailout funds among a total of 18 scheduled and non-scheduled carriers.

The special intervention was thrown open to all airlines with a valid Air Operating Certificate (AOC) and distributed according to the size of the carrier. The parameters, however, made some ‘dead’ airlines beneficiaries of the COVID-19 stimulus package.

An operator accused the executives of the Airline Operators of Nigeria (AON) of “making themselves” the biggest beneficiaries through the choice of parameters.

“I think we are all in these harsh realities together. It didn’t make any sense to some of us that we cannot get an equitable share of the palliative,” he said.

 It was gathered that the AON Board of Trustees (BOT) and the executive earlier had a heated argument over the sharing of N3 billion among six scheduled operators out of the N4 billion released to the carriers, while the remaining N1 billion goes to over 10 charter operators.

The Chief Executive Officer of Skypower Express Airways, a charter operator, Capt. Mohammed Joji, however, expressed gratitude to the Federal Government, especially the minister of aviation and Director-General of the Nigerian Civil Aviation Authority (NCAA), for “bringing relief to the industry”.Joji said the distributed sum was instrumental in offsetting salary backlog and pending insurance premiums.

“We are very grateful for the intervention. The minister and DG NCAA tried for us,” he said. Another of the beneficiaries said the intervention was a drop in the ocean of devastating effects of the pandemic on the air travel business.

 Though there is no consensus on how much was lost, estimates ranged the industry loss between N360b and N500b. In three months of lockdown, no fewer than 120 airplanes were parked, not yielding revenue, yet incurring maintenance cost.

The Chief Operating Officer of one of the airlines said without the heavy cost of maintenance, the airlines could have ignored the Federal Government’s bailout plan.

“The pandemic lock down was an unusual development that modern aviation did not foresee. That the whole world would be on lock down for months was unthinkable. Yet, it came. Airplanes that were programmed to be in the air 20 out of 24 hours a-day started sitting on the apron. That was devastating and huge losses to say the least. Someone has to bear the brunt, which no operator can afford. That is the rationale behind global requests for governments’ support so that aviation will not die.

 “In our case, C-check maintenance costs as much as $2 million per airplane because we have to fly them overseas. Most of the planes grounded during the lockdown are already due for C-checks. Think about it, the so-called N4 billion bailout can only repair four airplanes at the cost $2 million each. Isn’t that a drop in the ocean?

“We now see airlines closing routes all over the place, while some carriers have not even come back since local flight services resumed. Is that normal? I think the government needs to get serious with the plan to save the sector from imminent collapse. We are not asking for free money but a good loan deal that will support airlines through a mandatory maintenance schedule, restart and recovery process,” he said.

Speaking in an interview, Group Managing Director, Nigerian Aviation Handling Company (NAHCO) Plc , Mrs Olatokunbo Fagbemi , who commended the government for the bailout said ground handling companies looked forward to more .She said : “ Yes we were given about N70 million but if you look at how much we lost, it is not much but anything that is given is something that we are grateful for because it is better to have something than you have nothing. ‘But like Oliver Twist, as we are thanking the Ministry and the Federal Government, Central Bank of Nigeria (CBN) and the Minister of Finance, we are also hopeful that some more as we have told will be given to the ground handling companies,” On his part, Chairman of Air Peace, Mr Allen Onyema

Chairman of Air Peace and Vice Chairman Airline Operators of Nigeria (AON), Mr Allen Onyema said palliatives offered by the government will not solve the problems local carriers are grappling with because the N4 billion approved for carriers is only a temporary relief.

Onyema said even if the government had given N10billion each to individual airlines, it would only amount to a tip of the iceberg because the funds will be depleted within a short while.

Speaking in a telephone interview, he told The Nation that the major clamour by indigenous carriers was for the government to remove import duty on aircraft and spare parts as well as the abolition of Value Added Tax (VAT) on domestic tickets to reduce the huge cost and charges local operators were subjected to.

He said as much as the AON under its new leadership has engaged the Federal Government and the Ministry of Aviation on ways and means of assisting indigenous carriers, it is imperative for operators to devise an appropriate strategy to get the sector out of the woods.

Onyema said the new AON leadership has reached agreement with aviation agencies on how to recover the huge debts owed by local carriers, even as a repayment plan has been worked out to starve closure of airlines’ counters and other punitive measures.

He said rather than thinking of ways to engage the government, previous executives of the umbrella body of local carriers have engaged in scathing criticism of the government to cover up their indebtedness.

Onyema said the AON executive will not be dragged into controversies over how the N4billion approved by the government was disbursed because there is a template designed by the Minister of Aviation in doling out the package.

He clarified that no carrier was side tracked in the disbursement of the funds saying some operators were raising false alarm.

Onyema clarified that the criteria for doling out the bail funds was designed by the government following a template based on scale of operations and other factors.

He said: “I do not want to be dragged into the politics of how bail out funds were decided. The government had criteria that it used. It was not the job of Airline Operators of Nigeria. Anybody alleging that some airlines did not get whatever amount should feel free to ask such airlines.

“The new leadership of AON has been engaging the government constructively on how to fix problems of the industry to create a more enabling environment for airlines to do their business. The era of AON engaging in blind fight with the government is over. If airlines owe aviation agencies, they should approach such agencies on a repayment plan.  That should be the new thinking.”