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Govt Officials Spend N300b Annually on Aircraft Charter

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Vice President Namadi Sambo

By Chinedu Eze

“It has been revealed that top government officials at the Federal and state levels, including Ministers, President’s aides, governors, Senate and House committees, Speakers of State Houses of Assembly and others expend over N300 billion annually on aircraft charter.

A confirmed insider told THISDAY on Monday that charter operations in Nigeria is a multibillion Naira business that effectively competes with that of scheduled commercial operation and   involves largely foreign registered aircraft with foreign registered crew, although most of the aircraft are owned by Nigerians.

With average of about $6,500.00 (N1, 01400) for one hour charter, the charter operators rake in huge amounts of revenue every month from mainly government officials and some Nigerian businessmen and women.

It was also revealed that although this subsector of air operation in Nigeria generates billions of Naira annually, many of them do not pay the stipulated charges, Value Added Tax (VAT) and corporate tax to the Nigeria Civil Aviation Authority and government.

THISDAY learnt that according to regulations, before an aircraft is allowed to operate commercial charter in Nigeria,  it must be under an airline that has Audit Maintenance Organisation Certificate (AMO) and Air Operators Certificate (AOC).

AMO would ensure that the airline has the competence to maintain the aircraft it is flying, while the AOC would ensure that the aircraft is competently managed, but indications show that most of the aircraft that operate as charter in the country were acquired as privately owned and therefore do not pay the necessary charges, VAT and corporate tax to government.

For the aircraft to operate charter services in the country it must be deregistered of its foreign number and then be registered in Nigeria and the cockpit crew must hold valid Nigeria licence,  and the aircraft must be under a commercial operator, but many of these aircraft owners do not abide by these conditions.

A source said that if these aircraft are managed by an airline that meets the aforementioned conditions, “the commercial operator ensures that tax, VAT and other charges are paid when they are due. Currently government is losing so much money on VAT, corporate tax and 5 per cent charge to NCAA, which are lost from those privately owned aircraft that are used for commercial charter services.”

But the spokesman of the Nigeria Civil Aviation Authority (NCAA), Sam Adurogboye, told THISDAY on Wednesday that all aircraft operating in Nigeria meet the conditions set out by the regulatory body, adding that “every airline has a licence that specifies  its type of operations and are guided accordingly.”

He also said that private operators pay appropriate navigational charges like landing, parking etc. and that owners of private jets are not allowed to run commercial services, adding that    doing so would be regarded    as an aberration if detected.

“Owner of private jets are required to put their jets under an AOC holder for management, i.e., maintenance, insurance and crew, and accordingly held responsible for any violation in the process of its operations.”

But the source also told THISDAY, “Nigerians will travel overseas, buy aircraft, register it overseas, bring it to Nigeria in the pretext that it is leased and use it to operate commercial services without paying anything to government.”

The source also adds, “Crew members must correspond with the country of registry; however, these aircraft were not financed by any foreign financial institutions, they were bought by Nigerians, so most of them ought to be registered in Nigeria.”

Depending on sitting capacity and aircraft type, an aircraft could be chartered for average of $6,500 for one hour in addition to waiting charge, which includes return flight.”

Source:Thisday Newspaper

The Rigmarole in Nigeria’s Aviation

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By Simon Tumba
Early this month I was watching Quest Means Business on CNN, and the story was on how Ryan Air, Europe’s second largest regional carrier was making efforts to cut cost, by cajoling its cabin crew into losing weight, which was aimed at reducing the weight on the aircraft, and further cut the cost of the airline’s operation. More cost cutting measures include, using less ice in the drinks served passengers and cutting the size of inflight magazines.
The lower the weight carried aboard the aircraft, the lower the fuel consumption, hence, the lower the airline’s cost of operation, of which fuel constitutes about 40 per cent of an airline’s operating costs. A reduction in the cabin, any cabin crew weight, from 100 kilos to 50 kilos, would save the carrier about GBP 5,000 monthly or annually.
But what got me thinking was another angle to the story that Ryan Air had planned to remove the arm rests to its seats in order to reduce weight of the aircraft; all in a bid to cut cost! The airline, last year, removed two toilets out of three in its fleet, in a cost cutting plan aimed at reducing fares. Ryan Air’s business mantra is to offer low fares, no matter what, without compromising safety.
Unfortunately this cannot be replicated in Nigeria for three major reasons: most Nigerian carriers are in business with no knowledge of the nitty-gritty of the business; they lack a decent business plan, business model and innovative ideas on how to approach the business with reasonable expansionary strategy. Secondly, there is lack of suitable credit lines from the banking sector and harsh government policies and economic climate prevalent in the industry. A third reason is that the Nigerian Civil Aviation Authority (NCAA) would not permit innovative ideas like Ryan Air’s, either because of political pressure, ignorance, or both.
About two years ago, an innovative Nigerian carrier decided to launch low fares mixing and matching its pricing strategy along a rejuvenated Business Class, but that drew the flak of NCAA, which insisted that the model was anti-competitive and unwelcome in the Nigerian market. There were all kind of claims that the airline was over selling seats and diluting the market. It was alleged that a foremost and dominant carrier which was losing market share to this innovative was behind the pressure mounted by NCAA.
But quite frankly, airline business is not a Jankara market business. It requires strategic thinking on how to develop a brand, identifying a niche market, targeting market audience, reaching them, knowing what makes them tick, keeping customers loyal to the brand, et al. The business truly turns men mad, as they grow grey hair overnight! It’s a very thin margin business where the best run airlines make an average of 10 per cent return on investment. Over the last 50-60 years airlines have made more loses than profits.
A market largely dominated by foreign carriers, is bound to create problems as is being witnessed with the EU carriers, especially British Airways, which appears to be the scapegoat. BA has been in this market for over 70 years, and over this period has developed brand loyalty for two or more generations in some families.
The recent wave of anti-BA sentiment is unnecessary and misplaced for many reasons: It puts Nigeria on the wrong side of investment map, especially in the airline industry. After the Justice George Oguntade panel struck out the case against BA and Virgin Atlantic, someone thought they had to get their pound of flesh and the fare discrimination campaign was resurrected with so much frenzy and misplaced national sentiment. Truly, there is a huge fare disparity between Ghana and Nigeria in the premium cabins, and it takes a discerning mind to know why this is so.
Fares are generally a combination of many factors: cost of operations, market profile, capacity, etc. A major factor many fail to understand is that the profile of Nigeria’s airline market, based on capacity, probably has one of the highest demand for premium seats in the world. On the supply side, only BA offers First Class seats directly to London, with a total of 28 seats a day. There are 168 Business Class seats daily in the Nigerian market on Arik, BA and Virgin Atlantic, making a total of 196 premium seats a day directly to the UK.
Nigerians are globally known for their flamboyance and high taste for the good things of life, including air travel. An average Nigerian millionaire travels First or Business Class. Nearly 60 per cent of Nigerians in the premium cabins are paid for by the government. Check this roll call of government officials who travel in premium cabins at least once or more a year: at the state level, speakers of the 36 houses of assembly with their spouse(s), 108 first class chiefs (traditional rulers), 36 governors and their spouses(s), 72 deputy speakers/governors with their spouse(s). Others are at least 500 commissioners, aides of the governors, state legislatures and directors in the ministries and parastatals, chairmen and councilors of 774 local governments.
At the federal level starting with the presidency, we have special advisers, senior special advisers and permanent secretaries, 42 ministers and their advisers, directors; the legislature covers 109 Senators and 360 members of the House of Representatives as well as their senior aides; and departments and agencies of government includes security agencies, heads of parastatals and their directors. In the judiciary, starting from the Supreme Court, Appeal Court, Federal High Courts and State High Courts, Sharia and Magistrate Courts, we also have judges and grand khadis who also fly in premium cabins overseas.
This gives a significant picture of the premium market in Nigeria. That is why the EU carriers are inundated with calls to confirm the seats of ministers, legislators, governors and other officials who may be on the wait list. The premium cabins have been elevated to a form of status symbol, where you need to belong to be reckoned with. Where in the world do you have ministers and legislators travelling in premium cabins regularly?
In January 2012, Prime Minister David Cameron of Britain, the world’s seventh largest economy, travelled on a regular BA Business Class from London to Washington to meet President Obama, although that was against protocol. But that saved his nation over 200,000 GBP. He even rejected a First Class ticket. With this sense of modesty, Cameron ordered his cabinet members to fly Economy Class. In Canada, also, there are very stringent rules governing official trips of ministers. The issue is that if our politicians, civil servants and policy makers in government would cut their high taste for premium cabins, premium fares would drop.
The huge disparity in airfares in an equidistant zone is nothing new. Brussels a 45 minute flight from London, shares a wide fare disparity on the New York route (6 hours 40 mins from London and 8 hours from Brussels). Yet a First Class seat to New York from London is $14,800, while in Brussels it costs, $8,781; a Club World ticket costs $6,462 from London while it is $2,625 from Brussels. But the economy fare is cheaper out of London than it is from Brussels at $1,070 and $2,043 respectively – quite similar to the disparity between Ghana and Nigeria.
However, based on the Bilateral Services Agreement (BASA) signed between the UK and Nigeria, the latter has no business brow beating BA into reducing fares, or interfering in issues relating to fixing fares. Apart from anti-trust issues, for which we lack a law, NCAA has no basis interfering or commenting on the fares of airlines. The irony is that the same NCAA often presides over meetings with local airlines to increase fares. It is laughable that NCAA would not condone the ‘infractions’ by foreign airlines, but approves similar ‘infractions’ by local airlines.
The BASA with the UK has a ‘double disapproval’ clause where parties must totally agree or disagree on any issue; otherwise, the aggrieved party is required to approach an international arbitration panel for resolution. Where in the world do we find a regulatory body fixing the prices of services or products? When MTN and Econet introduced high call rates at the initial stage of their business in Nigeria, market forces through Glo forced them to change their pricing strategy. So let the market forces check the exorbitant fares of BA. The level of personal vendetta against BA is driving embarrassing government decisions and pronouncements.
Policy makers in our aviation industry are painting a worrying picture for local and foreign investors in the sector, and this must stop. It is globally recognised that this sector is a major catalyst to economic development, which we dearly need. I feel sad that in this modern age, there are calls for the re-establishment of another national carrier. The same corruption, free tickets galore, political cronyism, and parochial and myopic business decisions that killed Nigeria Airways will continue with the new carrier. Knowing the level of corruption in Nigeria today, the airline is a dead duck, as there is no any government-owned commercially driven enterprise running efficiently and profitably today.
Unfortunately, Arik Air which should be in a position to take advantage of the vast opportunities in the market is unable to see beyond its nose. The airline hasn’t displayed any idea, model or innovation to tap into this huge market. For instance, its economy seats have the best leg room in this market, but there has been no marketing strategy on its part to leverage on this advantage. Arik has hired many competent foreign experts with credible experience to turn the airline into a world class success, but often, they get fired or quit for whatever reason.
Nigeria’s aviation like the nation is at a crossroads and we need a serious surgical operation to get it back to life. May God help Nigeria!
•Tumba  is the CEO of SY& T Communications Ltd, a PR firm.

Source- Thisday

#Nigeria VIPs spent N29.7bn on chartered flights in 2011!!!

May 4, 2012 by Oyetunji Abioye
Director-General, NCAA, Dr Harold Demuren

Nigerians, notably public office holders and businessmen spent about N29.7bn on chartered flights in 2011, investigation by our correspondent has revealed.

Statistics obtained from the Nigerian Civil Aviation Authority, Federal Airports Authority of Nigeria and Nigerian Airspace Management Agency, showed that the nation’s airports handled an average of 50 chartered flights per day in 2011.

The Director-General, NCAA, Dr. Harold Demuren, in a paper presented two weeks ago, confirmed that the nation’s airports handled 50 chartered flights daily last year.

Some chartered flight operators, who spoke to our correspondent in Lagos on Thursday, said politicians, state governors and other clients paid an average of $7,000 per hour for each flight.

Chartered airline operators at the Murtala Muhammed Airport, Lagos, said each of the chartered flights took an average of one and a half hours; hence, the operators generated about $10,500 in revenue from each flight.

From the foregoing, it means the eminent Nigerians who patronised the services of the operators must have spent about $525,000 (N81.38m) on chartered flights each day last year at $10,500 multiplied by 50 flights.

Consequently, the Very Important Persons must have spent about $191.625m (N29.7bn) on chartered flights in 2011 at $525,000 multiplied by 365 days.

The chartered aircraft operators are Kings Airlines, Top Brazz Aviation, Wings Aviation, Associated Airlines, Overland Airways, Arik Air, Vistajet and Aero Contractors.

According to industry analysts, chartered airline operators are currently engaged in an intense competition over the VIP market in the country, which they said had been rated as one of the fastest growing in the world.

Different VIPs from the corporate world and government circles usually throng airport terminals daily to patronise the services of the chartered airline operators.

Nigeria’s aviation market is regarded as one of the most robust in the world, bringing huge revenue and profit to foreign airlines.

Passengers who used Nigerian airports in 2011 spent a total of $1.5bn (about N225bn) on the purchase of tickets, the Minister of Aviation, Stella Oduah, had recently said.

Oduah, in a keynote address she delivered at an interactive forum with aviation stakeholders in Abuja a fortnight ago, also said that 90 per cent of the total revenue from the airports came from the Lagos and Abuja airports.

The minister said 14.6 million passengers used the airports scattered across the country within the year, while 122,700 tonnes of cargoes were moved by air within the one-year period.

According to the minister, the nation’s airports handled 50 chartered flights and 300 scheduled flights per day during the period under review.

The aviation sector, she said, employed a total of 60,000 workers in 2011, including 1,835 cabin crew, 934 pilots, 325 air traffic controllers, 865 aircraft maintenance engineers and 250 meteorology personnel.

She said, “Aviation is pivotal to the growth of key economic sectors, such as travel and tourism, agriculture production and distribution, rural development, trade and commerce, manufacturing and other non-oil sectors, which are critical to economic transformation of any nation.

“The value chain of creation by aviation is enormous. In order to reposition the Nigerian aviation sector for this role, we consulted widely with industry stakeholders and relevant ministries, departments and agencies to develop a common mission and vision.”

Source : The Punch

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