Bankruptcy is on the horizon for Nigeria’s entire airline industry

Industry experts have said that existing Nigerian airlines would eventually be killed by bankruptcy, unless there are mergers and acquisition by the remaining airlines that are currently operating.

M & A will increase their fleet capacity, streamline the workforce and boost operating cash.

Seasoned aviation lawyer, Fubara Anga, told THISDAY that with M & A, there would be only one or two airlines in the country with high possibility of long term existence, long term projections and planning.

The airlines would then be able to attract credit facility from international financiers, they would be able to acquire new aircraft directly from manufacturers and also have enough liquidity to train and even establish maintenance facility that is fundamental to their existence.

Anga observed that average life span of airlines in Nigeria was about 10 years and while they operate unprofitably foreign airlines repatriate over N15 billion annually from Nigeria.

The Chairman of Airline Operators of Nigeria (AON), Dr Steve Mahonwu, told THISDAY that the major problem Nigerian airlines had was their unwillingness to cooperate with one another in order to have the benefits of economics of scale.

He noted that with merger, acquisition or cooperation two airlines that have put flights to Abuja from Lagos at the same time and have about 60 passengers each may decide to put the passengers in one aircraft and later reconcile their accounts, remarking that this would benefit them more than for each to fly to Abuja, burn fuel and pay for all the charges.

Mahonwu also said that the airlines do not plan strategically and don’t employ professionals to work for them; rather, they employ their relations and friends and put them in strategic areas of the business and they make mistakes which eventually give rise to the liquidation of the airline.

Besides the high charges from aviation agencies, the high cost of aviation fuel is universal; now that the Federal Government has waived Customs duties, it is expected that Nigerian airlines if properly managed would begin to operate profitably.

Many of the airlines have not instituted transparent accounting system and because of owner manager syndrome which is characteristic of all the airlines, they tend to mismanage their revenue, divert earnings from the airline to other businesses even when the airline is still limping financially.

A seasoned pilot who has operated in Nigeria for over 30 years said that in the airline industry an operator is not expected to make immediate profit, but airline operation is a cash cow because it generates huge cash with extremely little or no profit.

“So if we understand that the money is not ours to take, then we ought to understand that there should be financial discipline…a great level of discipline and creditability. One of the problems sometimes is, you lease an airplane, you buy fuel on credit, you buy spares on credit and these are sometimes denominated in dollars. You have to train pilots and engineers in dollars… all of these require that you may have to buy things on credit; you have to pay regularly.”

The pilot said that Nigerian airlines should realise that each time they made money they should take provision to pay their debts.

All Nigerian airiness are hugely in debt and if they pay all the debts they owe even in the next five years, they will go bankrupt and out of business; yet experts say that airline operation should be highly profitable in Nigeria.

© 2012 AllAfrica Global Media. Provided by Syndigate.info an Albawaba.com company.