Bailout for Nigerian, African airlines not strategic

  • Emirates Airlines dwarfs Ethiopian, Kenya, SAA

The extension of gesture by government to bail out Nigerian airlines, which are in distress, is more of sentiment than strategic economic sense, an expert has said.
Global aviation Consultant and Chairman, African Business Aviation Association (AfBAA), Nick Fadugba, said this while presenting a paper titled “Partnerships – Key to Survival of Domestic Airlines,” in Lagos.
Noting that over N400 billion intervention fund given to airlines some years back yielded no result, he said rather than rescuing them, majority of them have since closed shop.
Fadugba stated that recent headlines on Nigerian airlines suggest far more struggles than successes.
He illustrated his position with similar occurrences in countries such as South Africa, Zimbabwe and Namibia, saying troubled Air Zim (national carrier of Zimbabwe) sought $190 million bail out; South Africa Airways demanded from Pretoria R5 billion as rescue fund; Uganda seeking huge funds to revive its national airline and Nigeria’s government take-over of the once biggest carrier, Arik, in a bid to try and save its aviation industry.
While many airlines are on the downward spiral, Ethiopian Airlines is waxing stronger and reputed to be the only profitable airline in the continent just as Air Botswana is at the verge of being privatised.
Even with government’s injection of 10 billion rand ($709 million), the struggling South African Airways will remain under-capitalised with a negative equity position of over R9 billion, a presentation to parliament showed.
The national airline has been relying on government guarantees to keep it solvent and has been cited by major rating agencies as a threat to South Africa’s economy. It received the latest bailout last September.
The 2011 bailout by the Federal Government of Nigeria is a case of how badly managed bailouts could be. The hues and cries of the airlines were left to a point of where if not already comatose, they were prostrate. The intervention, as it were, came too little and too late. Its benefit to airlines is yet to be seen.
Fadugba regretted that top three sub-Saharan African airlines such as Ethiopian Airlines, South African Airways and Kenya Airways are smaller than Emirates Airlines.
While the total revenue of South African Airways as at 2010 and 11 stood at $2,933, 333,333, that of Ethiopian Airways was $1,180,000,000; Kenya Airways’ $997,625,000 totalling $5,110,958,333 while Emirates’ total revenue within same period stood at $11,627,865,668 carrying 22,700,000 compared with that of African countries that stood collectively at 12,520,000.
Many African nations have lost their national flag carriers, including Nigeria Airways, Ghana Airways, Cameroon Airlines, Zambia Airlines and East Africa Airlines, while many other airlines have been liquidated.
Air Afrique, a Pan-African Airline established by 11 West and Central African French speaking countries, was also liquidated. Most of those that are operating currently are fighting for survival, including the recently established ones, just as one of the leading airlines in Africa, South Africa Airlines, is in bad shape. It is receiving state funding to run its daily operations, but luckily for the airline, the South African government said recently that his government would never allow the airline to die and therefore would do everything possible to resuscitate and sustain its operations.
Air Tunis also is reducing its staff and on its way to demise. Similarly, Precision Air of Tanzania in which Kenya Airways has a 40 per cent stake, had filed for bail out, as Kenya Airways’ management had realised that why it is in the emergency ward is because it was ‘abandoned’ by government, which allowed the airline some autonomy to operate on its own.
There have been efforts by private investors to establish and run airlines in many countries in the continent.
Only a few of the privately-owned commercial airlines are thriving and almost all of them literally suffer some fracture or are sick in other ways.
Many of them are sick because they cannot source funds to increase fleet, acquire maintenance facility or acquire the right personnel in required number.
He noted that African aviation debt market is relatively small, reflecting the African airline landscape, adding however, that Africa’s gross domestic product (GDP) has been growing consistently for the last 20 years, outperforming the global economy.
But indications show that the airline industry in the continent is not growing in the same pace, as only five African carriers offer more than 65 per cent of the total capacity; largely from Ethiopia, South Africa, Egypt, Morocco and Kenya in a continent of 55 countries

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