Nigerian Aviation Industry Considers Merger as Government’s Bailout Fails

As the COVID-19 induced economic strains bite harder, the plights of businesses in Nigeria, especially aviation and hospitality deepen.

Travel restrictions introduced earlier in the year to curtail the spread of the virus, drove more nails to the coffin of Nigeria’s aviation industry. Now companies within that sector are weighing merger as an option to stay in business.

The Director-General of the Nigerian Civil Aviation Authority (NCAA), Capt. Musa Nuhu said a merger could be the lifeline operators in the industry have left.

Nuhu made the statement on Nigeria’s Television Authority (NTA), while discussing the impact of COVID-19 on the economy. He said the aviation industry is hardly hit by the pandemic and many companies will not survive without bailout.

“The COVID-19 pandemic exaggerated a bad situation; some airlines may not survive but the industry will come back better. It has always gone through crisis but has come back better. It has always gone through crisis but has come out stronger. The Airlines Operators of Nigeria are coming together to see what they can do to help the situation and they met with me. The industry will be different altogether.

“I am sure a lot of them will see changes in their model. I won’t be surprised there would be merger activities around airlines to reduce cost and survive,” he said.

Following the lift of flight restrictions in July, the Ministry of Aviation imposed safety measures that involve social distancing on airline operators. To curtail the loss that would come from that, the companies increased airfare by almost 100%.

Nuhu said there are other reasons for the hike in air ticket charges.

“The airlines carry their maintenance out of the country and it is done in foreign exchange. They need to raise enough money to service the aircraft,” he explained, adding that the increment isn’t enough to keep the industry, which is desperately in need of bailout, afloat.

“The airlines have to find a source of raising more naira. Passenger load has decreased during the pandemic. That is why they have been significant increase in airfares, they are trying their best and by the time the bailout kicks in, things will be better.”

Earlier in the year, the federal government of Nigeria had promised a N25 billion bailout fund for the aviation industry. Unfortunately, the promise has failed to materialize as the industry groans in pain following 60% decrease in flight patronage.

In November, the federal government made a N5 billion bailout offer to the aviation industry, reneging on the earlier promise of N25 billion. Aviation stakeholders and the Senate Committee on Aviation rejected the “insensitive” offer, saying the industry is better left to die than accept the meager offer, as N4 billion will amount to nothing in addressing the financial crisis that has engulfed the industry.

“This is all a result of the COVID-19 pandemic. Reasonable countries intervened in their aviation in the second or third month. This is the eight month and Nigeria is just responding,” said Dr. Gbenga Olowo, the President, Aviation Safety Round Table Initiative (ASRTI).

“I think the government should just leave us to die, and then we will know that Nigeria has no aviation industry. The N4 billion palliative for the aviation sector is very insensitive. I condemn it totally,” he said, adding that the aviation industry has lost N360 billion so far.

Local airlines are currently indebted to NCAA at the tune of N22 billion, a situation degenerating daily due to decline in flight activities around the country.

Last week, Arik Air sacked 300 workers as a result of the impact of the pandemic on the aviation sector. Other companies in the industry are also taking drastic measures that include reduction of salaries and furloughing, to stay in business.

With the current situation, the Nigerian aviation industry is reeling at the mercy of bail-out that the government appears unwilling to offer, and merger may be the only choice left.