by Adim Esohe
SBM Intelligence, a research and development think-tank based in Lagos have given reasons why Ben Ayade, the governor of Nigeria’s South-south state of Cross River should re-evaluate his decision to invest in a state-owned airline.
The research company had in its weekly newsletter urged the government of Cross River to rethink its decision to partner with Dana Group in floating an airline called Cally Air saying the plan is “not thought through”.
According to the publication: “The proposed airline is not provisioned in Ayade’s ‘Budget of Deep Vision’ for FY 2016, its proposed partner, Dana, does not even fly into Calabar (it does fly to neighbouring Uyo, which puts the economics of a Cross River air service in an interesting context) and the state is disproportionately reliant on its share of a shrinking federal allocation pie to fund its pressing sea-level concerns, let alone its sky-high ambitions.”
Read the full report titled ‘Troubled thinking in the Paradise State’ below:
Cross River governor, Ben Ayade, says the state government will float an airline, Cally Air, as part of its tourism investment policy. Ayade made the announcement on Monday in Calabar while hosting to a consortium of Indian investors. According to him, the airline will be managed by the Dana Group under a Public Private Partnership arrangement. The governor said the airline which will debut in November, would fly Calabar, Obudu, Lagos and Abuja routes. Dana MD, Jackies Hartmani applauded the partnership between his company and the state, saying his organisation was “very impressed with what Gov. Ayade is doing to transform the state in terms of investment and we are committed to ensuring the success of the partnership.”
We are not impressed in the least bit with this plan for one simple reason – the actual numbers do not add up. Let’s consider the evidence. Four days before Gov. Ayade’s triumphalist declaration, someone who has actual industry experience brandished a more cautious variant of optimism. Air Peace CEO, Allen Onyema told the press, while announcing the expansion of his company’s fleet to service domestic and new international routes, said the domestic airline industry was not getting the right support from, yes, government and he had a list of grievances – forex scarcity, an even more bewildering fuel scarcity, high insurance premiums, double taxation by regulatory and airport agencies, and the Nigerian Customs Services’ failure to comply with government’s directives on VAT exemption on aircraft spare parts. He also added that asking passengers to pay airfares as low as ₦12,500 on some routes by some airlines in the current economic climate was “absurd and unrealistic.” A paragraph from Onyema’s comments was particularly damming.
“We pay ₦50, 000 per hour for any delayed flight at night for the [Federal Airport Authority of Nigeria] to switch on the airfield light with diesel. Airlines are not making a profit (emphasis ours). Unless the government does something about infrastructure, airlines will continue to go into extinction,” – a not-so-subtle jibe at the ‘indefinite’ closure of Nigeria’s second biggest domestic carrier, Aero and the temporary suspension of another important player- FirstNation Airways. Foreign operators are not faring much better, not with the exodus of 14 airlines from the country due to low patronage on account of volatile forex risks and an economic recession – a list that includes Iberia, United and Air Gambia. We believe Cross River has clearly not thought this through – the proposed airline is not provisioned in Ayade’s “Budget of Deep Vision” for FY 2016, its proposed partner, Dana, does not even fly into Calabar (it does fly to neighbouring Uyo, which puts the economics of a Cross River air service in an interesting context) and the state is disproportionately reliant on its share of a shrinking federal allocation pie to fund its pressing sea-level concerns, let alone its sky-high ambitions. What is the way forward to ensuring a vibrant air transport sector? Onyema has one suggestion. To him, his list of woes is “one of the reasons I support airport privatisation to bring about efficiency.”