Tough decision

The Managing Director of Nigerian Airspace Management Agency (NAMA), Umar Ahmed Farouk, has dropped a bombshell of the increase of outdated, economically beaten en-route navigational charges from N6,000 to N18,000 and N54,000 per flight, just as the airspace agency equally increased the extension of hours of service to airlines from N50,000 to N450,000 per extension to enable the agency to recover the cost of diesel and other logistics during the period of extension.

Farouk, who spoke at the League of Airports and Aviation Correspondents (LAAC) seminar with the themed, “Aviation Survivability amidst a Challenging MacroEconomic Environment,” held in Lagos last week Friday, said the Nigerian Airspace Management Agency relied on statutory fees for the management of the airspace (remember that aviation takes place only in the air).

“These funds are generated from services we provide to the flying community, without these funds NAMA can’t discharge its responsibility of ensuring the safety of our airspace effectively. We majorly generate these funds through airline companies,” he said.

Apprehension

There is no decision to raise the prices of goods and services that would make the end users accept especially at a time when the economy has taken a serious hit and at a time diminishing incomes are pushing a lot of people and companies into the precipice.

Expectedly, airlines have voiced their concern over the implications of the hike in en route navigational charges that the carriers are ready to pass on to passengers, especially at a period when airfares have jumped out of the window to N150,000 and N200,000 for an hour flight and at a period airlines’ fleet number are depreciating at an alarming rate.Some airline operators and some experts who have expressed worries over the increase called on the agency to meet with the carriers to see how it helps to cushion the domino effect on the sector in general.

Strategic meeting/implications

Recall that NAMA and the Nigerian Civil Aviation Authority (NCAA) in January held a strategic meeting with some airline operators under the aegis of Airline Operators of Nigeria (AON) to review what has been described as the outdated N16,000 Terminal Enroute Navigational Charges (TNS). The meeting held in Abuja was called at the instance of the NCAA and NAMA to get the understanding of the airlines on the review of the rate which the airlines admitted needed to be reviewed. The implication of the action which NAMA took to cushion its high cost of airspace surveillance and security could further lead to astronomical increases in domestic airfares and by extension fares on international routes.

Quick fix

NAMA is greatly challenged. The agency is battling to survive because of the Federal Government’s deduction of its revenue from source by 50 per cent.Recall that NAMA and the Nigerian Civil Aviation Authority (NCAA) in January held a strategic meeting with some airline operators under the aegis of Airline Operators of Nigeria (AON) to review what has been described as the outdated N16,000 Terminal Enroute Navigational Charges (TNS).

The meeting held in Abuja was called at the instance of the NCAA and NAMA to get the understanding of the airlines on the review of the rate, which the airlines admitted needed to be reviewed. The implication of the action, which NAMA took to cushion its high cost of airspace surveillance and security, could further lead to astronomical increases in domestic airfares and by extension fares on international routes.

“We have to be moderate in increasing service charges because, in the end, it’s the paying air traveller who coughs out the money to pay for those increases, after legislation has compelled the same air traveller to fund the agencies in the form of ticket sales charges that NAMA partakes in sharing,” Farouk.

Experts’ views

A former Rector, Nigerian College of Aviation Technology (NCAT), Capt. Samuel Caulcrick, said in all of these, the airlines are the fall guys, just like the DisCos in the power sector – their sins – they interface between the paying customer and their respectful industry. He said whatever money comes into the aviation sector comes through the air operators, just like the DisCos in the power sector.

NAMA is greatly challenged. The agency is battling to survive because of the Federal Government’s deduction of its revenue from source by 50 per cent removed from the Federal Government appropriation. It is left bare to do its job effectively. It relies on statutory fees for the management of the airspace. These funds are generated from services it provides to the flying community, without this fund NAMA can’t discharge its responsibility of ensuring the safety of our airspace effectively.

It majorly generates these funds through airline companies. The largest percentage of NAMA’s revenue comes from en-route navigation charges (domestic and international flights) and terminal navigation charges (domestic and international flights). While international flights pay in US dollars, domestic flights pay in the Nigerian currency.

One of the easiest ways is seek ways of survival and to provide efficient air navigation services without compromising on safety is to raise the charges that have been in existence when airlines have increased fares by over 1000% in less than 10 years. A former Managing Director of NAMA, Emperor Onasanya, said, “Just a question please: Can NAMA IGR fund, for instance, the total radar coverage of Nigerian airspace?

Onasanya, who has the deep working of the agency he worked for many years, understands the situation the agency is faced with and could degenerate fast if it does not seek urgent solutions to infrastructure to keep the country’s airspace safer. A labour unionist, Olayinka Abioye, said whatever earnings come to these agencies have been reduced by 50% by their principal, adding that technically speaking, almost all these agencies have less than what they usually describe as their incomes/earnings.

Cost recovery

NAMA MD disclosed that as a service provider and by the International Civil Aviation Organisation (ICAO) best practices, the agency does not make a profit, stressing that the ICAO Doc 9082 recommends cost recovery for service provision to cater for the cost of equipment, personnel, training and other ancillary costs. His words: “For 2023, NAMA has an expenditure of about N21 billion in personnel costs alone. It spent over N12 billion in capital costs and over N10 billion in overhead costs.

All these were to be (and were) funded from fees (no FGN budgetary allocation). “NAMA has been charging as low as N11,000 per flight when a one-way domestic ticket costs only 16,000 Naira. While ticket prices today have gone up astronomically to as high as between N150,000 to N200,000 for a one-way economy ticket owing to the prevailing economic circumstances, NAMA’s navigational charges have remained the same since June 2008.

“Also, NAMA charges N50,000 for every hour that it has extended services beyond the stipulated hours of service at aerodromes that do not have 24-hour service. In 2008 a litre of diesel was sold at around N113, today it is well over N1,400 per litre which represents over a 1,000 per cent increase which makes the current charges unsustainable. The same goes with personnel costs and other costs.”

He noted that currently, “our unit rate for international flights charge for service provision is about $70, domestic flights are charged N6,000. While NAMA recognises the difficult economic environment aviation operates in Nigeria, it is equally a part of the ecosystem. It goes to the same market to procure equipment and other services like training. If NAMA is to survive and continue to guarantee safety and efficiency in the airspace, it must breathe.”

Last line

The aviation industry in Nigeria requires a very efficient pricing of products and services. It is a critical lever for enhancing affordability, driving competition, supporting infrastructural development, promoting sustainability, and improving operational efficiency. The price for services must reflect the value of these services.