Local Aviation Loses N11.6bn Annually To Poor Ground Handling Rates
Perennial underpricing and poor rates in the ground handling sub-sector of aviation yearly is costing the entire industry a shortfall of $28.35 million or N11.6 billion ($1:N410).
A rough estimate in revenue, according to industry benchmark on average handling rate on the continent, showed that the sub-sector is worth at least $56.7 million in turnover, as against the half it currently records yearly in Nigeria.
Stakeholders and operators alike have described the shortfall as enormous, with severe implications for safe operations and sustainability.
They, again, urged the Nigerian Civil Aviation Authority (NCAA) to intervene and institute a safety threshold-handling rate as part of economic regulation of the ground handlers.
It was earlier reported that Nigeria charges one of the least competitive ground handling rates on the continent, no thanks to the dearth of cooperation among operators.
Findings showed that there are about 45 narrow-body aircraft – Boeing B737, Airbus A320, ER 135 and ATR aircraft – on regional and international routes that are serviced by ground handlers at Nigerian international airports daily. Wide-body – B767, A330, B777 and B747 – are about 20 on a daily average.
Meanwhile, handling companies still charge between $300 to $1000 to handle a narrow-body aircraft rather than $1,400 to $1600 charged in other African countries. Similarly, they also charge about $3,000 as against the $5,000 average charged in neighbouring countries for wide-body aircraft.
For domestic operations, some airlines pay as low as N12, 000 to N20, 000 for aircraft turnaround.
Pioneer Chief Executive Officer (CEO) of Accident Investigation Bureau (AIB), Dr. Sam Oduselu, said the shortfall is alarming and a self-disservice to a sector in dire straits of funding.
Oduselu said: “I have had the privilege of seeing the current rates in Nigeria and other parts of the world. I think it is backward and should be reviewed. If you notice, before the outbreak of the COVID-19 pandemic, the Nigerian aviation industry had a major problem, which was funding. This situation has been worsened by the COVID-19 pandemic.”
He added that besides losses to the sector and regulators that earn a percentage from ground handling rates, the major worry is the impact that poor revenue accruable to operators and underpaid employees, would have on safety and security of airlines.
“Under a low regime handling rate, the ground handling company will find it difficult to function optimally and effectively. Also, the government is not deriving the economic benefit they should derive, especially from the foreign carriers. You will now see that with this, it is easy for the staff to be compromised.
“There is also the criminality aspect of it. For instance, if you are paying your staff peanuts and the syndicates are able to get hold of them, they could put drugs and any other dangerous items in the aircraft because they (staffers) are not happy with their jobs. I think it becomes expedient and extremely important for the regulatory agency to intervene and ensure the commencement of new handling rates.”
Oduselu said further that operators too would do the sector some good if they pipe down on mutually destructive competition and learn to cooperate.
Group Managing Director, Nigerian Aviation Handling Company (NAHCO) Plc, Olatokunbo Fagbemi, said despite challenges, the company remains focused on safe and secured ground handling services.
Fagbemi, however, said it was imperative for the NCAA, as the apex regulator, to intervene through the enactment of a safety threshold-handling rate.
“The rate we are talking about is the benchmark below which you cannot offer these services safely. Even, in deregulated economies globally, we have benchmarks that are given; some may not be announced while the others are.
“What we are saying is that you can charge whatever you want, but you must not go below a framework that will harm the industry, harm the business and cause safety issues. The NCAA is a regulator in charge of safety and security. NCAA is also the regulator for the economics of the industry,” Fagbemi said.
Her counterpart at SAHCO Plc, Basil Agboarumi, reckoned with the safety threshold proposal.
Agboarumi noted that pricing is a function of demand and supply, though no country exclusively leaves fixing of prices to operators.
Besides, “between 2020 and now, we have seen a major leap in terms of the forex that used to be N350 now over N500 to a dollar and we are a heavy consumer of forex. Nobody wants to hear of failure in ground handling services. So, we have the duty to provide not just ground handling services, but the best ground handling services that can compete with any in the world. We need the right equipment to do that.
“Ground handling equipment, personnel and certification are all dynamic. So, we have to change with global developments. In fact, you have to pay the right salaries and remunerations to attract and retain your best hands. We need to charge rightly too and that is where proper review is necessary,” Agboarumi said.
