Covid-19: Nigerian airlines face existential crisis as light dims
Samson Echenim is business a.m. correspondent providing coverage for maritime, aviation, travels and hospitality. A former business correspondent at the Punch and Leadership newspapers, he has a vast experience in business reporting. Samson can be reached on samhapp2000@yahoo.com and +2348037363024
Barely one month of closing her airspace and airports to scheduled commercial operation as part of measures to check the spread of the coronavirus, indications have emerged that some Nigeria airlines have begun to find routes into their shells.
A competent insider source told business a.m. that most of the local airlines in their weak state would not survive the airport shutdown.
With Arik Air announcing 80 percent pay cut for workers and placing 90 percent of its workers on leave without pay, the source said “the news did not send any shock through the industry.”
“With this kind of total shutdown of operations, it will be difficult, if not impossible, for most of the airlines to remain afloat. This is similar to having airlines grounded. How many of our grounded airlines were able to rise again,” said the source, a frontline aviation unionist who pleaded anonymity.
As COVID-19 pandemic continues to broaden roots in the country, Nigeria’s second oldest airline, Arik Air, announced on Friday it was implementing 80 per cent pay cut for all staff of the company for the month of April, 2020, while putting 90 percent workforce on compulsory leave without pay from. May 1.
Currently with 22 aircraft on its fleet, Arik Air had managed to remain afloat after narrowly surviving liquidation. The airline, once the biggest in the country is now under the ownership of Asset Management Company of Nigeria (AMCON) an entity set up by the Nigerian government to manage failed companies on its behalf.
“We expect several other airlines to embark on major staff pay cut and even going under,” the source hinted.
In a letter to staff, signed by Roy Iloegbu, CEO, Arik said the decision would be reviewed after a month.
He stated, “After careful deliberation and analyses, management has decided to implement an 80 percent pay cut for all members of staff across the entire organisation for the month of April 2020. Furthermore, commencing from May 1st 2020, no less than 90 percent of our staff will proceed on leave without pay until further notice. This position will be reviewed on a monthly basis and communications on further developments will be shared by our HR department as the situation evolves.
“While we are not unaware of the challenges that each and every one of us may face during this difficult period, we join you in remaining hopeful that this ugly situation will abate in the shortest possible time and our organisation will come out stronger in the long run.”
According to him, the airline has suffered a sharp decline of over 98 per cent in revenue streams since the suspension of scheduled flights a month ago.
Obi Mbanuzuo, accountable manager of Dana Air had last week called for government aid to the airlines to help secure the jobs of over 129,000 Nigerians engaged by the airline and travel industries, a position the Airline Operators of Nigeria has held since the beginning of the lockdown, seeking financial palliatives and low credit from government.
Earlier in the week, the International Air Transport Association (IATA), warned that Nigeria leads African airlines in a whopping N2.6 trillion loss to Covid-19.
According to IATA, Nigerian airlines stand to lose about N390 billion in revenues after seeing 4.7 million fewer passengers.
IATA also reiterated that Nigeria faces about 125,400 jobs losses.
Muhammad AL Bakri, regional vice president for Africa and the Middle East, said IATA had appealed to development banks and other sources of finance to support Africa’s air transport sectors which are now on the verge of collapse.
He explained that airlines on the continent were struggling for survival, buttressing that Air Mauritius had entered voluntary administration while South African Airways and SA Express are in business rescue respectively.
Bakri posited that other distressed carriers have placed staff on unpaid leave or signalled their intention to cut jobs, warning that more airlines would follow suit if urgent financial relief was not provided.
He stated that the economic damage of a crippled industry extends far beyond the sector itself, noting that aviation in Africa supports 6.2 million jobs and $56 billion in GDP.
Bakri said, “IATA is seeking the intervention of the Federal Government on relief measures for the continent’s carriers and noted that IATA expected revenue loss to the continent’s carriers was $2 billion (about N800 billion), which is more than the expectations at the beginning of the month.”