AON Kicks as FG Secretly Signs Agreement With Foreign Carriers Abolishing Royalties

By Chuks Okoh
The Airline Operators of Nigeria ( AON ) has faulted the directive issued by the Federal Government which has directed foreign carriers to stop the payment of royalties to it, effective October 27, 2014. According to the executive chairman of AON, Captain Nogie Meggison , the new directive by government is another step to further undermine the survival of the domestic airline carriers.
Speaking in an interview, Meggison said the stoppage of royalties by the foreign carriers will make government lose significant revenue it needs to fix critical infrastructure in the aviation sector.
The utilization of bilateral air services agreement ( BASA ),funds and royalties have assisted in the past to fund major aviation projects. He said industry experts were not carried along before government in a hurry cancelled the agreement, for which the benefitting international carriers have been officially communicated.
Meggison said government, through the ministry of aviation, only informed the umbrella body of domestic carriers after it has concluded the cancelation of the payment of royalties to Nigeria
He said the ministry of aviation violated the industry regulation of notice of ruling making, which requires that stakeholders be given ninety days notice to make their input on any vexed matter before it becomes law.
The AON boss said though, the stoppage of payment of royalties by foreign carriers to Nigerian government is in line with the Open Skies Policy , but Nigeria is not yet ripe for such a policy that throws up its airspace for foreign carriers at the detriment of indigenous carriers.
He said the new move by government is another attempt to further erode the Nigerian aviation market after the multiple entry policy, which has adverse effects on domestic carriers.
Meggison said : “ If something drastic is not done to correct these anomalies, the domestic carriers of today will be out of business in five years.”
Meggison said with such waiver or stoppage of payment of royalties, he wonders how government would raise substantial funds to liquidate its over N 174 billion borrowed by the ministry of aviation .
He queried that with such huge indebtedness position day , how will government pay up the loans used to fix the airports, when funds accruing from royalties paid by foreign carriers could be utilized to offset such loans.
In November 2012, the President of Nigerian Senate , David Mark urged the Federal Government to authorize relevant agencies including the Nigerian Civil Aviation Authority ( NCAA), to compel some foreign airlines to pay over $ 249 million accruing from fines and royalties.
Only last year, the ministry of aviation spent over N7.5 billion of bilateral air services agreement ( BASA), funds on the rebuilding of airports out of the $80million BASA funds domiciled with the NCAA . In 2012 it was alleged that NCAA had in its kitty over $ 80 million of BASA funds .
The Federal Government secretly signed the agreement on abolition of commercial agreements and royalties by foreign carriers a month ago.
About N150 billion is said to be collected as royalty from the foreign airlines flying into Nigeria annually. The BASA money is the royalty foreign airlines pay to Nigeria as charges for the extra rights they requested for and got outside the original bilateral agreement between their countries and Nigeria.
Presently, Nigeria has 78 BASAs worldwide, out of which about 30 are being utilised. The approval signed by the Federal Government to cancel the collection of the BASA charges according to sources is borne out of the position of the International Civil Aviation Organisations (ICAO) and International Air Transport Association (IATA) that airlines should be allowed to operate into each other’s countries without paying royalty.
While countries from Africa and many other foreign countries, even from developed countries are slow to embrace the policy, Nigeria had rushed to approve of the decision without considering the economic implications on the industry.
Prior to now, the money generated from the BASA account, which used to be managed by the defunct Nigeria Airways, but transferred to the Ministry of Aviation was squandered by the government in a controversial manner.
Following the heat over the disappearance of the money in the BASA’s accounts, running to several billions of naira, the government of late President Yar’Adua directed that the account be transferred to the Nigerian Civil Aviation Authority (NCAA) for the service of critical elements in the sector.
With the approval for the abolition of the BASA fund collection, the foreign carriers may have now actively taken over the country’s aviation sector with no competition from the Nigerian domestic carriers.
According to a source at the Ministry of Aviation, who did not support government’s position, “the rush to approve the abolition of the BASA levy was one of the unpatriotic decisions government has taken.”
Following the development, the aviation agencies, which hitherto had been the beneficiaries of the BASA royalties would have to look elsewhere to remain in business.
Already, the chief executives of the various aviation agencies, who were said to be shocked with government’s decision, had been holding series of meetings on how to free themselves from the financial mess the latest development was bound to put them in once it became effective, that is, in October.
The source took a swipe at the government for failing to weigh the negative financial implications the move would have on Nigeria. According to an airline chief, who promised to openly comment on the development in October, when the approval would be effective: “ This is another dangerous decision the government has just taken. By approving of the abolition, government has just unwisely opened up its airspace to the whole world and this singular action will end up sending domestic airlines to their graves.
“By opening up her airspace, Nigeria must surely witness the influx of more foreign airlines from across the world, but unfortunately, the indigenous carriers are no match.”
Top on the list of the 78 mega carriers operating into Nigeria include the British Airways, Virgin Atlantic, Lufthansa, Air France/KLM, Delta Airlines, United Airline, Emirates, Qatar Airways, Etihad Airways, Middle East Airlines, Air Iberia, Turkish Airlines, Ethiopian Airlines, South African Airways, Kenya Airways, Rwandair.