Each passing day brings us to the reality of the critical role of the aviation sector in the Nigerian economy. It is always said that Nigerians love to travel. Yes, they do! But I guess it is not just for travelling sake. They travel for business and leisure. And, many prefer air travel because of the several advantages it offers including time, speed, comfort, flexibility, business networking opportunities, safety, and convenience among others. Therefore, aviation has become a very important component of Nigeria’s transportation infrastructure. It is so important that a serious government would do all that is necessary to protect as well as support it. Protecting the sector is a necessity that powers its growth and sustains its importance in the economic ecosystem.
The basic reason the industry ought to be supported, and protected, by the government is to help safeguard it from some of the challenges that are likely to stifle its growth and negatively impact its critical role in the economic ecosystem. Some of such challenges include inadequate financing and poor infrastructure. These are realities that are obvious to consumers of air travel services. I guess this is the reason such consumers constantly ask for more from their airlines. This is irrespective of the fact that almost all the airlines strive through these challenges to sustain the sector, offer services and guarantee the jobs of millions of tax-paying Nigerians not minding the challenges.
This is exactly what such countries as the United States of America, the United Kingdom and France regularly do to keep aeroplanes in the air and to boost their state economies. For instance, faced with the prospect of liquidation of many airlines arising from the losses suffered due to the COVID-19 pandemic, the government of the United States provided financial assistance to airlines in the form of loans and tax credits, including $1.50 to $2.00 per gallon of sustainable aviation fuel (SAF) blender’s tax credit. It also provided financial assistance to airlines, airports and other aviation companies to help them cope with the financial aftershocks of the pandemic as well as provided loan guarantees to airlines and other aviation companies to help them to access capital for aircraft acquisition. In some cases, the US government provided tax relief by way of delaying tax payments and providing tax credits to help airlines and aviation companies stay afloat.
It also provided funding for improvements and expansions of airports across the country and waived certain fees while also providing funding support for training and development programmes for aviation workers and offering unemployment benefits to those who lost their jobs due to the pandemic.
In France, the French government spent heavily funding airlines in the country through an amendment to a previous aid measure in favour of Air France, which extended the duration of a previous guarantee until May 2025. The government also approved a 700 million Euro scheme to support aviation and other companies particularly affected by the coronavirus pandemic and the restrictive measures implemented to limit the spread of the virus. It further approved another 700 million Euro scheme to support retailers and support services in the aviation sector affected by the pandemic to remain in business.
In all, it is believed that the French government has spent about 15 billion Euros to support its aviation sector. This includes about a 7 billion Euros loan package to Air France-KLM; a 500 million Euro investment fund for smaller airlines and a 1.5 billion Euro for research and development of carbon-neutral planes. This investment is intended to save an estimated 300,000 direct and indirect jobs in the sector and support about 1,300 companies involved in the French aerospace supply chain which collectively add about 58 billion Euros to the French economy every year. French Finance Minister (as of June 2020), Bruno Le Maire said “If the state doesn’t intervene straight away then one-third of the jobs in the sector could disappear.”
The French government also approved a 61.19 million Euro injection to compensate Brittany Ferries for damages it suffered due to the coronavirus pandemic. This is in consideration of the importance the French government placed on the transport sector of its national economy.
In the UK, the British government deliberately funded British airlines through 2 billion euros worth of loans for British Airways in 2021. The loan was aimed at enhancing liquidity and providing “operational and strategic flexibility” for the airline. The government also injected 15 million Pounds Sterling for eight projects to receive a share of government funding for SAF. Put together, the aggregate of what the British government spent supporting the aviation sector to regain its strength and sustain jobs in the aftermath of the COVID-19 pandemic is put at approximately 8 billion Pounds Sterling.
However, these sorts of funding are not available to Nigeria’s aviation operators. This is even as financing is a critical component of aircraft acquisition. Airline operators in Nigeria are exposed to this hurdle which is a significant challenge in the sustainability of their operations. The basic reason here is that high-interest rates, inadequate collateral, and a lack of long-term financing options make it difficult for the airlines to access financing. This is a hurdle that the government can help the airlines to scale in order to add to the economic growth of the country through the provision of such financing options as low-interest loans, guarantees, or even equity participation in airlines.
This would enable airlines to grow their fleet, expand operations, reduce operating costs, and improve their overall financial sustainability. There is no doubt that aircraft acquisition and financing would have a positive impact on the Nigerian economy. This is because the aviation sector in Nigeria contributes significantly to the country’s GDP, and the acquisition of aircraft, or fleet expansion, would lead to increased economic activity, increased job opportunities, and revenue generation. With these, the government would have aided the growth of the aviation sector which would also become open to more investments, enhanced trade and economic activities, and improved tourism across the country.
I am also tempted to believe that the government’s intervention in the aviation sector would demonstrate its commitment to the development of critical national infrastructure through airport development and the provision of critical but unavailable flight aids that would open up more Nigerian airports to late evening operations. As I stated earlier, the aviation sector is a vital component of Nigeria’s transportation infrastructure; therefore, the government’s deliberately intended support for its growth through finance guarantees for fleet expansion and tax incentives would demonstrate the government’s commitment to the development of a modern and efficient transportation system that would aid nationwide connectivity through air transport.
Consumers of air transport services focus more on the safety, reliability, and efficiency of airlines. To achieve these and enhance the overall passenger experience, and promote economic growth and development, the Nigerian government ought to design, develop and implement policies that would enhance aircraft acquisition and financing through guarantees. The government’s intervention in this regard would demonstrate its commitment to the development and the long-term sustainability of the aviation sector.