17 FG Airports Not Viable, May Shut Down Over Losses

[Edoman]

Facilities incur N26.1b deficit in three years

• How to overcome challenge, by stakeholders

At least 17 out of the 20 airports owned and managed by the Federal Government have turned out to be unviable and have operated at a loss for three years.

Except the trio of the Murtala Muhammed International Airport (MMIA), Lagos; Nnamdi Azikiwe International Airport (NAIA), Abuja; and Port Harcourt International Airport (PHIA), Rivers State, none of the other airports has sufficient revenue to cover the cost of operations alone.

Investigations by The Guardian showed that additional funding from high-traffic Lagos and Abuja airports’ excess revenue to the tune of N26.1 billion cushioned the operational cost deficits incurred by the unviable airports in 2017, 2018 and 2019.

With zero revenue being recorded following the lockdown occasioned by the coronavirus pandemic and recent flight restrictions for another four weeks, the Federal Government is in a dilemma on what to do with the airports; either to keep running them at a loss regardless of liability or temporarily closing them till the economy and passenger traffic start looking up.

Apparently due to the political uproar that forbids shutdown, some stakeholders have urged the government to expedite the concession programme for the airports, and attendant restructuring of the Federal Airports Authority of Nigeria (FAAN) for sustainability.

FAAN owns and manages all the public airports in the country on behalf of the Federal Government. Among them are 20 that are directly owned by the Federal Government and four state-owned airports.

A fact-sheet of revenue and expenditure of the 20 federal airports and FAAN headquarters in the last three years, obtained by The Guardian, showed huge revenue shortfall and deficits across the board.

For instance, the Kaduna International Airport that was upgraded during the 2017 closure of Abuja airport has in the last three years pooled a total of N1.027 billion in generated revenue. Of the sum, N716.7 million was collected. However, the expenditure was in excess of N4.41 billion, leaving a deficit of N3.69 billion.

The Mallam Aminu Kano International Airport, Kano, did not fare better. The airport in 2017, 2018 and 2019 pooled a total of N8.28 billion in generated revenue and collected N7.16 billion but its expenditure totalled N9.6 billion, leaving a shortfall of N2.44 billion.

The Kastina Airport managed to make a total of N250.8 million in generated revenue in three years, out of which only N42.1 million was collected. Its cost of operations was put at N1.58 billion, leaving a deficit balance of N1.54 billion.

In the same situation, Sokoto Airport had a total of N725.7 million generated revenue, out of which N400.1 million was collected. The cost of operation was in excess of N2.71 billion, which gave a shortage of N2.31 billion.

In the South, Ibadan airport in three years made a total of N349.2 million in generated revenue and collected N244.9 million. The expenditure amounted to N1.39 billion with a deficit of N1.14 billion. Ilorin International Airport generated a total of N437.1 million revenue in three years and collected N264.2 million. The expenditure was in excess of N2.453 billion, giving a shortfall of N2.19 billion.

Ditto for Akure airport. The facility pooled a total of N175.8 million in generated revenue and collected N168.7 million. But the expenditure was N1.06 billion, leaving a difference of N893.7 million.

The Benin airport in Edo State also ran at a loss. The airport generated a total of N993.2 million in three years and collected N930.1 million. The total cost of operations was put N2.02 billion, leaving a shortfall of N1.09 billion.

The Margaret Ekpo International Airport, Calabar, had a total of N540.8 million generated revenue, though collected more put at N559.6 million, the expenditure was as much as N2.50 billion, giving a deficit of N1.94 billion.

Similarly, Sam Mbakwe International Cargo Airport, Owerri, amassed a total of N1.25 billion in generated revenue and collected N1.08 billion. Expenditure was, however, N2.50 billion, with a shortage of N1.42 billion.

The Guardian learnt that the poor revenue and zero profit sprees were not unconnected with the perennially low traffic inflow in and out of the airports.

The International Air Transport Association (IATA) lately stated that for an airport to be viable and self-sustaining, it must have at least five million passengers a year. Today, only Lagos and Abuja airports could boast of at least five million passengers annually.

Apparently without consideration for viability, some state governments, like Abia and Ekiti, are bent on building new airports.

Meanwhile, the Federal Government is at a crossroads on what to do with the airports that are still operating at a loss. The 2016 plan to concession the airport is still on, yet sustaining all the airports at FAAN’s N4 billion monthly overhead is a tough call during lean times.

A temporary closure of some of the airports was considered but not feasible given the political hullabaloo that awaits such a move, The Guardian has learnt.

Aviation consultant and Chief Executive Officer of Beljune Konzult Limited, Chris Aligbe, said it was expedient for the Federal Government to keep supporting FAAN and other regulatory and service providers with grant, pending the time the airlines will return to pre-coronavirus capacity.

Aligbe said aviation infrastructure abhored temporary shutdown. More so, they are readymade tools in the hand of politicians. He observed that some of the unviable government-owned airports were built by state governments for political aggrandizement.

“It was after building them that they found that they did not have resources to run them and quietly pushed them to the Federal Government through the back door. That was how they got into the care of FAAN.

“But we cannot shut them down, especially for political reasons. It is never going to be easy. If you try to do that, the impact will be more on the northern airports than on the south. The airport in the south that has become the ghost of its old self is that in Calabar. It records only one flight a day since Donald Duke left as governor of Cross River State. The Uyo Airport has taken over. Owerri is bubbling. Enugu will pick up because, at a time, it was behind Lagos and Abuja, even ahead of Port Harcourt International Airport.

“But in the north, you will have to shut down Sokoto, Bauchi, Gombe, Minna, and Ilorin maybe, among others. In the west, maybe Akure. Hence, it becomes highly political and more dangerous. So, for the length of time that it will take the airlines to bounce back, the agencies and the airports will have to keep running with the government’s support,” Aligbe said.

The Secretary General of the Aviation of Safety Round Table Initiative (ASRTI), Group Capt. John Ojikutu (rtd), urged the government to concession all the airports, and not the big four alone, to run efficiently and profitably.

Ojikutu advised that the Lagos and Abuja airports should be concessioned in blocs with four or six others.

“Lagos could go with Kano and some others in the south but not Enugu or PHIA. Abuja could go with Enugu but not with PHIA. PHIA could go with Kaduna and others but not with any other mentioned.

“My idea of concession is only for the non-aeronautical. These include the passenger terminal buildings, cargo terminals, aircraft parking areas, car parks and tollgates. FAAN could become a holding company overseeing the concession airports on behalf of the government,” Ojikutu said.

The Chairman, House of Representatives Committee on Aviation, Nnolim Nnaji, earlier called for the unbundling of FAAN ahead of the move to concession major airports. Nnaji said it was a glaring fact that Nigeria’s airports were not just underdeveloped, but grossly underutilised.

Indeed, FAAN headquarters in the last three years generated N16.10 billion in revenue and collected N15.02 billion. Its expenditure was put at N59.41 billion, leaving a deficit of N29.1 billion.

The Chairman, NIGAV Centre, Fortune Idu, said FAAN was overburdened with managing 22 airports and paying salaries of over 12,000 workers from the revenue generated by Lagos and Abuja airports.

Idu said it was only FAAN, among airport authorities in the world, that had such a peculiar business model of airport subsidisation.

According to him, the body remains critical to the “fragile aviation industry” and should be carefully considered and properly repositioned to save the industry.

https://m.guardian.ng/news/17-fg-airports-not-viable-may-shut-down-over-losses/