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 Daily Independent Online.
* Friday,July 16, 2004.
How viable
are Nigerian airports?
Although airport venture is a lucrative business all
over the world, but this is where economic considerations are uppermost
in the choice of location of facilities. In this report, Aviation
Correspondent, Rotimi Durojaiye, reports that the Nigerian scene is slightly different with
consequences of too many unviable airports across the country.
The Federal Airports Authority of Nigeria (FAAN)
(Amendment) Act No. 52 of 1999 was an offshoot of Decree 9 of 1996,
establishing FAAN. According to the act, the authority’s principal
responsibilities include the development, provision and maintenance at
the airports all necessary services and facilities for the safe, orderly,
expeditious and economic operation of air transport; provision of
adequate facilities and personnel for effective security at all airports;
provision of conducive environment under which passengers and goods would
be carried by air and under which aircraft would be used for other
gainful purposes; provision of accommodation and other facilities for the
effective handling of passengers and freight; development and provision
of facilities for surface transportation at airports and carrying out, at
airports, such economic activities that are relevant to air transport;
and other commercial activities, which are not relevant to air transport
but which may be carried out without prejudice to other functions of the
authority. These statutory provisions make it mandatory for FAAN to
ensure comfort, security and safety of persons, goods, vehicles and
equipment at all airports in Nigeria.
The authority derives its major part of revenue from
aviation-related sources, such as landing and parking charges, passenger
service charge (PSC), fuel surcharge and cargo surcharge. Other sources
of revenue are minor concessions, car park, toll gate fees and car hire
services.
The viability of an airport depends largely on these
aviation-related sources. At the moment, FAAN manages 21 airports. Four
of these airports are designated international airports and are open for
24 hours daily, providing regular International flight operations, as
well as domestic services for airlines and other operators. These
airports are Murtala Muhammed International Airport,Lagos, Nnamdi Azikiwe
International Airport, Abuja, Malam Aminu Kano International Airport,
Kano and Port Harcourt International Airport, Port Harcourt. The
following major domestic airports are open 18 hours daily: Margaret Ekpo
Airport, Calabar, Sultan Abubakar III Airport, Sokoto, Yakubu Gowon
Airport, Jos; Enugu Airport, Enugu, Yola Airport, Yola, Maiduguri
Airport, Maiduguri and Kaduna Airport, Kaduna. Other domestic airports,
which are open for 12 hours daily are: Benin Airport, Benin, Minna
Airport, Minna, Ilorin Airport, Ilorin, Akure Airport, Akure, Ibadan
Airport, Ibadan, Makurdi Airport, Makurdi, Sam Mbakwe Airport, Owerri,
Osubi Airport, Osubi (Delta State), Bauchi Airport, Bauchi and Zaria
Airport (Training), Zaria.
At the moment, the current problems, facing FAAN is
that of low traffic and the underutilisation of more than 90 per cent of
these airports. Of the 21
airports managed by the authority, only three (Lagos, Kano and Port
Harcourt) are said to be economically viable. They account for about 80
per cent of the authority’s overall revenue with Murtala Muhammed Airport,
accounting for more than 60 per cent.
Revenue generation at airports is a function of
traffic flow. Low traffic begets low revenue. A source at FAAN told Daily
Independent that traffic flow at these 21 airports is too low for
financial viability when compared with what obtains in other parts of the
world. “Atlanta Airport
(United States) alone averages 80 million passengers per year.
Heathrow Airport (United Kingdom) averages 64 million passengers per
year. Johannesburg Airport (South Africa) averages nine million
passengers per year and Cairo Airport (Egypt) averages eight million
passengers per year”, the source added.
The source regretted that yearly passenger traffic at
all the 21 airports is just about seven million, adding that “this is
below those of the individual airports of Nairobi, Cairo and Addis Ababa,
even within the African region”. The total passenger movement recorded at
all the 21 airports last year, was 7,261,757 with the Lagos Airport alone
generating 3,362,464. According to our investigations, the total revenue
generated at the 21 airports
last year was N8,381,916,876, with the MMIA alone generating
N6,305,139,213. The airport equally incurred an expenditure of
N1,020,551,595. In terms of passenger movement and revenue generation,
Nnamdi Azikiwe International Airport followed MMIA closely with 1,848,993
passengers and N674,578.754, respectively.
Regrettably, our source added that some of the
airports with low passenger traffic and revenue generation incur more
expenditure than the viable ones. While Katsina airport generated only
N854,140 last year, it incurred a whopping expenditure of N20,539,015.
While Sam Mbakwe Airport, airlifted only 33,823 passengers last year and
thus generated only N4, 846,292 and incurred an expenditure of N76,127,798,
that of Ibadan was said to be pathetic. “It airlifted only 2,979
passengers, generated only N4,686,827 and gulped N49,286,343”, our source
added. Akure, Yola, Sokoto, Benin,Maiduguri, Ilorin, Jos and Zaria
airports were also said to belong to the category of unviable airports in
the country.
As panacea, our source suggested that FAAN should be
given free hand to allow market forces to determine its tariff structure
and that public policies,
which mitigate against revenue generation should be reviewed. The
source made particular reference to wiavers on major revenue sources as
passenger service charge, landing and parking fees and fuel surcharge. It
also pleaded with the Federal Government to release the N6.5 billion
appropriated fund to FAAN. This amount was said to be the accumulated
capital budgetary allocations to the authority since 2002. N1.25 billion,
N3.706 and N1.50 billion were said to have been earmarked for the
authority in 2002,2003 and this year’s budgets respectively, but yet to
be released by the Federal Government.
Daily Independent
investigations revealed that revenue generated from the viable airports,
especially MMIA, is used in running the remaining 20 underutilised ones.
“The problem is made worse by the withdrawal of
government’s recurrent subvention to the authority since 1982. That is
why most installed airport equipment and facilities cannot be maintained
at the optimum level of efficiency - if they have not become obsolete or
unserviceable”, the source added. Another aviation expert, who would not
want his names in print, added that an airport can not be economically viable
“unless it generates some minimum level of traffic (passengers and
cargoes). It is also fairly certain that most of our unviable airports
may not be able to generate the needed traffic within the foreseeable
future.”
In this scenario, therefore, the source suggested
various options as solutions. According to him, FAAN should be made to
run the viable (and the potentially viable) airports, while the Federal
or state governments should be made to take over the remaining ones. The
source is also of the opinion that should FAAN be made to manage all the
nation’s airports, “then, the government should subvent it to the extent
of the deficits recorded by the unviable airports. “Government should
lease the unviable airports to willing individuals or companies, who will
take full charge of their maintenance. However, security consideration
may render this option unacceptable to the government”, the source
stressed.
At its inception in 1978, the then Nigerian Airports
Authority (NAA) was administered under five major divisions, as
recommended by the Dutch firm of management consultants -
Borenschot-Moret-Boshoom (BMB), engaged by the then Federal Ministry of
Civil Aviation, to fashion out an organisational structure for the newly
created NAA. The five divisions were Technical Development, Personnel,
Commercial, Finance and Operations. The firm also produced the first and
only expatriate general manager of the authority, Mr. J.G.C.Machwirth. In
1985, the government decided to privatise and commercialise some public
enterprises, including the former NAA through the Technical Committee on
Privatisation and Commercialisation (TCPC), now Bureau for Public
Enterprises (BPE). After about two years of intensive study and exercise
on the authority, the TCPC came up with recommendation for it to be
“partially commercialised” and this was accepted by the government. The
implication then was that the government realised that the authority was
rendering some social services, as well as serving political interests by
running a great number of unviable airports and thus, it could not
generate sufficient revenue to run its services and make profit.
A performance agreement was signed between the TCPC
and the then Federal Ministry of Transport, Aviation and Communications
and the NAA with a management structure, consisting of four directorates.
The heads of the four directorates were designated executive directors
and also became members of the board of directors - a privilege, which
was not enjoyed by previous directors in the earlier management. A
structural change was also effected at the top management level whereby
directors, deputy directors and assistant directors were re-designated general
managers, deputy general managers and assistant general managers. The
authority was to be subvented with about N800 million by the TCPC to
enable it refurbish and/or replace some of its assets, so that it could
start its new commercialised status on a clean and comfortable state, but
this never materialised. Instead, in 2001, BPE classified FAAN for
privatisation.
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