The Nigerian Civil Aviation Authority, NCAA, has yesterday, withheld Azman Air Transport License, ATL, pending when the airline provides required documentation for its operational licenses renewal and sign a Memorandum of Understanding on how it would remit over N1.2bn legacy debt accrued from collection of Passenger Service Charge, PSC.
An ATL is issued as authorisation to airlines to provide scheduled and non-scheduled services. It is one of the licenses received by airlines before they can commence operation just as they await the Air Operator Certificate, AOC, that fully guarantees them the right to begin air services. Without ATL the AOC becomes invalid.
Vanguard Aviation World, gathered that the suspension would affect travel through the northern part of the country as Azman is the major carrier along that route.
The development will impact capacity on other route within the country negatively.
It was also gathered that the indefinite suspension is coming barely two months after the suspension of Dana Airlines on July 20, 2022, in pursuant to Section 35(2), 3(b) and (4) of the Civil Aviation Act, 2006 and Part 18.104.22.168(a)(1) of the Nigeria Civil Aviation Regulations (Nig.CARs), 2015.
Also, in same month, Aero Contractors suspended its flight operations, due to its inability to sustain daily operations as a result of hike in Jet A1, along with other financial constraints.
Following the suspension, a total of three domestic airlines operating 23 aircrafts are not in operation, thus creating more passenger traffic in the country.
There were also indications that domestic flight movements would be threatened, following the grounding of three airlines operations over capacity in the past three months.
While Dana Airlines and Azman Air were suspended by the NCAA, Aero Contractors suspended its operations indefinitely following economic realities.
The development has impacted travels significantly, as the suspensions have reduced the number of aircraft in operations to 36 from 123, with grounded aircraft currently at 87.
This recent grounding could cause airfares to skyrocket as the issue of scarcity of aviation kerosene, also known as Jet A1 led to the surge in airfares across the country some few week ago, which may force passengers to pay more.
Why we suspended Azman Air — NCAA
While confirming the suspension, NCAA Director General, Captain Musa Nuhu, noted that the move is not particularly aimed as Azman but that all indebted airlines would need to comply with these rules to enable them renew their ATL.
He said:”Azman Air must provide Tax Clearance as one of the documentation for its ATL and must sign the MOU to negotiate its debt remittance which is part of the N42 billion and $7.8 million debt in PSC.
“This is not a charge and this is not their money, it’s monies collected in trust for us from passengers and they squandered it. We are not asking them for an interest rate, no penalties, we just want our funds remitted. We asked them to sit and negotiate as they collected on our behalf and refused to remit.
” I cannot keep explaining to the Minister, to the Accountant General, to the Presidency why we cannot remit money meant for them to them. We have been forced to carry out this action.
“Everyone is having challenges, difficulties and this is not restricted to the industry stakeholders alone, the airlines, ground handlers and other service providers as even the agencies have the same problem in the issues of funds.
“We know that if we tell them to give us all these monies at the same time, it is very difficult and not possible, so, what we have put in place in NCAA and to prevent the debts from growing, we have put in place a tripartite agreement; the NCAA, airlines and the airlines’ banks. So, once those funds go to the bank, the 5 per cent TSA/CSC is automatically deducted and goes into the NCAA bank and NCAA will share it with the other sister agencies on a pre-determined ratio as entrenched in the 2006 Civil Aviation Act.
“What we have said is that if they don’t pay this legacy debt, we are not going to renew their licenses; AOC, ATL. That is one of the conditions and most of them have entered into the agreement.”
Northern route heavily impacted — Experts
Meanwhile, stakeholders in the industry have lamented that the development would impact travellers utilizing the northern route.
According to aviation experts, Mr. Olumide Ohunayo, “Nigeria is losing capacity on a daily basis, and the northern routes will be mostly affected by the suspension of Azman Air because that is their area of strength.
“They have been there for years, connecting the northern routes through Abuja, Lagos, amongst others. The region will feel the impacts more. Here we are talking about route where ticket fares are around N150, 000 to N200, 000 and with this development, I fear the airfare will jump to N250, 000 or even more.
“At some point passengers might be scrambling for seats at the airports which will be taking us back to those old days that we never prayed to return.
“I think it is time for the management NCAA and the Ministry of Aviation to remove pride and release Nigeria’s Eagles AOC, belonging to AMCON, which has three aircrafts to join the market and operate. You cannot keep three aircraft down there and we are losing capacity daily. Apart from this, there is the issue of employment, as staff will not be paid or be asked to go home.
“Also, some of the airports that Azman is moving to, the shops within, service providers, taxi operating amongst others will also not operate. Down the line, there will be losses for everybody, even the agencies will be impacted too. The market is tough at the moment.
Also, the Principal Managing Partner Avaero Capital, Sindy Foster, noted that, the level of capacity in the sector is dire.
She said: “Dana was suspended by the regulator, but are planning to come back. Aero voluntarily suspended their services, and it appears that Azman has voluntarily suspended operations whilst they renew their AOC.
“The withdrawal of services from three airlines significantly reduces the amount of bookable seats and will yet again lead to increased fares if there continues to be a mismatch of supply and demand.
“The NCAA recently announced they would not renew the ATL and AOC of indebted airlines, so we can expect to see more voluntary and involuntary suspensions down the line. As this is a financial crisis, it can be remedied by cash injections into the airlines. This is not just a Nigerian cash liquidity issue.
“Other airlines are issuing shares, attracting private equity investment, or are utilising other creative ways of recapitalisation which are not easy in this environment, where company accounts and valuations are not as transparent or confidence rendering as they might be.”