Foreign airlines’ trapped funds cause expensive fares – Operator

The chairman of the Airlines and Passengers Joint Committee of the International Air Transport Association and Group Managing Director /CEO Finchglow Holdings, Bankole Bernard, explains in this interview with FUNMI FABUNMI and LILIAN UKAGWU, why foreign airlines’ funds have been trapped and how the government can resolve the issue

What is your take on the trapped funds of foreign airlines, which IATA recently said have climbed to $743m?

This is an unfortunate situation. I will consider certain things, a misplacement of priority. We have a choice in business. If the Bilateral Air Service Agreement (BASA) says foreign airlines make sales in local currency, it should be changed to foreign currency. We should be able to fulfil that obligation because reputation damage causes a lot and it is one of the things that made airlines like Emirates and Etihad Airways leave, when we could have had more airlines coming into the market. They do not want their funds to be trapped. So, they will go to another market that is lucrative and this would not have been possible if we were doing proper dialogue.

If you say you do not have funds for them at the official rate and you decide to make them pay for a premium, they will sell their tickets at a premium and they will be able to repatriate their funds. But if you do not give them dollars at the official rate and they are unable to repatriate their money, that is wrong and fraudulent as a nation. And it is not good for our image as a country.

So, this thing is all about applying your sense, but we have a lot of people that are not willing to think. Now that we have started to sell tickets at N551 to a dollar, I can tell you that the issue of trapped funds will move as fast as possible and it will come to zero. To fly to London now, it is about N1m and that is the cheapest.

The law of demand and supply is applicable in every business. If the supply outweighs the demand, the price would crash, but when people are threatened by the fact that their funds cannot be repatriated, they start to reduce inventories, so that they can make money. In the airline business, we have two ways of selling; you either sell volume or you make yield. Volume is when you have a lot of people while yield is when you sell a few, but still, make your money.

Some state governments are building agro-cargo airports. Do you think this is sustainable?

This is another misplacement of priority. Agro-cargo airport is a capital project. It is easier to make money and name when you embark on a capital project. None of them wants to come in and continue on any legacy project not completed by their predecessors because the people will ask them what they did.

However, there is nothing actually wrong if they get their priority right. You cannot be in a state where all the interstate roads are bad and agro is the priority. You cannot be in a state where all the schools are mushrooms and teachers’ salaries are not paid and then say agro is what is important to you. The government needs to get their priorities right. The concept is a beautiful one, but it is about setting priorities right.

How has the current cashless policy affected your operations as a travel agency?

I am waiting for the figures that the Nigerian Bureau of Statistics will release to the public. Whether we like it or not, the economy nosedived and I want to see what they are going to give to us. It is clear to us that the economy is seriously nosediving. I would not be surprised if we lost more than 50 per cent because it was as if everything got grounded. Apart from the scarcity of cash, even online financial transactions were also grounded, which prompted the Governor of Central Bank of Nigeria, Mr Godwin Emefiele, to apologise to Nigerians.

The fact remains that the government did not tell us the truth about what happened, but I do hope that one day, somebody would be bold enough to tell us the truth about what happened. That the cash was not made available, it was intentional. If cash was not working, but the financial transfer was effective, the agony will not be too bad.

What is your assessment of the performance of the outgoing government in the aviation industry?

It is always easier for you to make an assessment of the government’s performance when you are on the other side of the seat. President Buhari has done his bit. Today, you and I are talking about the Maintenance, Repair and Overhaul (MRO) facility, but was it there about eight years ago? We have seen a lot of improvements at the Nigerian College of Aviation Technology (NCAT), Zaria. Within this period, the college acquired a lot of simulators. Also, in the last eight years, we did not have an air crash involving any commercial airline. It is very easy for us to take it for granted.

In that same eight years, we are talking about cargo airports across the country. Let us remember that somebody gave approval for their establishment. If the government did not buy into the idea, the cargo airports would not happen.

Should tickets be sold in foreign currency to avoid a situation where foreign airlines funds are trapped?

 What we call aviation business is a commercial decision. If we have BASA, there is what we call a commercial decision. A commercial decision is when things like this happen and you still want to continue to operate within the market. You will have no choice, otherwise, they won’t stop coming.  That was what made a company like Emirates leave. When you look at the composition of the ticket, it comprises both fares and taxes even taxes are charged in dollars, which should not be. So, there are ways we can get these things done. We have just not embraced the right attitude.

We should always be fair in business. So, if they are sold in dollars, it is because we are pushing them to the wall and making it uncomfortable for them to function. Again, they are scared that if they leave the shores of your country, they might probably not get their money.

You once said the Federal Government should stop the establishment of mushroom aviation training schools. Why did you say that?

In aviation, one of the things you must ensure, because of the sensitivity of the industry, is professionalism. When you talk about professionalism and you have mushroom schools here and there, it means that it will affect the manpower we will have in the industry. Our personnel will not be attractive to the rest of the world. We need to create a conducive industry where the quality is very stringent and we have aviation schools that are licensed to operate. If they are licensed to operate, they will live up to expectations because the Nigerian Civil Aviation Authority carries out inspections on these schools.

Are there fears more airlines may pull out of the country because of the challenge of trapped funds?

 In the very long run, if it continues, they would not have a choice but to pull out if they cannot bear the grudge anymore. So, it is a matter of choice. If you continue to make your environment conducive, they will stay.

Foreign airlines increased airfares despite their funds being trapped. How do you think this would impact the industry?

 They are not here as philanthropists but to do business and make a profit. When their funds are trapped, there is what they call the cost of funds. Who bears the cost?  If the funds are trapped and they have to do dollars, it means that they have to go for yield and not for volume because there are two ways the airlines make money. It is either they go for volume or yield.

So, when their funds are trapped and it continues to be trapped, they will change their business model to yield and not volume.

Yield means that they will sell more expensively to recover their money. If you sold a ticket at N500,000 and you were able to sell 10 but if you sell that same ticket at N1m and you were only able to sell five, you were still able to cover your cost. It is simple logic.  There is no hard and fast rule about it.