Improper rates cost FG, Aircraft Ground Handlers N14.2 billion per year

According to Daily Independent investigations, the Federal Government and ground handling companies in the Nigerian aviation industry lose about $28,350,000 (N14, 175 billion) annually due to improper handling rates in the country.

This comes as stakeholders have warned that if the current rates charged by handling companies to airlines are not reviewed, ground handlers may soon collapse, putting safety and security at risk.

According to an investigation by the Daily Independent, handling companies still charge between $300 and $1000 to handle a narrow body aircraft, rather than the $1400 to $1600 charged in other African countries, and about $3000 to handle a wide body aircraft, rather than the $5,000 charged in other African countries.
Further investigation revealed that ground handling companies handle no less than 45 narrow-body aircraft on regional and international routes, including Boeing B737, Airbus A320, ER 135 and ATR aircraft, on a daily basis at the country’s international airports.

Ground handling companies handle at least 20 flights per day for wide-body aircraft such as the B767, A330, B777, and B747.

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For example, in other West African countries, the average handling rate for a narrow body aircraft is $1500, whereas in Nigeria, it still varies between $300 and $1,000 per aircraft.

Wide-body aircraft are handled by handling companies at least 20 times per day across the country’s international airports, with 600 handled monthly and 7,200 handled annually.

The companies handle 45 narrow body aircraft per day, 1,350 per month, and 16,200 per year.

The estimated annual revenue loss of N14.2 billion is in addition to the handlers’ losses on the domestic scene.

Ground handling companies handle at least 150 aircraft per day. Domestic aircraft are still handled for a pittance of N15,000 to N20,000 by handling companies, according to an investigation.

Overall, the combined handling companies in the sector, Skyway Aviation Handling Company (SAHCO) Plc, Nigerian Aviation Handling Company (NAHCO) Plc, Swissport Handling Company, and Precision Aviation Han­dling Company Limited (PAHCOL), are striving to stay in business, according to the investigation.

It was discovered that whatever revenue the ground handling companies currently generate is half of what they were expected to earn on a daily, weekly, monthly, or annual basis.

Apart from the huge losses incurred by the handlers, the Federal Government loses revenue from the handlers through the Federal Airports Authority of Nigeria (FAAN).

FAAN receives 5% of total annual turnover from han­dling firms.

In order to prevent the handling companies from collapsing and jeopardizing security and safety in the sub-sector, players in the Nigerian aviation industry have called on the Nigerian Civil Aviation Authority (NCAA) to intervene.

They also warned that unless the authority intervened, the gains made in the civil aviation sector over the previous eight years could be jeopardized.

The current rates in the sub-sector, according to Dr. Sam Oduselu, pioneer Commissioner, Accident Investigation Bureau (AIB), were due for review.

He described the current rates as “backward,” emphasizing that the outbreak of the COVID-19 pandemic had added to the woes of industry organizations, including the ground handling industry.

Oduselu insisted that the rates were unsustainable, fearing that the Federal Government was losing massive revenues from the sub-sector, in addition to the safety and security implications.

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“When I was the Director of Airworthiness at NCAA, the division was known as economic regulation, and when you talk about economics, this is a part of it, and it will tie into safety. The purpose of economic regulation is to ensure that whatever you charge for an airline ticket is sufficient to maintain your airline ticket, maintain your equipment, and pay your employees properly.

“However, the ground handling company will find it difficult to operate optimally and effectively under lowregime handling rates. Furthermore, government sites are not reaping the economic benefits that they should, particularly from foreign carriers. Those airlines are aware of the handling rates they pay in the countries to which they fly, but when compared to what we charge, it is clear that they prefer the rates in Nigeria to those in those countries.

“I believe the most significant challenge we face is that these ground handling companies were established by airlines, but now that they are in private hands, they have discovered that the charges are too low and are affecting their profit margins. As a result, ground handler activities may jeopardize safety. If employees are not adequately compensated or paid on time, you will find that they will not give it their all on the job.”

He warned that, given the current situation, criminals could easily compromise the airside personnel of the handling companies.

He also charged the ground handling companies to lobby the National Assembly through their association, the Aviation Ground Handling Associ­ation of Nigeria (AGHAN), to back up the anticipated new rates with legislation.

Mrs. Olatokunbo Fagbemi, NAHCO Plc’s Group Managing Director, bemoaned the fact that handling company rates had been stagnant or declining in recent years, while foreign exchange and the living index had been skyrocketing.

Despite the difficulties of low handing rates, she said, NAHCO had ensured that the safety and security of its clients was not jeopardized, and that the company had continued to invest in equipment to improve its services.

She emphasized that the rates should be reviewed for safety, security, and economic reasons, noting that the handling companies had spent a significant amount of money to train personnel, obtain international certifications, and purchase cutting-edge equipment to improve their services.

Fagbemi, like Oduselu, believes the NCAA should intervene in the situation.

“We have benchmarks that are given even in deregulated economies around the world; some may not be nuanced while others are announced. What we’re saying is that you can charge whatever you want, but you can’t go below a set of guidelines that will harm the industry, business, and public safety.

“As we move forward, we must invest in our GSEs, facilities, and people; we have done so and will continue to do so, but we must review our rates in light of these astronomical changes that have not been matched with recent changes. Is it possible for us to continue in this manner and remain viable as a company? “No,” says the author.

Despite the fall in the naira and rise in the prices of GSEs, Mr. Basil Agboarumi, the Managing Director of SAHCO Plc, expressed regret that the current rates had remained unchanged for over two decades.

Though he agreed that the industry was deregulated, he stated that the NCAA could not leave price fixing to the ground handling companies alone.

He bemoaned the rate of inflation, which he claimed had continued to rise over the past two decades while handling rates remained unchanged.

“Between 2020 and now, we have seen a significant increase in the value of the currency, which used to be N350 to now over N500 to a dollar, and we are a significant forex consumer. Nobody wants to hear that ground handling services have failed. So, we have a responsibility to provide not just ground handling services, but the best ground handling services in the world, and in order to do so, we need the equipment to do so, because the world of equipment is changing.”