Static ground handling charges have resulted in a financial loss for local aviation during the last 35 years. The existing underpricing structure, as well as the low tariffs that international airlines remit to Nigeria, are the cause of both grand handlers and local aviation significant revenue.
Underpricing and the low tariffs that foreign airlines currently remit to Nigeria are losing both grand handlers and local aviation significant money.
The scenario, which is not unrelated to unhealthy competition among operators, has reduced the sector’s perspective profitability even further.
Concerned stakeholders said it was past time for the Nigerian Civil Aviation Authority (NCAA) to step in and bring competing parties to a round-table discussion, putting an end to the sector’s run of pittance remittances.
Despite having better ground support equipment (GSE) than most of their African counterparts, the three ground handling companies, Skyway Aviation Handling Company (SAHCO) Plc, Nigerian Aviation Handling Company (NAHCO) Plc, and AHS Aviation Handling Services, charge the lowest rates on the continent.
Given the fact that this part of the aircraft industry has now been deregulated, internal competition among operators has kept the tariffs low since the 1990s.
A narrow-body aircraft such as the Boeing 737 or turboprops is charged $1,673 in Guinea, whereas a wide-body aircraft such as the Boeing 767 or A330 is charged $4,715. In that order, Senegal charges $2,250 and $5,259 respectively. It costs between $1,400 and $4,500 in Cameroon. Sierra Leone charges $2,250 and $5,250 for passenger flights, whereas Ghana charges $1,500 and $4,150.
Senegal, Cameroon, Sierra Leone, and Ghana, respectively, charge $2,300, $1,750, $2,300, and $2,500 for narrow-body cargo aircraft. Ground handlers in such countries charge between $4,450 and $5,250 every trip for wide-body planes.
Similar fees in Nigeria, on the other hand, start at $1,000 for a narrow-body plane and go as low as $3,000 for a wide-body plane.
Depending on the foreign airline’s negotiation power, the $1,000 ground-handling cost might drop as low as $400, according to sources.
Sam Oluwole, Chairman of the Board of Trustees of the Aviation Ground Handlers Association of Nigeria (AGHAN), verified the situation but expressed sorrow that ground handling businesses continue to charge significantly less than in 1986.
Ground handlers then charged $1,139 for a B737 aircraft, according to Oluwole. Despite the naira’s depreciation and rising equipment costs, handlers will charge as little as $300 for the same service in 2021.
“There are three aspects that concern us at the moment: economic, safety and security of the industry. As far back as 1986, ground handlers were charging about $1,139 when a dollar equals 90k. Today, the same dollar is about N500, yet we are charging low.
“Another challenge here is that the Nigerian government is losing considerably a lot of tax revenues because the handling companies pay five per cent annual turnover to the government and it is this money that they use to acquire facilities, upgrade equipment, while the handlers train personnel and pay workers’ welfare pack¬ages and insurance,” Oluwole said.
Kayode Oluwasegun-Ojo, the former MD of NAHCO, said the anomaly had gone on for far too long and was unsustainable for operators as well.
“If your price for a service is less than cost-reflective, it means you are not recouping your costs, and it will not be viable in the long run,” Oluwasegun-Ojo added.
Chike Ogeah, Vice-Chairman of SAHCO Plc, believes that the ground handling companies must band together and work together.
If a ground handling company wants to get the bulk of the clients, it gives services below its cost and that is dangerous. The rates are inelastic; it is open-ended. There is a number of clients that everybody is trying to get because aviation is a specialized business, not a foodstuff business. So, by the time you look at passenger and cargo handlings, you will realize that you need to be able to enforce your prices, which must be standard and must be realistic to ensure that safety is not compromised.
“It is ridiculous for Nigeria to charge as low as what they are charging now. It doesn’t make sense. I think the coming onboard of AGHAN will address that. The only way their survival will be guaranteed is for them to charge right. Mind you, some of the companies are listed on the Nigerian Stock Exchange (NSE) and they need to deliver to their shareholders.”