Ground Handlers Groan, As Handling Charges In Nigeria Remain Lowest In Africa
…As Stakeholders Ask NCAA To Intervene
…Say Current Rates Overdue For Review
Ground handling companies in Nigeria and the Federal Airports Authority of Nigeria(FAAN) may continuously lose billions of Naira as revenue, if the current trend of low ground handling charges, which is between $400 and $1,139 collected by handlers from airlines persists .
This is just as investigation revealed that ground handling rates in Nigeria is the lowest in Africa .
In Nigeria, the rates fluctuate between $400 and $1,139 for narrow body body aircraft and $3,000 and $3,200 for wide body airplanes, depending on the bargaining power of the international airline.
These rates, which have been giving ground handling companies; Skyway Aviation Handling Company(SAHCO) PLC and Nigerian Aviation Handling Company(NAHCo) PLC sleepless nights,AbelNews learnt, have not been reviewed since they came into existence in the 1980s and 1999.
While ground handling rates in Nigeria have been stagnant for over a decade,ground handling rates in Guinea for example stood at $1,673 for narrow body aircraft and $4,715 for wide body aircraft.
In Senegal, the rate is $2,250 for narrow body airplanes and $5,259 for wide body aircraft,while in Cameroon the rate goes for $1,400 for narrow body aircraft and $4,500 for wide body airplanes.
Sierra Leone, a fellow anglophone country handling narrow body aircraft, costs $2,250 and $5,250 for wide body planes, while Ghana, another English country in West Africa charges $1,500 for narrow body and $4,150 for wide body.
The narrow body aircraft include B737, Airbus A320, ER 135 and ATR aircraft, while the wide body aircraft are categorised as B767, A330, B777, B747 and A380 aircraft.
It was also learnt that the low rate charged by ground handlers is not peculiar to international airlines alone, as the ground handling companies are proposing to adjust domestic ramp handling rates to be at par with the exchange rate, which according to them has significantly impacted on the cost of operations.
The not-too encouraging trend, the ground handlers and aviation stakeholders said has economic, security and safety effects of low handling rates on the Nigerian aviation industry, especially FAAN, which loses billions of naira annually from the 5 per cent gross annual turnover paid by the ground handling companies.
Speaking on the issue, the former Managing Director of NAHCO, Kayode Oluwasegun-Ojo, stated that the current rates charged by the ground handling companies in Nigeria are not sustainable.
He said that though he may not be able to pinpoint the actual rates, he feels the ground handlers other aspects to do the business,
“I will say this, again, anybody doing business must first recover his cost and this is simple to do. You must recover the cost of depreciation, tax, profit and others. Otherwise, inflation will catch up with you.
“Clearly, the rates they are charging are not sustainable, but I may not be able to be specific on the right rates. What I think they are doing right now is subsidising from other aspects of the business. That is not a sustainable model for business in the long run. Whatever that is not sustainable, you will eventually crash,” Oluwasegun-Ojo said.
On price fixing, he said, “You must allow prices to be cost-reflective, but still show some levels of competitiveness. The telecom industry is a good example; operators compete around service and the call tariff’s difference is not that much. They have a minimum service level that they must provide.
“There should be price fixing for narrow body and wide body aircraft. You should have a minimum level you can go, but don’t charge yourself out of business. If you are already operating below the bottom, honestly, it is not sustainable. There are implications on safety, security, job employment and the government. If companies are not making sufficient profit, it will affect the level of tax they will pay.
Also speaking on the thorny issue, the former Managing Director of SAHCO, Alhaji Oluropo Owolabi, noted that the issue has been on for more than 10 years, adding that it is unfortunate that the Federal Government is not paying attention to it .
He contended that the issue is affecting the government, foreign exchange, FAAN and even the Nigerian Civil Aviation Authority(NCAA), the regulator and that it is a tripartite agreement.
According to him, “When you fly straight, within the next 25 minutes, you are in Accra. Then, you ask how much they handle a wide and narrow body aircraft over there. It is completely different from what they are paying in Nigeria. In fact, it is a peanut. When you move further to other West African countries, you will see the disparities and they are unbelievable. Move to South Africa, Europe and America, the disparities are unbelievable.”
Owolabi posited that Nigeria ground handlers are suffering because no authority has been able to enforce the regulation on these airlines and also call the ground handling companies to order.
“This act has painfully affected the revenues of the handlers, the take home of FAAN at the end of the year. The total sales that we pay as remuneration to FAAN at the end of every year surely will diminish. It is what we take that we pay for. As we are losing, FAAN is losing and NCAA is not taking up its responsibility to ensure everything is being done rightly.
“The point is, how much are you paying for air tickets 10 years, five years and even three years ago? Is it the same as you are paying now? Handing prices must move at par as what we are paying on tickets.
“Don’t forget that the equipment we are using are imported and are cleared by ICAO and IATA before we can use them.”
On his part, Ex. Managing Director of SAHCO,Barr. Chike Ogeah,while speaking on the rates and implication, urged the two handling companies to work together, stressing that as long as they are not working in tandem and setting the bars for themselves, knowing that the most important issue in the aviation business is safety, if they realise that, then they will not want to be undercutting themselves because that is where the greatest problem lies.
He pointed out that the idea of ground handlers delivering services below its cost because the ground handling company wants to get the bulk of the clients, is a dangerous trend.
In his words, “The rates are inelastic, it is open ended. There is a particular amount of client that everybody is trying to get because aviation is a specialized business, not a food stuff business. It is a specific business. So, by the time you look at passenger and cargo handling, you will realize that you need to be able to enforce your own prices, which must be standard and must be realistic to ensure that safety is not compromised.
“It shows that something is wrong for Nigeria to have the lowest handling charges on the continent. NCAA as the regulator must sit down with the handling companies to come out with a realistic regime for the handling companies.”
Speaking further, Ogeah, stated that it was ridiculous for Nigeria to charge as low as what they are charging now and that it doesn’t make sense.
He, however, believed that with the coming on board of AGHAN, the issue would be addressed, adding the only way their survivals will be guaranteed is for them to charge right in view of the fact that some of the companies are listed on the Nigerian Stock Exchange (NSE) and they need to deliver to their shareholders.
Chairman, Board of Trustees,Association of Ground Handlers of Nigeria ( AGHAN), Engr. Sam Oluwole, who also added his voice to the thorny issue, said that the bane of the sub-sector currently is the extremely low charges by ground handling companies in Nigeria, which according to him is not commensurate with the quality of service that they render daily, the safety and security.
According to Oluwole, “There are three aspects that concern us at the moment; economic, safety and security of the industry. As far back as 1986, grand handlers were charging about $1,139 to handle a narrow body aircraft for instance, but regrettably today, despite the crash of naira against the dollars and other currencies, some of the handlers charge as low as $300. Then a dollar was equal to 90 Kobo, but today, the same dollar is about N500, yet we are charging low.”
He pointed out that airlines play on the infighting among the ground handling companies to pay them a token today, yet they get better services here than whatever they are getting outside the country.
To bu tress his point,Oluwole cited Accra, Ghana, where airlines pay about $2,000 for same service, if not lower.
In his words, “The challenge here is that the Nigerian Government is losing considerably a lot of tax revenues because the handling companies pay 5 per cent annual turnover to the government and it is this money that they are using to acquire facilities, upgrade equipment, while the handlers too train personnel and pay workers’ welfare packages and insurance.”
He continued, “We have been static over the years and because we have been static, we find it very difficult to maintain relevant standards. As you know, aviation is international business with safety as our hallmark. If this continues, there is this tendency that one may want to compromise on safety if care is not taken. If the staff is not well-paid and the equipment are not ultra-modern and we start to cut corners, the resultant effect of this is that we may have accident.
On the appropriate rates by handlers, AGHAN BoT Chairman said, “We need to work out something that will be a win-win situation for the airlines and ourselves. I mean something that will enable us to still be in business and provide adequate service to our customers. There are standards set by international organisations on this; IATA, ICAO all have standards.
The stakeholders called on NCAA not only to intervene but to also that there should be minimum handling rate, which will be observed by all ground handling companies and that there should be a uniform rate, which NCAA is going to supervise.
NCAA, they agreed should be able to regulate this by ensuring that the Service Level Agreements (SLAs) are maintained and to ensure there is no undercutting.
They argued that whatever the handlers are agitating for is not increment but only trying to regularise the rates, adding that whatever the ground handling companies are charging now is lower than what they did in the 1980s and early 1990s.
The essence of asking NCAA to intervene and play its role as a regulator, stakeholders further said is to be at par with other countries.
NCAA, they posited should play its role just the way the Central Bank of Nigeria (CBN) regulates activities in the banking sector.