Safety concerns as aviation ground handling companies operate at loss

Abiola Seun

Ground handling companies operating in the nation’s airports are groaning under low profit margins due to low tariff combined with increasing cost of doing business in the country.

Consequently, aviation stakeholders have said that low profit margins would put pressure on safety and security as well as long term sustainability of ground handling business in the country.

They argued that ground handling companies can no longer afford to invest in innovative technology, modern equipment, recruit, retain quality manpower and training aimed at preventing incidents and accidents.

However, it was gathered that ground handling rates in Nigeria is the lowest in the entire African countries as domestic operators pay between N10,000 to N20,000 for full ground handling charges by handlers.

For instance, foreign airline operators Guinea charge $1,673 for narrow body and $4,715 for wide body aircraft while Senegal charge $2,250 for narrow body aircraft and $5,259 for wide body aircraft.

Cameroon charges $1,400 for narrow body and $4,500 for wide body while Ghana charge $1,500 for narrow body and $4,150 for wide body.

But, in Nigeria, the rates oscillate between $400 and $1,139 (narrow body), depending on the negotiating power of a foreign carrier and $3,000 and $3,200 (wide body), depending on the negotiation of the foreign carrier and local airlines.

The former Managing Director of Nigeria Aviation Handling Company (NAHCO), Kayode Oluwasegun-Ojo, said the charges of the aviation handling companies is not sustainable to drive growth in the industry.

He said charging less than the cost means subsidizing from somewhere and will impact on the service provided, equipment on the ground and others.

His words, “if you charge for a service that is less than cost-reflective, it means you are not getting your cost back and on the long run, it will not be sustainable.

Lack of sustainability for aviation has serious implications because aviation actually starts from the ground and you land back on the ground. It is the ground handling companies that do that.

“You know that most accidents and incidents in the aviation industry actually occur on take-off and landing. So, it is extremely important that we take care of what happens on the ground and in this case, via the ground handlers in charging the cost-reflective tariff.

“That means you can recover cost with some margins for hospitability, including being able to pay taxes to the government. Companies that make losses will not be able to pay taxes.

As you are aware, all the ground handling companies are locally-owned now and there is employment implication for staff. If these companies are not making money, thousands of people will be out of work,” he warned.

“If Ghana is charging about $1,500 to handle narrow body aircraft and Nigeria is charging this little, then, something is wrong with our system.

“We must do something about helping our country and industry to grow. We have a huge market here and we must do something to boost the sector, starting from the ground handlers.”

Also speaking, the Assistant Secretary, aviation round table, Olumide Ohunayo , said low profit margins of aviation handling companies will affect safety, saying there should be a benchmark of what is obtainable because Nigeria cannot price herself out of the region.

He said, “On the ground handling side, a time will come when safety might be affected if they continue to run their services below the cost of production.

“We cannot be different from the rest of the world. If the last approval was 1999, we are now in 2021, which is about 22 years later.

“So, we need to look at that figure, considering that the foreign exchange rate has risen, the naira has continued to depreciate and has never appreciated since 1999.

“There is no way the agreement of 1999 can be sustained in modern day and what we are doing now is that we are giving the foreign carriers profitability and shooting our own ground handlers on the foot.

” It is better that the regulatory authority and other agencies push forward this process, use whatever method that can bring about a competitive rate as compared to other countries.

It is obvious that the Nigerian handling companies are not catred for and not put into consideration at any point, despite the state-of-the-art equipment they deploy for services. They also do staff training and other services, which are not commensurate with the services provided.

“There should be a benchmark of what is obtainable because we cannot price ourselves out of the region. We can pick the average rate in West African countries. If we go higher, we can allow the airlines to pull fares up and that may have a negative effect on Nigeria, but if we benchmark, the airlines will still come to Nigeria, and continue to operate because we have the population.

“But, with what we have right away, it is the foreign airlines that are making money, yet, giving Nigeria the highest ticket fares with very low ground handling rate. The airlines have monopolized the fares and making outrageous gains at the expense of Nigeria and the ground handling companies.”

Also speaking, Tayo ojuri, Aviation analyst said to ensure safe, secured commercial operations, ground handling charges need to be competitive and be a true reflection of cost of operations

Accorsing to him, ground handling charges should be market determined through competition to ensure they reflect the most cost-effective level for the provision of optimal ground handling services.

He said, “ICAO Document 9562 highlighted key considerations when determining ground handling charges. Ground handling charges shall be market determined through competition to ensure that they reflect the most cost-effective level for the provision of optimal ground handling services.

“Experience has shown that market-determined ground handling charges through competition provide the best outcome. We reckon ample negotiation coupled with meaningful consultations with the airlines based on transparent information is necessary to verify that airlines are subject to cost-related and effective ground handling charges.