Amidst Covid-19 new hope rises in Nigeria’s ground handling sector

Before the Covid-19, the ground-handling industry in Nigeria, Africa’s largest economy, faced serious challenges of price war, poor equipment and underpaid service provision. Olaniyi Adigun, Chairman of the recently established Association of Ground Handlers of Nigeria (AGHAN), and also the executive director, sales and marketing of SAHCO Lagos, reveals new hope in Nigeria’s ground handling industry and solution to lingering challenges. He spoke to Roy Ezze in Lagos, Nigeria. Edited excerpts.

How would you describe air cargo in Nigeria over the past 3 months amidst Covid-19?

The aviation industry has been the worst hit by the Covid-19 pandemic all over the world. Nigeria is no exception as both domestic and international flights were suspended in a bid to curtail the spread of the virus. At the peak of the lockdown, airlines were only permitted to deliver essential cargo such as medical supplies, personal protective equipment (PPE) and food. This resulted into up to 60 percent decline in cargo revenue for aviation ground handlers.

What is the major cost of the pandemic on the air cargo industry?

The negative effect of the Covid-19 pandemic on air cargo was not only limited to loss of revenue. There was a significant increase in the cost of operation during the lockdown. For instance, we had to pay hazard allowance to our employees who were working during the period as well as make arrangement for transportation and accommodation as the case maybe. In addition to this, we provided PPE, installed hand washing points across all our service points, carry out deep cleaning and disinfection of our facilities and ground service equipment at regular intervals so as to protect the staff and prevent the spread of the virus. At the same time, we had to continue paying our salary despite the fact that only a fraction of our employees were engaged.

Olaniyi Adigun, chairman, AGHAN, and executive director, sales and marketing of SAHCO Lagos

How do you think local cargo can be built up in Nigeria given the very low quantity of air cargo in Nigeria?

The entire value-chain and system for air cargo in Nigeria is largely uncoordinated and fragmented. This value-chain comprises of different stakeholders such as farmers, produce sellers, packaging companies, transporters, and food manufacturing companies whom are mostly working independently.  As a result of this, up to 65 percent of perishable produce goes to waste due to improper preservation. To improve the quantity of air cargo within Nigeria and export of Nigerian produce, it is important that there is a concerted effort by all stakeholders. Farmers need to determine beforehand if they will sell their produce locally or export. It is more profitable for a farmer to identify and serve a niche market. For example, I am aware that some organic farmers in Nigeria cater to health-conscious individuals hence both livestock and crop production is grown without chemical additives. This market niche commands premium price. Produce meant for export will be required to meet certain predetermined specification and the farmers need to be aware of this. To reduce wastage of perishables and maximize profit, transporters and produce sellers should invest in appropriate infrastructure such as refrigerated trucks.

Some people argue that cargo export especially for perishables is mainly challenged by bureaucracies at the airports. Would you agree?

Bureaucracy is not the only challenge for perishables exporters although multiple checks by various government agencies create a bottleneck. I would rather advocate for a concerted effort by government agencies and all stakeholders in the perishable export value chain. This will serve to increase the volume of Nigerian produce being exported, showcase the quality of Nigeria’s produce in international market as well as boost government earning from non-oil sector of the economy.

Nigeria has designated a number of airports as cargo airports. Do you think these airports have the capacity to encourage increased air cargo activities in Nigeria?

The Federal Airport Authority of Nigeria (FAAN) has designated 13 airports as cargo airports. Only four of these designated airports have functional cargo facilities. I strongly believe that for the volume of air cargo to increase, there is still need to invest heavily in infrastructure. The investment will go into upgrading the facilities at the functional airports as well as open up new cargo terminal closer to farmers and manufacturers.

Kano Interntional Airport

Would you say the current multimodal transportation system in Nigeria is adequate to encourage effective and seamless movement of air cargo around Nigeria? 

The multimodal transport system in Nigeria as of today is not as developed as it should be to facilitate a seamless cargo freighting environment. Most cities are far from functional airports and our roads are not as reliable as they should be for connectivity. Our rail transport system is also not as functional while Nigeria’s major functional seaport is in Lagos.

How has eCommerce affected or been affected by air cargo in Nigeria?

I am of the opinion that eCommerce has grown astronomically due to the emergence of small and medium enterprises online shops. These shops ship their products within Nigeria and worldwide. They require logistic partners who can deliver reliable and fast services. This trend will persist as this is an evolving lifestyle among the younger generation. I foresee that domestic and international air cargo will continue to grow as a result of this.

What would you describe as the major challenges facing ground handling companies in Nigeria currently?

Ground handling companies in Nigeria are faced with several challenges. I think the strategic position that we occupy in the air transport value chain puts us in a precarious situation. We operate in a very demanding industry. Our customer airlines are cost-sensitive, however they expect seamless, safe and speedy services at all times. Ground handling companies on the other hand are faced with myriads of constraints ranging from cost and airport facilities to regulations, etc.

Firstly, the airport facility is far from adequate. There are times when the conveyor belt will break down and we still have to meet up with the flight turnaround time. We have to deploy additional manpower as a stop-gap solution to prevent delay. This is at a cost to the ground handling company.

Secondly, the cost of doing business is extremely high and our profit margin is slim. To mention just a few, acquisition of ground support equipment (GSE) and staff training are denominated in Dollars. Unlike airlines, ground handling companies don’t get waiver on custom duties when we import GSE. We also pay concession on revenue to FAAN. 

Another challenge is that of unhealthy rivalry resulting to rate cutting which translates to loss in revenue for all the ground handling companies involved. The airline wields strong negotiating power and face minimal switching cost. The barrier to entry for new ground handling companies is low. There are even licensed ground handling companies that are not yet operational. In a bid to survive the unfavorable business environment, ground handling companies resort to unhealthy competition amongst themselves which leads to price war. Within the West African Region, airlines pay the lowest ground handling fees in Nigeria as such; the federal government cannot derive optimal economic benefits from international carriers in the form of VAT. 

Lastly, ground handling companies are barely surviving due to the low operating profit. They cannot afford to invest in innovative technology and training aimed at preventing incidents and accidents. Rather they are reduced to making do with only those mandatory safety measures. By so doing safety procedures have become a reactive exercise instead of being seen as a proactive measure. Again, low profit margin attracts low employee remuneration. Staff members facing financial challenges are easy targets for criminals.

The association of ground handlers was formed less than a year ago. How much succour do you think this association will bring to air cargo improvement in Nigeria?

The Association of Aviation Ground Handlers of Nigeria (AGHAN) was created to represent, advocate policies and regulations for the overall interest of the member organizations so as to enhance quality, safety and security standards. The airlines have an association and so do the cargo agents; this has enabled them to speak with one voice. Since we have the same challenges, AGHAN will help to have a common front in presenting challenges to the appropriate authority and also to create an environment to build and reach consensus on critical aviation ground handling matters.

We have not been able to achieve as much as we anticipated however our objectives are clear and concise. We will make concerted effort to achieve our objectives. To represent, advocate policies and regulations for the overall interest of the member organizations in order to enhance quality, safety and security standards, as well as to create an enabling business environment within the aviation industry that will be favorable to all members of AGHAN. Another point is to represent, advocate policies and regulations for the overall interest of the member organizations in order to enhance quality, safety and security standards. AGHAN also has the objective to improve and enforce compliance in the quality of service delivery by benchmarking operational and safety standards with global best practices; and to create an environment for members to build and reach consensus on critical aviation ground handling related matters; as well as to be recognized as the sole representative of the Nigeria aviation ground handling industry internationally.

What lessons do you think can be learnt from the Covid-19 pandemic in Nigeria's aviation industry?

The Covid-19 pandemic has shown that as much as the aviation industry is critical in driving economic activity there should be proactive efforts so as to prevent the negative effect that this type of pandemic can have on the aviation industry. Another lesson learnt is that during the lock down, technologies to ensure that you don’t have to be on ground in an office space was learnt and used which has helped to reduce a lot of logistics and facility cost.