Airlines And Ground Handling Dispute: Justifying The Price Increase

Understanding the Ground Handling Dispute in Nigeria’s Aviation Industry

The recent price hike in ground handling services has sparked a heated debate among domestic airline operators and aviation stakeholders in Nigeria. Chris Aligbe, a former General Manager of Corporate Affairs at Nigeria Airways and now an aviation consultant, sheds light on the situation, emphasizing the necessity of these cost adjustments.

Ground handling companies provide crucial services such as passenger boarding, baggage handling, aircraft refueling, catering, and maintenance coordination. These services ensure seamless flight operations. However, the rising cost of operations, forex fluctuations, and inflation have compelled ground handling companies to adjust their rates.

Aviation Industry Changes Over the Years

In the early days of Nigeria’s aviation industry, NAHCO was the sole ground handling company, primarily controlled by the Federal Airport Authority of Nigeria (FAAN) with investments from foreign airlines. Eventually, NAHCO transitioned into a fully private entity. Nigeria Airways, on the other hand, had Skypower Aviation Handling Company (SAHCO), which survived privatization and later evolved into Skyway Aviation Handling Company, currently owned by Sifax Group.

According to Aligbe, ground handling charges were not a major concern in the past, but with rising operational costs, it has become necessary for these service providers to increase their rates to sustain business operations.

Are Higher Ground Handling Charges a Burden on Airlines?

Aligbe argues that the recent increase in ground handling fees should not be viewed in isolation, as costs have risen across various aviation sectors. Airlines have consistently adjusted ticket prices to accommodate surging fuel prices, foreign exchange rates, and other expenses. Consequently, ground handling firms also need to adjust their pricing to remain viable.

While airlines worry about the financial implications, Aligbe notes that ground handling expenses are among the lowest operational costs in aviation. The biggest cost drivers for airlines remain aviation fuel and forex. Additionally, the specialized equipment required for ground handling services is imported, necessitating forex transactions and high maintenance costs.

Breaking Down the Price Increase

The notion that ground handling fees have surged by 600% is misleading, according to Aligbe. The increase, in reality, is closer to 300%, raising the cost for handling a Boeing 737 from ₦75,000 to approximately ₦280,000–₦290,000. Given the manpower, technical expertise, and specialized equipment involved, this adjustment is justified.

Despite airlines’ concerns about rising costs, it is important to recognize that ground handling charges have remained relatively stable compared to fluctuations in airfare during peak travel seasons. For instance, ticket prices during the December holiday period skyrocketed to between ₦500,000 and ₦700,000, whereas ground handling fees remained unchanged.

Role of the Government and Regulatory Bodies

While the Minister of Aviation intervened to mediate the situation, Aligbe asserts that the industry remains deregulated, meaning the government cannot directly dictate pricing. However, the Nigerian Civil Aviation Authority (NCAA) has encouraged negotiations between airlines and ground handling firms to maintain industrial harmony.

Ultimately, the dispute was resolved with a 15% reduction in the proposed handling fees, settling at a new rate approximately 260% higher than the previous charge. This compromise ensures that ground handling companies can sustain operations while keeping airline costs within reasonable limits.

Conclusion

The increase in ground handling fees is a necessary adjustment dictated by economic realities. While airlines express concerns over rising costs, the aviation sector must recognize that all service providers in the industry face similar financial pressures. As the aviation landscape continues to evolve, collaboration between stakeholders remains essential to sustaining efficient and safe airline operations in Nigeria.

International Air Transport Association (IATA) on Ground Handling Services