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Stronger local carriers through serious reforms

By Wole Oyebade
01 November 2019   |   3:36 am
The local airlines in Nigeria are doing more with less. But beyond some dozy recognition of efforts, the National Assembly needs more than a passing interest, to overhaul toxic provisions that undermine sustainable growth of the air travel business.

The National Assembly needs more than a passing interest, to overhaul toxic provisions that undermine sustainable growth of the air travel business. Photo: PIXABAY

The local airlines in Nigeria are doing more with less. But beyond some dozy recognition of efforts, the National Assembly needs more than a passing interest, to overhaul toxic provisions that undermine sustainable growth of the air travel business. WOLE OYEBADE writes.

British Airways (BA) and Royal Dutch Airlines (KLM) recently rolled out the drums in commemoration of their centenary. The auspicious moments reflected a success story of two dominant carriers. But much more to celebrate was 100 years of strategic planning, changing and shuffling through turbulence, and drastic reforms to earn sustainable growth.

The Executive Vice President, Flight Operations of KLM, Vincent van Hooff, at a commemoration in Lagos, said the most important ingredient for success in aviation was to put the customers first, be where they are, get good supports and keep changing with the trend.

Indeed, the success nuggets and their adherence largely distinguish between successful airlines and others had either gone under or struggling to stay afloat amid undermining systems that would not propel growth.

A rough, tough terrain to travel
Globally, aviation business is tough – a huge-capital guzzling industry that gives very little in return. Legacy carriers in the status of BA and KLM, in a good year, make between one and four per cent return on investment. Many airlines operate for years without a profit margin, though a single mishap or careless move could be more unforgiving; ruining several years of toiling!

The Nigerian experience with its numerous constraints is most revealing. Unlike in other climes, the cost of routine maintenance is a major nemesis that stifles the local operators.

For instance, one of the major maintenance programmes – C-check – is done overseas every 18 months, and at a cost that ranges between N350 million and N700 million per aircraft.

Next, are about 37 obnoxious charges that account for another 30 per cent of the airlines’ earnings. The longsuffering airlines are then left with little for fuel, overhead, among other sundry obligations.

It is, therefore, a little surprised that the “the mortality rate of airlines in Nigeria in the last 12 years stands at 57 per cent,” according to an estimate by the Airlines Operators of Nigeria (AON).

The fact has it that the industry in Nigeria has one of the highest turnovers of registered domestic airlines in the world. It is also known for parading airlines with the shortest lifespan of 10 years. No fewer than 150 airlines were registered in 2000. Only 28 survived till 2006 and only nine are scheduled carriers by 2019.

Breaking the glass ceilings, in style
But it is not all doom and gloom for the industry lately. The local operators and their investors are showing some strength to prove what is possible, if their conditions could be more favourable.

Specifically, with a boost in capacity via aircraft acquisitions, airlines like Dana Air, Arik Air, Aero Contractors, Max Air, and Ibom Air have expanded operations into new routes for improved connectivity across the country.

Most pleasing is the success story of Air Peace airline that has in just five years literally broken through the glass ceilings in local, regional and international aviation.

The airline, which began operations in October 2014 with four aircraft, has completely changed the narrative in fleet acquisition, capacity utilisation, international operations and attendant job opportunities by a local airline.

Recall that the airline some months ago set a continental record with a firm order for 10 brand new Embraer 195-E2 aircraft. The deal that was unveiled during Embraer Business Meeting in Port Louis, Mauritius, makes Air Peace the first to order the brand of jets in the whole of Africa, thereby becoming the official launch customer of the brand of aircraft in Africa.

The order comprises purchase rights for another 20 E195-E2 jets. The aircraft is a 124 seater jet in dual-class and 146-seater jet in single class configurations respectively. With all purchase rights exercised, the contract was valued at N646.6 billion.

Prior to this bid, Air Peace had set a regional record in September 2018 when it ordered 10 brand new MAX aircraft from Boeing, to increase its fleet size to about 37 aircraft.

Shortly before the firm order for 10 brand new aircraft from Boeing, Air Peace set a domestic record as the first Nigerian airline to acquire and register the Boeing 777 aircraft in the country.

Three of the four B777 airplanes are currently revved up to begin the Johannesburg, London, Houston, Guangzhou and Mumbai long-haul operations, after the successful launch of Dubai via Sharjah in July.

A strategy that works

Indeed the air travel product is the most perishable commodity in the world. So, a good strategy for success is to be where the customer is and with the right equipment.

With over 20 airports across the country, Air Peace had embraced a ‘no-city-left-behind’ initiative dedicated to the air travelling middle class in all cities.

The chairman of the airline, Allen Onyema, said that it was for that purpose that the airline, under the Air Peace Hopper subsidiary, first acquired six low-capacity but fuel-efficient ERJ145 of 50 seats apiece, and subsequently placed orders for Embraer195 jets.

“Embraer’s new E195-E2 presents us with a marvel of economic performance. It’s also great that we will be the first E2 operator on the African continent. We already have the ERJ145s in our fleet, so we understand the high standards of Embraer products.

“Our plan is to massively expand our operations from our base in Lagos into mini-hubs across all regions of Nigeria and the West Coast of Africa. There is no doubt that as the leading and biggest airline in Nigeria with a fleet size of over 30 aircraft, we are now more positioned to transform air travel experience in Nigeria, the West Coast of Africa and beyond. But more importantly, we are proud to use our flight services to build bridges of unity in Nigeria.

“We will be an airline that the rest of the world will have to contend with for the airspace. One major airline in Africa celebrated its 100th airplane in 60 years. Air Peace is talking about 60 planes, by the time the 40 come in, in about four years. So, which one is stronger?

“We are not being appreciated nor supported around here and that hurts me. It shows that in the next 10 years, we will overtake all airlines in Africa. So, with the support of the government and Nigerian people, it will come to pass,” Onyema said.

Stronger with support, reforms
Quite an ambitious plan by a Nigerian carrier, but it speaks volumes about possibilities among the Nigerian private sector. An aviation enthusiast, Daniel Akindele, saluted the courage of the airline operators that keep weathering the storm to sustain the industry.

“I have no doubt in my mind that there is nothing wrong with our operators. With almost all odds possible and without any support, they have been able to sustain operation. But if the industry must truly develop, then it is up to the authorities to reshape the rules accordingly.

“We have been mouthing it all these years. We need to reform taxes and charges in aviation. No country in the world charges its airlines over 30 types of levies. Given the complexity of the business, they should have access to cheaper funds. The banks are ready from the example of Air Peace and Fidelity. Let the government also show its support and then, the industry will blossom,” Akindele said.

He added that it was not enough for the House of Representatives to applaud Onyema for his “big brother” role in the recent xenophobic crisis in South Africa. But beyond the recognition, the lawmakers can take an equally courageous step to address the yearnings of the industry.

The chairman of AON, Capt. Nogie Meggison, noted that the airlines had consistently demonstrated faith in the economy, but the Federal Government must complement the efforts, but supporting the carriers to further succeed in the face of stiffer competition and aero politics.

“Air Peace has taken a bold step and they should be encouraged by Nigerians. The airline’s flights to Dubai meant more jobs for our Nigerian youths; it means jobs for over 600 unemployed Nigerian pilots.

“It also means more travel choices for Nigerian travellers at affordable rates; it means more contribution to the Nigerian economy and Gross Domestic Product (GDP). It also means a reduction in capital flight from the country by foreign airlines. Government, therefore, needs to rally round Air Peace as a proud Nigerian operator and give the airline all the support to succeed,” Meggison said.

Apparently speaking the minds of Akindele and Meggison, the Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru, recently said the National Assembly owes it a duty to reform the aviation sector by reducing the different layers of charges by different agencies, which makes it extremely difficult for airline to survive in the country.

“There is something the National Assembly should do to help the aviation industry. Why is it that there is no airline in Nigeria that has successfully existed for 10 years? We have successful businessmen in Nigeria, which tells you that what is happening in the aviation sector is a structural problem that needs to be address and I think the National Assembly has a role to play,” Kuru said.