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‘No local airline can survive 26% interest rate, regulatory hostility, dirty aeropolitics for long’

By Clara Nwachukwu, Wole Oyebade
22 July 2019   |   3:45 am
Air Peace Airlines, in a manner quite unusual of private indigenous carriers worldwide, is blazing the trail in the much-labeled ‘toxic’ operating environment in Nigeria. The airline, in less than five years of entry, has acquired a fleet of 26 aircraft, among which are three Boeing 777 airplanes for international services, and has a placed firm order for 40 brand new planes that are due for delivery early 2020.

Managing Director of Air Peace airlines, Allen Onyema

Air Peace Airlines, in a manner quite unusual of private indigenous carriers worldwide, is blazing the trail in the much-labeled ‘toxic’ operating environment in Nigeria. The airline, in less than five years of entry, has acquired a fleet of 26 aircraft, among which are three Boeing 777 airplanes for international services, and has a placed firm order for 40 brand new planes that are due for delivery early 2020. The Chairman and Chief Executive Officer of the Airline, Allen Onyema, spoke with CLARA NWACHUKWU (Business Editor) and WOLE OYEBADE on the journey thus far, the secret of success and yawning problems of Nigerian airlines, among other sundry issues. Excerpts:

The Nigerian aviation industry appears to be hostile to investors. Because no sooner do operators open shop than they close it. What do you think is happening here?
You have said it all. There are different types and kinds of hostilities in the sector. It has never been rosy for any airline. This is a business that is highly capital intensive and requires 24-hour undiluted support from all and sundry. The moment that support is not there, no matter the amount of money you put in to do things rightly, there is bound to be unpleasant consequences at the end.

It is a very hostile environment to operate airlines. Hostilities come from everywhere, including quarters you least expect; including the flying public, foreign airlines, and equipment lessors. It is like Nigeria is suffering from unwritten blacklisting, which makes it very difficult to get aircraft leased to us. So, there is a lot on our path to success; sometimes deliberate or inadvertently, put out there to scuttle the survival of Nigerian airlines. The factors are legion. It is extremely difficult for airlines to survive here. Those that are surviving are doing so by the special grace of God.

If Virgin Atlantic, with all their capital lay-out and technical know-how, could not survive in this clime, then you may begin to understand what I’m talking about. You don’t need to go far, just read Richard Branson’s book where he advertised Nigeria in unpleasant commentaries.

Some people do feel that the operators often don’t do due diligence before setting out, but they are rather carried away by the glamour of the industry.

I disagree with you. These operators are people that have succeeded in other businesses. You don’t just come into aviation; you must have been doing other businesses to endow you with the finance that aviation startups require. It means you have been a success in other endeavours. So, why is everybody failing in aviation? All these owners cannot all be wrong. The reasons why airlines fail are legion and are there for everyone to see.

It is not at all times that the failures could be attributed to ownership or glamour. I don’t even see any glamour. What glamour am I enjoying if I go to bed at 3:30 a.m. every day and wake up 5:30 or 6:00 a.m.? Because, the moment your staff are reporting to duty, you also want to know what is happening; how many aircraft are flying, are we going to have disruptions? and so on. So, it doesn’t give much joy. The only joy I derive is when I see the thousands of faces I have given jobs.

Another school of thought has it that the problems of aviation in Nigeria are neither peculiar nor new, and airlines investors should have factored them into their business designs. Is that the case with Air Peace?
Yes. Before I decided to go into this (Air Peace), I was warned that it is a turbulent business and that you don’t make gains in scheduled flight operations. However, if you run it very well, you will not lose your money, but make some profits of one or two per cent in the next seven or eight years. I knew all these and I tried to factor them into our planning. But there are other things we never believed that people in certain corridors would be doing to us.

Things like?
Like people deliberately trying to scuttle our efforts, especially those that are supposed to help or support us. Other airlines have been saying it in the past but I never believed it. Now, I am in the saddle and can see it. Recently, you all saw some publications against a Nigerian airline. It is left to you to judge if they were made in good faith. I don’t want to delve into that, but it is one in thousands. Until civil servants begin to understand that investors are not their enemies, but partners in progress, so long will Nigeria continue to bleed.

In your earlier narrative you talked about antagonism from every quarter. But in other climes, you will find the government supporting the local industry against competition from international operators. But that seems not to be the case here. Why is that so?

As far as I know, the president of this country, whom I have met personally, is very eager to make indigenous investments, airlines inclusive, succeed. He has done everything to support us. He has removed Value Added Tax (VAT), import duties on aircraft spares, and that is why we have been able to acquire the number of planes in our fleet. These are milestones in the industry. However, my plea is for civil servants and appointees to carry out the vision of the president. If we all play our parts, including the airlines, then we will succeed.

One sure thing that is affecting the airlines is the problem of multiple destinations and frequencies given to foreign airlines. No country does that. Airlines in Nigeria will never succeed if they are scrambling for space with foreign airlines.

How do you mean?
For instance, Turkish Airline is doing Istanbul-Abuja, Abuja-Port Harcourt, Port Harcourt-Abuja, Abuja-Istanbul. Where does that happen? Why not force them (Turkish Airline) to have an interlining arrangement with a local airline, such that when they land in Abuja, it is the local airline that takes the passengers beyond or gathers their traffic feed to Abuja en route Istanbul? To do otherwise amounts to foreign carriers running local operations in Nigeria.

If you report to government officials, they will say that it is good for competition; ‘that is what our passengers want’. But you could as well open up our borders and allow all the Igbo people to bring in whatever they want including water because people like imported water. It is a disservice that should stop. It is not only Turkish airline; there are others that are doing the same. Now Air Peace has started international operations and a lot of foreign airlines are jittery because of Air Peace. A lot of foreign airlines are desperate now.

How was your experience going international, beginning with Lagos-Sharjah?
The experience was okay. On our first day, we took over 300 passengers on our 364-capacity aircraft. I thank Nigerians and the Federal Government. The Nigerian Ambassador, Alh. Muhammed Rimi, was there to welcome us.

Why Sharjah and not the most patronised Dubai airport?
Dubai and Sharjah are just 15 minutes apart. In fact, you can get into some parts of Dubai earlier from the Sharjah airport, then someone flying from the DXB airport (in Dubai). Flying into Sharjah, the international airport is very friendly and not massive, so your transit time is short. It was the choice of Air Peace to fly into Sharjah. We have the right to fly into DXB; they gave us both. At DXB, passengers can trek as far as two kilometres or 40 minutes before getting to immigration stand. In Sharjah, in three to five minutes, you are out of the airport. We put all of these into consideration.

Air Peace does not end flight at Sharjah; we are a one-stop-shop for travels to cities in India, Riyadh, Medina, and Jeddah (Saudi Arabia) and so on. If you buy our tickets here to these places, you will pick up your luggage at the final destination. Our partnering airline, Air Arabia, will take you to the final destination from Sharjah. We also distribute their passengers across Nigeria and West Africa.

So, the Air Peace ticket automatically puts you on Air Arabia flight from Sharjah. You can fly Air Peace to eight cities in India, Moscow, Bangladesh, and Sri Lanka. We go beyond Sharjah and Dubai.
Compared to the environment in Nigeria, is the operating climate different on the international front?

The truth is that all foreign airlines actually do not want any Nigerian airline to be strong or even survive. Unfortunately, they get support from within Nigeria. So, we must begin to support our own. I know that one airline is desperate now; running from pillar to post, trying to run a national carrier. Another one is desperate slashing prices. Nigerians should appreciate and support Air Peace for goodness sake. I didn’t say that we are perfect; we are just starting. Except we support our own, this country will continue to cry and have a problem.

Air Peace is not an Igbo airline, but a pan-Nigerian. I may be Igbo by birth but I am a Nigerian by my actions. This airline does not know Hausa, Igbo or Yoruba. What we know is Nigeria. I as the owner, I’m a pan-Nigerian nationalist. Everything I have done in this country is pro-Nigeria. People should treat Air Peace accordingly. I have trained more northern pilots than I have trained Igbo. Air Peace has 156 pilots. The Igbo among them is not up to 12. We have about 30 expatriates. The over 120 pilots are non-Igbo, but fellow Nigerians. Air Peace must, therefore, get support from all and sundry.

Every penny spent flying Air Peace goes a long way in taking off the street someone that could have been deadly to your safety. All the employees of the 34 foreign airlines flying into Nigeria, put together, do not reach up to 150. I have over 3000 people working here. I have created over 9000 ancillary jobs too. We are adding to our Gross Domestic Product (GDP), but foreign airlines will not do that.

One foreign airline recently came to say they want to help Nigeria. But it is a lie. They are all jittery because of Air Peace because we have come out strongly, prepared for international operations. We have acquired four B777, with three already in the country flying. Before the end of the year, two or three more will join. So, why should a foreign airline come into my country to insult the nation and we are clapping for them?
The truth is that these airlines know that their game is up because if a Nigerian airline is doing direct flight out of Nigeria, definitely, Nigerians will patronise the airline and that will cut the 65 per cent passenger load factor they have been getting from Nigeria. That is why a Group CEO of an African airline will come here and start telling us that they want to help us to create a strong airline. That is an insult and I take exception to that.

Why is Air Peace not being recognised as a strong airline when the outside world recognises us? Everywhere, all over the world, they are coming to do one thing or the other with Air Peace. African national carriers are coming to us, telling us to give them planes. How could a Group CEO of another airline that has been feasting on Nigerians come to insult Nigerian airlines? Is it because he is getting cooperation from some quarters?
An airline in the last four years has acquired 26 planes and 40 new aircraft coming in in the next 10 months, and you say that airline is not strong? Have they ever done that in their history? Why are we Nigerians always thinking that everything foreign is the best? Nigerian pilots are the best you can get anywhere in the world. I feel safe flying them. This foreign carrier just wants to partake of our national pie, but no country allows that. Go and find out if this foreign carrier allows other carriers to come into its country.

We are curious over your entry into international operations where other airlines have got their fingers burnt. What are you doing differently?
I have said this before. You should not blame those Nigerian operators. Arik Air, Virgin Nigeria, and Med-View all suffered the same fate. I don’t have anything against these airlines. They all tried their best. But, the unfair competition brought against them did not allow them to succeed. Perhaps, we are not patriotic enough to understand the game and support these airlines.

Competition or not, I don’t want any Nigerian airline to suffer but to succeed. I’m not just mouthing, I have practised it even though some of them don’t have the same mind towards me. It is on record that I have told my chief operating officer not to put Air Peace on certain routes to allow some airlines flying those routes to succeed. It is deliberate, though I have the machine to go round this country.

We should begin to look at international aero politics. If any airline that flies into your country is doing an unfair competition, then you have to call that airline to order. Those employing arm-twisting tactics, like ramp-checking an airplane for hours, causing delays to discredit their counterparts before its passengers, should be forbidden. We need to be protected, not only by the government but by the media and the public too. Some airlines in America cried about some of the things the gulf carriers were doing to them and the response was not palatable for the Gulf carriers. It was aimed at protecting American jobs. We should do the same here.

If I’m going to Dubai/Sharjah and you increase the frequencies of Emirates or any other airline on that route, believe me, that is a recipe for disaster for the Nigerian airline. And when that Nigerian airline leaves, these foreign carriers immediately go back to their old fares that they had crashed just to force us out.

Nigerians should appreciate Air Peace on the Dubai route. Just within seven days, fares have crashed. This is money being saved for the Nigerian economy. Air Peace started with N180, 000. A major airline doing direct flight has come down to N220, 000 from the rooftop of about N500, 000. The extra N300, 000 is Nigeria’s money that would have left this country.

Nigerians pay more for six hours flight to Europe than those doing nine hours from Johannesburg. Why is it so? Every airline in the world sees Nigerian routes as a goldmine, where they charge the highest and make their gains. Nigerians are happy to pay once it is foreign. We must begin to support our own.

When we are flying to Sharjah and the plane took off, a passenger in the first-class cabin came to me confused and said ‘I didn’t hear the sound of the landing gear retract. Does it mean we are still flying with the landing gear extended?’ I said, ‘must you hear it? If it did not retract, the pilot would have gone back. He was sweating and scared because he was used to an airline from Europe that often creates much noise when the landing gear retracts, and Nigerians will be smiling because it is a foreign airline. The question is, was the aircraft manufactured to make such noise? No! Then, it means something is wrong. Let a Nigerian airline make 10 per cent of such noise, you will see passengers on their feet, telling the crew to take them back.

So, aviation policy is very dirty and we must be protected. The way to protect us is not by giving these foreign carriers multiple destinations that allow them to fly into every city in Nigeria. Let them use Nigerian airlines to connect to different cities in Nigeria. That is the only way we can make the airlines succeed.

People tend to believe that you are expanding too quickly too soon. Do you think so?
No! Everything we are doing is in order with our business plan. The reason they are thinking so is because of the delays they see these days. For goodness sake, we are in the rainy season. Nigerians must understand the environment we operate and the issue of safety is sacrosanct. Delays are caused by several factors. One, the airline may have a snag. You don’t use that to fly people.

At Air Peace, any little thing, we are coming back because we don’t want to play with peoples’ lives. Two, the weather is not helpful at this time of the year. Just one hour delay in the morning due to rain in Lagos already disrupts the entire day’s operation across all the routes. The airport infrastructure is also not helpful. The government is just trying to do something about it and until it finishes, we would keep having the challenges.

Most of our airports don’t have night landing facilities, except for Lagos, Abuja, Port Harcourt, and Kano. You have to prioritise your schedules to accommodate those sunset airports that close by 6:00 p.m. So, you see us trying to do Owerri, Benin, Yola and other sunset airports during the day. When you do that, Abuja, Lagos, Port Harcourt are sacrificed and flown into at night.

But passengers don’t understand this. Hence, you see them start beating staffers and destroying computers in protest against delays. It is only in Nigeria that passengers invade airside to block a moving aircraft saying it is supposed to be their turn. One day, the engine will suck in somebody. Authorities need to beef up security. If airports have night flying facilities, you will see the delays minimised.

You are a member of the presidential committee set up by the Federal Government to look into multiple charges in the industry. How far has the committee gone?
Members of the committee have sat for several times, but we are still waiting for the report. That is all I can say about that.

You mentioned the removal of VAT by the Federal Government. Has it been implemented?
The President has given us the waiver, but we pray that the Federal Inland Revenue Service (FIRS) will also help us make it work. I think we are getting there.

Still, on incentives, I know some of your members have also asked for intervention fund from the Central Bank of Nigeria (CBN) in terms of cheaper funds. Do you think that will really solve the funding problem in the sector?

Of course! Access to cheaper funds will help. All over the world, aviation is a catalyst for economic development. It is not a profitable business, but it drives the economy. Today, Air Peace, at full capacity, does about 110 flights daily. That is huge for the economy.

Outside Nigeria, airlines access funds at two to four per cent interest rates. Me, I have been borrowing for Air Peace at 26 per cent. That is why in Air Peace we would struggle immediately to pay back our loans. We create a sinking fund for Fidelity Bank to start paying back immediately. We don’t want to carry more than we can handle and Fidelity is happy with our financial discipline.

But the worry is that if some operators have access to these cheaper funds they will divert them.

That is where the problem also lies. That is why I have said that some of the problems we are having are caused by the owners. I only implore my colleagues to always use their loans for what they are meant for. Don’t divert and when you are making money from the ticket, don’t think it is your money. It is not. Just one spare part could gulp everything you have made in a month. I have changed up to 10 engines this year due to bird strikes and pebbles from airports like Enugu. An engine is about $3 million, that is, over a billion naira. So, when people get to an airport and see a lot of people, they would say this Igbo man go don make money. It is a lie. There is no money there. At the end of the month, you are only paying salaries. If you start diverting money, then you are running into problems.

Among these new 40 aircraft on order, do you have the Max model among them?
Yes, among them are 10 Max models. Now, it is premature to start talking of canceling or not canceling the Max order, because I know that the next question is ‘are you going on with the Max’? We believe that Boeing has the capacity to sort out this problem. However, we are yet to decide whether to go on with it or not because we still have about four years on the delivery of the Max. Until Boeing is through with its investigation and the confidence returns, we are still waiting.

Five years from now, where do you see Air Peace?
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 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. We don’t need any foreign airline to come and set up a national or local carrier for Nigeria. It is a capital flight that they are planning. All we need is indigenous support.