Fadugba: Nigeria Can’t Compete With Crop Of Airlines It Has At Moment

Fadugba

Nick Fadugba, is the former General Secretary of African Airlines Association (AFRAA) and the publisher of African Aviation magazine for 27 years. Fadugba in this interview with OLUSEGUN KOIKI,  he said that Nigeria can take advantage of aviation industry to boost its economy.

Excerpts:

What is your view on the number of indigenous carriers we have in Nigeria at the moment?

We have a situation in Nigeria today where we have too many airlines, which are too small, and their market is fragmented. None of the airlines has a critical mass, in terms of fleet or route network to become effective and to make money. When you look at Ethiopian Airlines, the combined fleet of all Nigerian airlines is about 40 per cent of the fleet of Ethiopian Airlines.

We have approximately 40 aircraft as a country, all our airlines. Ethiopian Airlines has over 90 aircraft and most modern you can imagine. Not only that, in the next few years, they will operate about 130 aircraft.

So, you see Ethiopian is thinking on a bigger scale. You could say that in Ethiopia, they have a monopoly, which is very different from Nigeria. And in Nigeria, of course, we have a very vibrant economy, which is not a monopoly. We have many airlines, which is a good thing in a way, but the problem is that none of them to the best of my knowledge is really profitable.

So, what I will recommend for Nigerian airlines: they need to work together. They can compete for example on Lagos-Abuja or Abuja-Port Harcourt. They can work together on training, maintenance, spares pooling, spare parts purchasing. There are many areas they can work together. They can still compete. It is done in the rest of the world. They can still compete and collaborate. More importantly, I would like to see Nigerian airlines come together. Ego is a big factor. It is a negative factor in the airline industry in Nigeria. It is pulling us back. If you look around the world, British Airways is coming to Nigeria. Collectively within the International Airline Group (IAG), they have about 600 aircraft, Delta Air Lines has over 600 aircraft or is it Emirates, you can imagine huge planes. And yet, we have the market in terms of passengers.

Everybody wants to come to Nigeria. If you look at any market in Africa, most popular one is Nigeria, because you can be sure as a foreign airline, you will fill your aircraft probably from the front because Nigerians like to travel in style and can afford it. It is a strange market where the aircraft fills from the front; the first class, the business class and then the economy. You do not get that in South Africa or in Ethiopia or Kenya. The aircraft tends to fill from the back, but in Nigeria, it is from the front. That means that the premium, the ticket yield is very high, and it can be profitable. And of course, the load factor in Nigeria is unusually high, compare to the rest of Africa.

So, I will like to see Nigerian airlines work together. They need to codeshare. It is quite a surprise and a disappointment that no airline in Nigeria is code-sharing. For example, if a flight is delayed on airline A, you can quickly send your passengers to airline B if you have interlining agreement and codeshare. You know it is what they do in the modern world and we need to do it in Nigeria.

Financing is a major challenge in the Nigerian aviation industry, how can the country’s carriers benefit from the financial sector in Nigeria?

Financing is a big problem. We find out that in Nigerian airlines, there can be leakage of revenues in them. So, what we need is transparency and good corporate governance to ensure that all revenues are reinvested in the operation.

It is extremely important. And I will encourage all Nigerian airlines to focus on unit cost, load factor, and the yield-the fare yield.

These are three critical ingredients for success. The unit cost (cost of operation), the ticket yield (how much are they making) and then the load factor; are they flying half-empty or almost full? It is a big difference. By working together, they will save money.

How can the Federal Government come to the aid of the nation’s airlines to save them from dying?

I believe the government of today in Nigeria, needs to take an urgent action to rescue Nigerian aviation industry. When we look at the infrastructure in Nigeria, aviation infrastructure, it is far behind where we need to be. And we need to aspire to the global standard of excellence.

I would like Nigeria’s government to take the Singapore aviation model and the Dubai aviation model. In Singapore and Dubai, the governments have harnessed aviation as a tool for economic development. Deliberately, decisively, they have taken aviation that, ‘this is what is going to develop our economy.’ We are talking about Dubai, is it as big as Lagos? Singapore, I am sure you can fit it in Lagos State. If there is no aviation, will we be talking about Dubai? We would not be talking of Singapore if not for the amazing aviation industry. It is a hub in Asia, a major hub.

Dubai of course is a major hub in the Middle East and, yet they built it with nothing that we have in terms of the population. What is the population of Singapore? In Nigeria, we have 180 million people of entrepreneurs and I am talking from the board chairman to the market woman or man. They are all business people, they fly. I have been at Murtala Muhammed Airport and profile passengers, young men and women travelling going to China.

It is amazing! It is marvellous! I do not see it in South Africa. We have the aviation product in terms of passengers and cargo demands.

There is absolutely no reason why Nigeria should not have two or three thriving airlines. I do not believe sincerely that Nigeria needs more than maximum, three large airlines. We can have niche airlines.   If you look at Air Namibia for example, you can say it is like a niche airline-they go to Windhoek, Johannesburg and Frankfurt. They are not trying to be everywhere.

So, in Nigeria, we can have three. I would have said two, but I want to be over-generous, so I say three; three strong airlines with a fleet of 50 each minimum. If you have minimum of 50 aircraft, then you have critical mass. When you are ordering aircraft, you can dictate to your supplier. When you are buying spare parts, you can dictate. When you are getting a Maintenance, Repair and Overhaul (MRO) facility, you can dictate your terms.

There has been call for establishment of a national hangar over the years, why has this been so elusive in the country?

All of us in this country have been hearing of this national hangar like it is beyond achievement. It is not a rocket science, it is a hangar.    If you go to Ethiopia, they have like six and they are modern, state-of-the-art. Here in Nigeria, we do not have one major Maintenance, Repair and Overhaul (MRO) facility centre and it is not good enough.

I believe the government really needs to take decisive action to harness aviation as a tool for economic development. I am not saying the government should fund the MRO. I believe Nigerian airlines individually; do not have sufficient fleet to warrant the investment, but collectively, they can work together.

So, what we need in Nigeria, instead of the airlines complaining about government all the time, when they have worked together to the maximum possible, then they can complain about government. But, I really want to see a more practical, achievable cooperation. If you look at other airlines in other countries, they work together.

It is only in Nigeria that we all trying to kill each other, all the airlines. The thing is that, foreign airlines are taking advantage of the Nigerian airlines’ lack of cooperation. They can see what we are doing and will think we are not wise.

Can you imagine Ethiopian Airlines? A lot of Nigerians complain about Ethiopia. But, I want to put it on record that Nigeria should not envy Ethiopian Airlines, they should emulate it. They should seek to match it and surpass it.  After all, a big percentage of customers of Ethiopian Airlines are from Nigeria. I have no doubt in my mind that if we have strong airlines, efficient airlines, safe airlines, on-time airlines, Nigerian passengers will fly with them. I have got no doubt in my mind because when Nigeria Airways was flying, everybody was proud to fly on Nigeria Airways. I have no doubt that if we have one or two strong airlines in the future, Nigerians will patronise them.

Does Nigeria require a new national carrier, after the demise of the former and if yes, what format should it take?

Let me first of all, pay respect to the government and the Minister of  State for Aviation, Sen. Hadi Sirika. He is an aviator.

He is very committed and dedicated to the aviation industry in Nigeria. However, my question is that the government of Nigeria is de-facto controller of two airlines today; Arik Air and Aero because they are partly owned by the Asset Management Corporation of Nigeria (AMCON), a government agency. What we are saying is this, if the government by default is a part owner of two airlines, why are we talking about creating the third airline? You can be sure that all three will not make money. And of course, there are other airlines beyond the three.

So, I would suggest very respectfully that the government needs to rethink its policy on national airline. What is going to happen to Arik? What is going to happen to Aero?

I do not think it can be expected that Arik can flourish, Aero can flourish, and the new national carrier will flourish. I would have thought in my own mind, that the government would merge Aero and Arik, turn it into a national carrier. The current owners of Arik and Aero will now be key shareholders in the new venture of the national carrier.

The beauty is that this new carrier will inherit the Nigeria Airways hangar and compound, which is the best in Nigeria-of airside and landside. There is no doubt in my mind that if you combine Aero, Arik and the national carrier, they would be formidable. I think the government needs to rethink its strategy, because I do not believe sincerely that all three airlines can survive. If you revive Aero and you revive Arik and you introduce a new national airline, to do what? Yes, I do believe that Nigeria needs a national carrier.

A national carrier in which government should have a golden share, a minority golden share, because sometimes; it is important to have government ownership in the international market.

It should be a minority golden share and the rest should be sold to other shareholders.

Therefore, the current owners of Arik and Aero should be offered shares in the new ventures. It should be combined effort and then all the other domestic airlines should be offered shares, to buy-in to this national airline. That means we can shrink the numbers of airlines in Nigeria today to may be three or four.

Now we are talking serious business, because the scale will be much bigger. I am not criticising the government policy, but right now, the government is spending taxpayers’ money to restructure two airlines, which the government partly owns by default through AMCON.

What is your say about the regulatory environment in the industry?

The government has made great effort, and everybody commends Dr. Harold Demuren, the past Director-General of the Nigerian Civil Aviation Authority (NCAA).

I really want to commend him so much and many others in the industry. What Demuren has done is formidable and he is recognised around the world. I am one of his great fans in the aviation industry. To move forward, I believe we need a stronger regulatory environment.

The government took a wise step few years ago to regulate that a one aircraft airline is not an airline.

I believe we need to take a step further as the President of Aviation Round Table (ART), Mr. Gbenga Olowo, suggested. I believe we need to increase the minimum numbers of aircraft needed to constitute a viable airline. It could be five, I would have loved to say 10; minimum of 10 aircraft to be an airline, a real airline. I know this would be punitive for many of the airlines that do not have the resources to get up to 10 aircraft.

But, I really do believe that in the interest of the industry, we need to scale up and this should be part of the regulatory requirements; to have a minimum size, which is viable. In addition to regulating the size of the fleet, I believe it is critical for NCAA to regulate the economic and financial viability of every airline in Nigeria. If you go to the United Kingdom Civil Aviation Authority (UK CAA), one of the delights is that, you can go online and get the traffic data. It is amazing the information that is available. We need to adopt that system.

Who knows numbers of passengers airlines carry? Is it a public knowledge? It is not widely reported. It is critical to know the size of the industry and the trends.

So, the CAA must become stronger in terms of data collection from the airlines, the traffic, the on-time performance, the financial performance. Is the airline paying staff? Are they maintaining their aircraft? We need stronger financial and economic oversight for airlines in Nigeria to move forward.

I have tremendous respect for all the airlines in Nigeria and the owners, it is not an easy job and they are working very hard. But, if we want to move forward, we must scale up in terms of fleet, traffic, cooperation and joint ventures.  We really need to move forward.

Several players in the sector have condemned the Bilateral Air Services Agreements (BASAs) arrangements the country is having with lots of foreign countries as we hardly reciprocate, how can we address this?

When I look at BASA in Nigeria, it is like we open the stable door and the horse is gone. And to catch it back, it is going to be very difficult.  We entered into BASA arrangement with numerous countries. The principle of BASA is reciprocity. And yet we entered BASA and we are not able to reciprocate. Why?  It is because we do not have the airlines. And why don’t we have the airlines? It is because they are weak, small and under-capitalised. When you go for BASA, you allocate the route, the frequency.

The foreign partners will come and say they want to operate for   example into Lagos, 10 times a week. Where is your airline to operate to London, 10 times a week to reciprocate or to any other route? We cannot match it. And the government cannot hold back the industry because Nigerian airlines cannot reciprocate, because people have to travel.

Nigerian economy would have been weaker, if the government says until we wait for airlines in Nigeria to catch up. When I look at BASA, it is a good concern for me. It is a problem we created, because we did not ensure that we have strong enough airlines to reciprocate.

Therefore, we gave the market to foreign airlines to provide our economy with safe and efficient airlines. When you have opened your market in that basis, then it is difficult to plough it back out of spite or out of resentment. It is a tough question. The only way it could be resolved is having strong airlines that have the capacity to provide the services. For example, if you have three hypothetical number, three very strong with 50 aircraft each minimum. These airlines would be able to put up the services required, so you can go to Ethiopia. You can go back to the negotiating table.

Now, we are ready to reciprocate. That way, you can get your market back. Without that, it is very difficult to get your market back.    If we regulate to minimum numbers of aircraft, if we regulate that the airlines must work together. The government did it with banks. We can do it with airlines.

Independent.ng 

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