Access to foreign exchange to purchase aircraft spare parts, import duty waivers, cost of aviation fuel are some of the recurring issues that have continued to stall seamless domestic operations in Nigeria. These problems have been fingered by Nigerian-owned airlines as some of the reasons why air fares have skyrocketed and why aviation business is not as profitable as it should be.
To address this issue, venture capitalist and entrepreneur, Dr. Obiora Okonkwo, the Chief Executive Officer of United Nigeria Airline, the latest domestic operator to begin operations in the country wants the Central Bank of Nigeria (CBN) to give airlines a special window in which they can bid and access forex to buy spare parts and carry out maintenance.
Though many airlines have been gone out of business in the past, Dr. Okonkwo who met with aviation reporters recently in Lagos, is very optimistic about the success of his business venture. He says that contrary to widely held beliefs, the Nigerian aviation market is very huge and has much potential for profit.
United Nigeria Airline
I didn’t attend any aviation school; I am just an entrepreneur and venture capitalist. I looked into the business and felt that we can do this. This story has come a long way and this is the best time to tell it.
Some time ago, the Nigerian Air Force approached me to partner with them to establish an airline. They had the manpower and they felt the airline would help them increase their capacity to lift troops from one location to the other especially during the international peacekeeping era. They were looking for an investor to invest in the aircraft. We did our negotiations and procured the first aircraft and went through all the processes. We were about to start our operations but the head of the Air Force who conceived that idea was removed before the arrival of the aircraft and obviously, the focus and intention changed.
So, here I was with my huge investment in the aircraft which was supposed to help the Air Force in the training of the captains who were working on the presidential fleet and so many other things. We had also invested in a second aircraft which was getting ready to come in but at the end of the day, that plan did not actualise. I am someone who doesn’t give up and I don’t say no to anything, I took up the challenge and prayed to God to give me direction because I was in the middle of the wilderness.
The only options I had was to sell the aircraft and forget about the dream of an airline but having looked at what I have put in because I had to get the Air Transport Licence, I prayed for a way forward. That is how the journey of what is now United Nigeria Airline started.
Within four weeks of commencing flights, we have done about 25,000 passengers and we are organically increasing our capacity. We could have started using all the four aircraft on the same day but we are an organisation that is very particular about knowing our strengths and limitations. Our ability to respond to the challenges of the industry, whether it is the inadequacies of the airport facilities or access to forex, we are open with our customers on our challenges. We are an airline that has integrity and we keep our promises.
We assembled a great team and most of them are Nigerians. We would grow according to our capacity and resources and we are spending a lot of time and resources in training our pilots and all our staff. The aviation market is huge and that is one thing Nigeria must understand. There is no industry comparable to it.
Embraer jets
Our choice of aircraft was done after thorough due diligence and the fuel saving capacity is an advantage. We thought that as a new airline, it would take us a long time to fill the aircraft but to our surprise, we got our certified true copy of our AOC on 6pm of a Thursday of that first week of operation and fixed our inaugural flight and other commercial flights the next day from 6.45am. Within 12 hours of opening our portal on the first day of operations, we had full passenger load and I can tell you that it has been like that on some routes all day round, which is confirming that oppourtunites are huge and the market is large.
We are more blessed than others because their story might be a little different. A friend of mine of blessed memory, Chief Victor Ikwuemesi, the chairman of Sosoliso, was a great inspiration to me. Even when I wasn’t sure which way to go, he volunteered and supported us with every experience and knowledge he had. He told me that on the day of his inaugural flight, he had four passengers and on return, he had just two passengers. He told me this so that I would get prepared for the worst. I wish he was alive to be part of our flight.
On the issue of medium to long term maintenance plan, we have begun a process of acquiring accommodation to establish an MRO in Enugu which is our operational base. We are still in touch with the authorities for them to allocate a place for us. We have given ourselves 24 months to be able to do our full C-check in our own facility and also offer service to others in the industry. We are already two months behind schedule but we hope that very soon, the Federal Airports Authority of Nigeria (FAAN), would be able to clear that up for us and we would embark on that project.
We are hoping to increase our fleet from the current four by adding two more Embraer in a short while, but by then, we would have consolidated on certain routes and passenger loads. We have plans that afterwards, we may consider a larger body aircraft.
Skyrocketing airfare
If you look at the cost of operations in the industry, I would say that there is no amount paid for air fare that would be too much. When the rate is very high, it is usually due to demand.
In some seasons when you have to fly full and come back empty, you have to find a way to cover the cost. People need to understand that operating an airline cost a lot. In terms of the fuel price, it is a cause for concern because we started when it was about N230 per litre and you know that the cost component of aviation fuel is about 30 to 40 per cent. And if the cost of fuel increases, one ordinarily should expect that the price of airfare would increase to at least 50 per cent.
For the industry to even remain operational, not even viable, certain things have to be considered and the only way you can make profit is through ticketing or cargo. Also, your staff won’t want to hear that because operational cost is increasing, then you want to reduce salaries.
If you want to buy ticket at a lower price, book it in advance and save cost. But if you book during peak periods or when demand is high, you have to pay the maximum cost. But it is my wish that there would be some intervention or policies that would reduce the cost so that the service would be affordable to more people because there is so much risk involved if you travel by road.
Interlining
On the issue of interlining, I am a strong advocate of corporation. The market is huge, so, there should be synergy between the operators. There could even be opportunities for airlines to merger so they can become stronger and use common facilities for themselves to reduce cost. I also encourage a situation where airlines can exchange spare parts and we are open to such collaborations.
Forex challenges
It is a big problem for operators because, by the rules and regulations, CBN makes the official bidding market for dollars bi-weekly, which means that if you approach your bank and they bid for you this week, if they don’t get it, you have to wait for the next two weeks. If you rely on that to make things happen, you will find it difficult. I am advocating that a special window be opened for airlines so that we can access forex. Similar businesses overseas have been hugely supported by their countries with different policies. This is a service-based industry and a little support from the government would help operators. Air travel helps the economy and it helps security and should not be left alone in the hand of operators.
Flight delays
If there is an issue with the weather in Owerri or Asaba for instance, and the staff tells the passenger, ‘we can’t go to Asaba or Owerri because we can’t land’ and the passenger is asking why they can’t land, when that person doesn’t understand, what do you do? The industry must have to come together to educate passengers, it would help reduce the tension that is experienced on both sides. If you are about to take off and safety is your watch word and there is a snag in the aircraft, you must have to wait to find out what the reason is. But people don’t understand, they just want you to fly. There is no operator that doesn’t want to fly but most of the reasons for cancelled or delayed flights are usually beyond the control of the operators. However, some reasons may be due to management but it is minimal.
One of the major issues with operations is fueling. In Lagos and Abuja, there are no issues but when you begin to operate outside to marginal airports like Asaba and Owerri, you start having some problems. However, we are managing these issues and many of the weight limitations have come from these destinations. But since we started, we have not had problems. There has been a few delays here and there but none has gone beyond one hour or thereabout but we would continue to work on that because we don’t give excuses. The media have to help us enlighten passengers on why some delays can occur.
Custom waivers
There is a waiver regime that exists and we have benefitted from it especially for the aircraft tariff but we are still battling to benefit from that in the aspect of spare parts because from the rules, for every spare part, you have to go and get a particular clearance. But on a general note, the waiver comes from the Ministry of Finance. There should be an integration with customs. But when there is a misinterpretation of what the law is supposed to mean, it is very frustrating for the operator. I wasn’t quite aware of the response from the Customs concerning waivers but I can only make an appeal and say that the waiver regime is healthy for the industry because anything on the contrary will ground operations. Assessing waivers easily and seamlessly would only justify the good intentions of the government and all the relevant ministries and agencies should sychronise.
