• Tuesday, July 16, 2024
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Mergers loom as airlines need fleet of six to fly

Six aircraft entry requirement seen driving airlines’ partnerships, mergers

Following the recently introduced civil aviation regulation, requiring a minimum of six aircraft for start-ups and existing airlines, local carriers may be seen entering partnerships, mergers and engaging in acquisitions in a bid to remain in the market.

Before now, prospective airlines in Nigeria were only required to get two aircraft to commence scheduled operations but with regular flight delays and cancellations and sometimes shut down of airline operations as a result of aircraft shortage, NCAA has had to review this regulation, demanding that prospective airlines must now present a minimum of six aircraft before they are allowed start scheduled operations.

While International Civil Aviation Organization (ICAO) regulation do not place any minimum aircraft requirement for airline to start operation, the Nigeria Civil Aviation Authority (NCAA) has said he new regulations has become necessary to safeguard the viability and stability of incoming airlines within the aviation sector.

Olumide Ohunayo industry analyst and Director, Research, Zenith Travels said the new regulations would make airlines restrategise and enter partnerships and aquisitions agreements in a bid to survive.

“There have been some people who have objected to the new regulation but I don’t have any objection to it. We need to grow capacity, we need to have strong airlines. The regular flight delays and cancellations has to do with aircraft availability. Some say there are airlines in the world that started as one airline and have become big airlines and this I agree.

“But after looking at our recurrent misteps and failures, if we need this regulation to build strong airlines from beginning, then so be it,” Ohunayo said.

He however suggested that NCAA should look at the possibility of creating another cadre of airlines that would have for instance, not more than one hundred seats comprising of maybe 13 to 20 seater aircraft.

He explained that as these small airlines grow and are able to do certain number of seats, then the full schedule operators law would be applied on them.

“This group may not need up to six aircraft. You can ask them to have just two aircraft or three and they will be going to the short routes and airports without much traffic. These are the aircraft that will now develop into the bigger ones or merge or go into partnership with one of the bigger ones.

“Those still operating will still remain but along the line, they may start discussing partnerships and integration. Most airlines don’t want to hear the word ‘mergers’ but there is a need to begin to build airlines with capacity and airlines that go beyond single ownership.

“We are talking about Bilateral Air Service Agreement (BASA) but we cannot to have airlines owned by one person being pushed as flag carrier. People will definitely object to it. Airline ownership must go beyond one person. We must find a way to get others onboard, so people will now see them as Nigerian airline and not airline owned by one man,” Ohunayo said.

Musa Nuhu, the Director-General of the Nigeria Civil Aviation Authority, said the acquisition of six airplanes is not restricted to new entrants, he stated that the old ones also have a period by which they have to comply.

He explained that if airlines have three aircraft for instance and lose one out of it, it has become a problem to meet up with their operations and then they start to have issues with flight delays, cancellations, and eventual suspension of operations.

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“The number of aircraft you will have will depend on the kind of operations you want to do. You can imagine somebody who comes in with just one or two aircraft and one of the aircraft goes out of business, and sells tickets to the passengers, think of what will happen. For you to have six aircraft, it shows you have very strong financial backgrounds of running an airline.”

“If everybody has one or two aircraft, we will keep having this recurring problem. We have to avoid that. People will criticize, but every country is different. We have to look at our own peculiar history and try to come up with solutions, but regulations are not cast in stone. If the situation changes, the regulation would be reviewed accordingly. Whenever it is necessary, we don’t have to wait for five years before we make amendments,” he added.

In the last two years, several airlines have had to temporarily suspend operations as a result of aircraft shortage, as their all aircraft had to go on scheduled maintenance at the same time. These airlines include Aero Contractors, Dana Air and Azman Air, thereby leaving several passengers stranded. Some of these airlines have however resumed operations after the arrival of their aircraft from maintenance facilities.

However, barley one month after it resumed operations, Azman Air has again shut down operations as a result of shortage of aircraft.

The management in a memo, signed by Magaji Misau, its Human Resource Manager, dated August 3 and titled: ‘PLACEMENT OF LEAVE WITHOUT PAY,” asked all of staff to proceed on leave with an exception of an under listed eight names.

The letter read in part: “As you are aware, our domestic operations has been put on hold for a while due to the conveyance of our aircraft for C-checks and the MROs has given a longer time of completion.

“In view of the above, the management directed to write and communicate its decision that all staff have been placed on leave without pay with effect from August 1, 2023.”

For some other airlines like Medview and First Nation, these airlines have been unable to resume flight operations afterwards.

John Ojikutu, security expert and former military commandant at the Murtala Muhammed International Airport, Lagos said the six aircraft requirement has been long overdue.

“In my Book Troubled Skyline, I have recommended five aircraft and three domestic routes. This will reduce the unnecessary delays and cancellations if only partnerships, interlining or code sharing are incorporated into the Domestic Operations by the Airline Operators of Nigeria (AON). Unfortunately, the ego practices among our domestic airlines operators can’t create growth in the commercial aviation industry in Nigeria.

“We have too many in the airport of Lagos same manner you have danfos, korope, maruwa and Okada on our roads competing for space. What one BRT will take in one sweep and one space is what seven danfos would carry in three BRT spaces on the roads. Imagine how many aircraft loading at Murtala Muhammed Airport (MMA) for Abuja in the morning and how many of them have optimum number of passengers for take off at schedule time?,” Ojikutu said.

He said it is not enough to limit the number to six, but also necessary to restrict airlines to operating bases instead of them all concentrating on MMA.

“In the past, OKADA was operating from Benin, Kabo from Kano, Horco later Harka from Kaduna, etc. ADC that was to operate from Calabar was operating from Lagos. These regulations are necessary to reduce conflicts among the operators and even with the services providers,” he added.

Ibrahim Mshelia, owner of West Link Airlines Nigeria and Mish Aviation Flying School, however described the new regulation as an unprogressive one , adding the NCAA is supposed to be thinking of how things will get easier for airlines to operate and not make it difficult for airlines.

Mshelia explained that acquisition of airplanes can either be outright purchase or lease which can either be dry lease or wet lease but for schedule operations, the law requires airlines bring wet lease aircraft.

“Wet lease means the airplane has to be registered in Nigeria so that the NCAA can oversight the operations for safety reasons, which is the ideal thing and is correct. However, the six aircraft requirement is a law that stall our growth. If it is NCAA that brought the idea of minimum of six aircraft, then NCAA has failed the system.

“I know I told people in NCAA that this will be counter productive. We have standard and recommended practices of ICAO which makes it easy for airlines to operate. General aviation means stepping down the regulation within the minimum safety and allow people to learn the trade and advance to the next stage.

“But in Nigeria we raise the bar trying to be the best but we are stalling the growth of airlines. Nigeria has higher aircraft put together than most African countrues. ICAO allows you start scheduled operations with one aircraft and anywhere in the world, there is nothing wrong with this. I called Ghana Civil Aviation and asked how many aircraft I needed to start operations in Ghana and I was told minimum of one. This makes the airline overhead cost lower to start and grow the operations,” he explained.

He said African countries work in synergy so the laws should be similar.

He suggested that instead of placing entry requirements based on aircraft number, NCAA can demand that prospective airlines show how they can start, make profit over time and operate safely, so they don’t cut corners.

He said If anyone flaunts the law, then he should be shut down.