Obi Mbanuzuo is the accountable manager of Dana Air. In this interview with IFEOMA OKEKE, he speaks on why the government needs to support domestic airlines urgently, and explains why Dana Air is staying afloat amid the impact of COVID on airlines in Nigeria and across.
How have operations been for Dana Air since domestic flights resumed?
Since the lockdown, it has been very difficult. Even after flights resumed, the aviation industry worldwide has been struggling. But after the resumption of domestic flights, people are gradually coming back to fly.
There have been no incidents of infection as a result of the procedures we have put in place. July was not good enough but it was better than expected. In July, the load factor was about 32 percent, but the good thing was that we saw people coming back to fly. It was just the beginning. August was better than July, and September was better than August. Every month, there have been increments. As I mentioned, we had about 32 percent load factor in July, 43 percent in August and about 50 percent in September. We are still far ahead of breaking even, but there have been some slimmer of hope. We hope the government will intervene with the palliatives. We are doing our best to keep people in their jobs. In Dana Air, we haven’t fired anyone yet. During the lockdown, people could not work because we were not in operations, but now we have half of our workforce back at work and we hope that the rest can return to work because that is really what we are doing.
Looking at the losses you incurred during the four-month lockdown, do you think you will be able to recover in the next one year if the government provides palliatives?
I don’t think airlines can recover the losses they incurred in a year because it wasn’t just the fact that we were shut down; airlines still had to pay for several things. Some of the airplanes are leased, and we had to pay for them. Even the airplanes that were not being flown had to be looked after on a schedule. Whether we fly or not, the engineers do some checks daily. Some engineers had to go in there, start up the engines, check major parts and fix what needed to be fixed. So, there was still money being spent even though we were not flying. Now that we are flying, it is even worse because we are not making profit but we are paying for fuel, spare parts, landing charges and several other charges. So, the palliatives are only to get us through. What I see is that some
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airlines may go down. It is not something we wish for, but it will happen if these airlines don’t get support. Now we are flying, we are paying operational costs of flying these airplanes. We are just trying our best to conserve cash and keep jobs. Without the airlines, the airports will be shut down, and the Nigeria Civil Aviation Authority (NCAA) will not do anything. The aviation industry contributes a big chunk to the economy, to development and travel and tourism, among others. We just have to get urgent support or else thousands of people may lose their jobs.
In addition to the impact of COVID-19 to your operations, I know the high foreign exchange rate has compounded your woes. How has this affected your operations?
The exchange rate is a big factor when it comes to increase in losses. The naira was about N360 to a dollar before lockdown, but now it is about N450 to a dollar. Our tickets are sold in naira but the spare parts, the leased airplanes, the insurance and many more are paid in foreign currency. We don’t have access to foreign exchange at the official rate. When we get foreign exchange, there is limitation on how much can be paid on a daily basis. There was a time the Central Bank of Nigeria (CBN) mandated us to pay a maximum of $10,000 a day. For instance if I have one spare part that costs $40,000, it would take four days to spend for just one spare part. That means I can’t pay for anything else during the four-day period. The people abroad do not understand these things. This is why we need the government to support us. Let the government at least make foreign currency available.
Do you have any aircraft out of the country on maintenance?
We have one aircraft out of the county on maintenance but hopefully it will come back in a week’s time. A second aircraft is due to go on maintenance. Before the lockdown, we had brought in two new Boeing aircraft to add to our fleet.
With the reduction in flight frequencies as a result of low passenger traffic, do you have all your aircraft flying currently? All our airplanes are not flying. We started with only two airplanes flying out of six because we knew that it didn’t make sense to fly aircraft that were empty. We didn’t even start flying to all the destinations we used to fly to. When we resumed operations, we only flew to Abuja and Port Harcourt. We are gradually coming back to other routes now. In July, we only operated two airplanes, but now we are about to add a third airplane. We are really being careful. We started Owerri a month ago. We are looking to start Uyo soon. We are also looking to resume operations in Enugu in October.
Now that you are back in operations, what is the next big thing for Dana?
Before the lockdown, the big thing was to do fleet renewal. The 737 we got were just a stop-gap. We were looking at a complete fleet renewal but the pandemic, which has affected market dynamics, has meant that we put others on hold. For now, we are trying to conserve cash, and keep giving customers’ confidence so as to increase capacity and patronage. We need an average of 65 percent load factor to break even. The more we keep giving people confidence to come and fly, the more we are able to break even. By next year, we should see some major improvements. We are just trying to be consistent, conserve cash and stay alive.
Despite these challenges you are facing, you have not increased fares. How are you able to manage with low passenger traffic, yet low fares?
When we wanted to start flight operations, we sat down and looked at the dynamics and we knew that fares were going to go up, especially as the Federal Airports Authority of Nigeria (FAAN) said it would increase Passenger Service Charge (PSC). So we were thinking whether to absorb these internally or pass it to the passengers. We knew that, somehow, fares would go up. However, we are in a competitive market and some have decided that they can survive at a lower price, which drives the market down. So, we are trying to be intelligent at what we are doing. We are trying to increase our average fares, as we have a department that is focused on that. If you buy your tickets, you can still get some cheap prices but we have, on average, increased the fares. For instance, on a flight of 100 passengers, 50 people pay N20, 000 each and the other 50 people pay N22, 000 each, so the average fare is N21, 000. So, we manage to get something extra from the fares. So, we have increased fares slightly, however, we are in a marketplace and we cannot ignore competition. I might want to sell tickets for N35, 000, which will make us try to break even but we know the market is price-sensitive. At this time, it is not easy for the passengers and it is not easy for the airline.
Is Dana Air complying strictly with the COVID-19 protocol set out by the federal government?
Even before the COVID era, we had quality control. So long as we have that quality control that is working, we just know that everything will fall in place. The regulator, in conjunction with port health and the airlines, has put in procedures for protection of passengers. We have taken those procedures and we have incorporated them into our procedures. We have quality control that makes sure that the procedure is done every day and every time irrespective of who is watching or who is not watching. For instance, there is a rule that says on a row of three passengers, the middle passenger should have a face shield and that face shield will be provided by the airline. Initially we were the only airline doing that. We have quality control for how we operate, so once we put that COVID-19 procedure into our normal operations, and it will always be there.
We started with only two airplanes flying out of six because we knew that it didn’t make sense to fly aircraft that were empty. We didn’t even start flying to all the destinations we used to fly to.
What other policies do you think the government should put in place to help grow the aviation sector?
We have been very bureaucratic. The airline is a business and having to go through several processes to get things done shouldn’t be so. For instance, when we want to import our aircraft we have to go through many processes just to import an aircraft. Apart from palliatives, we need to implement the ease of doing business we hear every day. Passengers have had to feel several forms when they travel. We need to get them done easily. They need to work on visa processes for foreigners coming in. There are better ways to work out things and make them easier.
