Q:Survival strategy amidst crises
There are so many things that make up the survival strategy. What we have done first and foremost is that we try to do things properly; we try to put safety first. If you talk about crisis in the industry, you also talk about some of the issues that border on safety and that is a major problem. What we have done is to properly take care of that aspect first which will help us manage other issues relating to financing and growing the business.
That is the crux of our strategy. A lot of other things that we do are driven by the fact that we are a safety conscious airline; we have consciously grown the airline from being a small scale operation to being one that has some economies of scale. That is what we have done.
After our sixth anniversary, Lufthansa came here, and we have signed an MoU for the setting up of an Maintenance Repair and Overhaul (MRO). We are still in discussions to realising the plans. We’ve had another meeting with Lufthansa in London, the plans are still very much on course. We have a land for the MRO in Lagos, they have also visited the environment, they have seen drawings of the new MRO and our hangar. It is something that we are still working on but not something that we may accomplish this year, it’s one of these medium to long term projects.
Maintenance is difficult because we have to fly out and when we fly to a maintenance organisation, we lose the use of the aircraft. That is the biggest part of it. The cost of doing it outside is also a factor to reckon with. It should be cheaper if we do it here in Nigeria, we will be able to leverage on local labour, it will give us flexibility because these days, there are some maintenance practices that are different from what airlines used to do. You need to continuously maintain your aircraft, you need to do checks everyday and from time to time.
It is also not difficult for airlines to agree to establish an MRO but the means of establishing it is what will be difficult, we can come together today and agree and after that you want people to begin to commit money to it.
Proposed 30 aircraft lifeline
One of the things that we need to do more is to consult airlines in terms of making a decision. I think the biggest problem that an airline will have is the cost of funding the acquisition
of aircraft. Government can decide on what they want to do depending on the resources available, but I don’t think that is the request of airlines.
But whichever way, government is going to incur some cost but I believe that if government makes it easier for airlines to finance aircraft acquisition, it will be a lasting solution to the problem. I think there will be a lot of problems though I don’t understand how government intends to do it because of the sustenance.
Airline joint decision
We had a lot of consultations, a lot of meetings before the so- called intervention fund which was only designed to rescue Banks from their non-performing loans, though a lot of the loans were coming from aviation and the power sector. But I think government should have done something that is more targeted at the airlines and something that will make it a lot easier for them. You can’t borrow at 20 percent to buy aircraft or run airline business. We actually articulated a few things and presented to government.
Another thing on the list was the issue of custom duties on aircraft and spare parts. That is one thing that is very important because you can’t pay import duties on aircraft importation and survive.
Again, if you look at the environment there are lot of charges, their airlines have to pass it back to the passengers, the air fare is high, the passengers do not take time to find out why but are concerned about the amount they pay. This is an industry that government wants to support. Government has realised that the sector needs bail-out. Then government needs to at least reduce the money and charges it gets from the sector. If the airlines and passengers are made to pay for it, only fewer people will afford to buy the tickets, and that means the market shrinks and the revenue coming back to us shrinks and eventually it gets back to us.
Aviation is a special kind of business because it has a lot of implications on the nation. It impacts on the economy as well as security. That is why government must safeguard it. It must work. If it works, the economy grows in other sectors. That is why there must be a policy that enables airlines to grow. We have a large market in Nigeria, that is why we can accommodate many foreign airlines, but we have to grow the indigenous airlines to the level of being able to compete favourably. That is when we get more from the size of the aviation sector.
Experts discuss a lot of things but the practicality is a different thing altogether. It is possible for airlines to merge, there is nothing wrong in that, companies can merge but companies have not been merging in Nigeria. I have not seen airlines discussing mergers. But if you look at the number of airlines we have, I think with the right environment, they can run profitably and survive. Merger may not be the only option open to airlines because if the problems are there, even if you merge the airlines into one it still may not work. What we need to do is to solve the problems that have reduced these airlines to what you think should be merged, because if the problems are not there, there will not be need to think of merging. Let us solve the problems from the root, and those who want to merge can do so willingly because they want to have economies of scale. Airlines that have merged in other countries do not do so because they are doing badly, they merge because they see the benefits of the mergers and they discuss it and the shareholders willingly agree. We need to create the right working environment. Merger should not be something that happens just because the environment is difficult because you want to lean on each other to stand but we need to tackle the problems headlong.
We don’t have so much scope in the domestic market to expand except for what we’ve done lately on Lagos-Abuja-Port Harcourt where we put a shuttle service that enables us to do flights every hour at peak periods. Already we operate into almost all domestic routes. We will be focusing on regional and international operations. We are looking at the regional markets as a big future market and also the international market which is largely untapped, where we are a small operator. We still have a lot to do in that market.
Our international operations are doing well but not as robust as the domestic operations because of the sheer scale which is very important for airline operations. A lot of things happen everyday. You can wake up and see that the aircraft is not serviceable. If you find that for one reason or another you can’t use that aircraft that day, you should be able to use another one. That is what we can do on the domestic operations but we can’t do that on the international market. We are still limited by the number of wide-bodied aircraft. That is why we want to get two A320s in May and June and so we can pull out the B738 from the Johannesburg route and deploy the new wide-bodied one. It also gives us additional stability of being able to maintain and sustain the same type of aircraft even when the aircraft goes for check. Sometimes when we deploy another aircraft when the aircraft goes for check, the passengers don’t want that because that is not what they want to see, they don’t want to understand what the problem is, ours is to solve it and put things right. However, we’ve enjoyed support from so many Nigerians who have patronised us and so we want to ensure that the products we put out are comparable with what foreign airlines are using so that it does not appear as if we persuade them to give up their comfort in order to patronise local airlines.
The first aircraft will come in this month. We are in the process of registering it in Nigeria, a lot of things have been done, the pilots and crew have been trained, we are ready to go.
We are linking up with domestic airlines in the US. It is a very big market. We believe that New York is still the largest market. You can’t fly to so many cities. We are still
concerned about how passengers get to their destinations in the US and that is why we are working on interline arrangements. Before the end of the year, we should be able to have some interline agreements with domestic airlines that will help us get our passengers to and from other cities in the US and even Canada, with through-check-in of luggage and seamless transfer from one aircraft or airline to another. We are also working on our own transfer networks in Lagos.
We are one of the safest airlines in the world today because Lufthansa Technick, which is about the best the world today, is what we use. We don’t influence them. We are producing the best quality in terms of the age of the aircraft and the comfort of the interior especially of the aircraft on the New York route. There is no airline that has the quality of equipment that we have on the London and New York routes.
You can’t even find that kind of comfort on some first class. I think we have excelled in that area. The configuration is classic, the lie-flat beds, the bar and lounge area that is accessible to all business class passengers, we call it the Premium class. We are getting stronger on other international operations and that is why we want to strengthen our operations in a way that can provide and maintain the same quality of service because sometimes when we downgrade to smaller aircraft, it also impacts on the passenger service, but that has ended now.
In terms of entertainment, we had some issues in the past, but we’ve fixed that now, it’s been working steadily for sometime now, everything is going on well.