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Africa: How Nigerian Government can Support Local Airlines

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As Air Peace expands its operation, Chinedu Eze writes on how government can support local carriers to grow and improve capacity.

There are three key things that make commercial flight operation in Nigeria expensive. One is that major aircraft maintenance is conducted overseas; two is that aviation fuel is, relatively, expensive in Nigeria, and three is multiple taxation of airlines.

In addition to the above, there is high insurance premium paid by Nigerian airlines because insurers, who are foreign based, see the Nigerian operating environment as harsh and precarious. So Nigerian airlines pay almost double what airlines pay in Europe and other parts of the world. It is said that the insurance premium charged Nigerian operators is the highest in a country that is not in war. It is the same with cost of aviation fuel.

Incentivising Airline Operation
One of the most challenging businesses in Nigeria is the operation of an airline. According to former Chief Operating Officer of the defunct Chanchangi Airlines, Alhaji Mohammed Tukur, immediately an airline begins flight operations in Nigeria it starts to pay taxes and charges, with no tax holiday or suspension of payment of charges even for six months. Tukur believes such reliefs are the way to incentivise new airlines because of the pivotal role they play in the economy of any nation.

It was under similar challenges that three years ago Air Peace airline started flight operations. Surprisingly, it started with seven aircraft at a time airlines were starting with the mandatory minimum of two aircraft. Within the first two years, the airline upped its fleet to 12, and after three years of flight service, the airline now has about 24 aircraft.
This is historical, especially when this was achieved under a very harsh economic situation; when recession was eating up the finances of organisations and when airlines were paying three times what they paid three years ago to acquire aircraft spares and conduct C-check overseas.

Air Peace recently acquired six Embraer 145 planes, a couple of Boeing 737 and two Boeing 777 aircraft, bringing its fleet size to 24 aircraft, to drive its massive domestic, regional and international expansion project.

Route Expansion
Air Peace said it would introduce new routes in Nigeria and the West Coast in 2018 in order to operate some destinations currently underserved and offer air travellers better choices. Chairman/Chief Executive Officer of Air Peace, Mr. Allen Onyema, said the new destinations would commence in 2018.

Reviewing the operations of the airline in 2017, Onyema said the airline deserved commendation for rescuing the Nigerian aviation industry and giving air travellers hope in the period under review. He said he was quite satisfied that Air Peace was able to expand its fleet to 24 aircraft, despite the economic downturn in the country and what the aviation sector experienced in 2017. He attributed the airline’s success in the three years of its existence to the unflinching support of the flying public and the quality leadership of its management team.

The Air Peace boss said the airline would remain grateful to its customers for their patronage over the years, urging the flying public to continue to trust the carrier’s services. Air Peace, he assured, would continue to strive to sustain its uncompromising approach to safety, prioritisation of the comfort of its customers and job creation.
Onyema, however, said the airline still had a lot of grounds to cover in its vision to transform air travel experience in Nigeria, the West Coast of Africa, and the Dubai, Guangzhou-China, London, Houston, Mumbai, and Johannesburg routes.

He said the airline, which commenced flight operations to Accra, Ghana, on February 16, 2017, was determined to expand to about nine destinations on the West Coast of Africa. The airline, he added, was awaiting the delivery of two Boeing 777 it recently acquired to start its flight operations to Dubai, Guangzhou, London, Houston, Mumbai, and Johannesburg.

Government’s Role
In Nigeria there is always a conflict between the interest of domestic carriers and that of policy makers in government. To the policy makers, while government would always support Nigerian airlines, the airlines do not have the capacity to meet passenger demand in international travel. So government, through its Bilateral Air Service Agreement (BASA) policy, opens doors to international carriers, which have dominated the international market of the Nigerian aviation industry.

Aviation expert and former secretary-general of African Airlines Association (FRAA), Nick Fadugba, said foreign airlines operate the major routes from Nigeria and for these airlines to relinquish these routes, it must involve negotiation. But now, Nigerian airlines cannot provide the capacity to airlift even 30 per cent of Nigerian travellers to international destinations.

But the conflict comes when a Nigerian airline is ready to operate international destinations and has to compete with the well-established airlines already operating the routes, for example, Medview competing with British Airways and Virgin Atlantic Airways on the Lagos-London route.

The airlines want government to give them incentives to enhance their operations. But because of the old BASA signed by Nigeria and the host countries of these airlines, there may not be much the government can do. But in countries like South Africa, foreign airlines negotiate commercial agreements with the national carrier, South Africa Airways, and determine frequencies and seat sales. So if Emirates, for example, wants to operate more frequencies to Johannesburg or Cape Town and South Africa Airways does not have the capacity to go to Dubai for the number of times in the principle of reciprocity, Emirates would have to earmark a certain number of seats in its aircraft and pay the revenues to South Africa Airways.

THISDAY leant that a similar arrangement was made between British Airways and the defunct national carrier, Nigeria Airways Limited.

There are areas Nigerian airlines would need government’s support. They expect government to facilitate single digit, long term credit facilities for airlines, as it is done overseas. This will enable airlines acquire new aircraft and also help them to develop indigenous manpower through training and retraining of pilots, engineers and other technical and commercial staff.

The airlines expect government to ease the process of moving aviation fuel to the airports because the current process is cumbersome, slow and causes flight delays. According to the CEO of Aero Contractors, Captain Ado Sanusi, tanking aviation fuel from Apapa to the Lagos airport, for example, is very slow with the well-known traffic gridlock on the Apapa road.

The airlines have requested that the pipeline that connects the Lagos airport to Ejigbo depot, which has been out of use for decades, should be revived and instead of tanking fuel to the tarmac to feed aircraft, fuel hydrants should be opened at the tarmac, the way it is done in other parts of the world.

Recently, Aero Contractors has been able to successfully upgrade its maintenance facility and can now do C-check on Boeing B737 classics. This is a great achievement because industry experts agree that any airline that takes its aircraft overseas for maintenance would be spending huge amounts of revenue on maintenance, buying foreign exchange at exorbitant prices, while the airline earns its revenue in naira.
Government needs to assist airlines to build their own maintenance facility, known as Maintenance, Repair and Overhaul (MRO) facility.

Sanusi said, “To control cost, every operating airline should be able to conduct its maintenance locally. As Nigerian airlines earn their revenues in naira, they pay hugely for the maintenance of their aircraft overseas. If you earn tickets in naira you have to change it to dollar to maintain your aircraft overseas. With the current exchange rate an airline pays a substantial amount of its revenue for maintenance and that is why they should patronise the local maintenance facility we now have in Nigeria. This will save them a lot of money.”

Government is also expected to assist these airlines as they negotiate with other countries they wish to operate to. One of the challenges Nigerian airlines face when they want to operate to West African and other destinations in Africa is lack of cooperation by the countries’ government.But when airlines from those countries wish to operate to Nigeria, concerned agencies quickly acquiesce their requests.

Air Peace has really set a new record in Nigeria, to acquire 24 aircraft in three years. In a recent interview with Onyema, he spoke about Air Peace airline’s aircraft acquisitions. According to him, “We started with seven aircraft; four Boeing B737 and three Donnier 328 jets. Today, we have been able to acquire 17 more aircraft.

So we now have a total of 24 aircraft in our fleet. Air Peace is Nigeria’s largest carrier today fleet-wise. We have 15 Boeing B737s, six Embraer 145 regional jets and one Donnier 328 jet. We also have two Boeing777 for our international operations. This feat could not have been achieved without the corporation of our banks. And it is also the evidence of our integrity. If we are not effectively servicing our loans, I doubt if the banks would have been supporting us.”

What the airline and other carries need is unflinching government support to grow in capacity and also provide more employment for Nigerians.

Source: thisdaylive.com

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