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    Domestic Airlines and Challenge of Capacity

    19 Sep 2020

    Chinedu Eze writes that indigenous airlines must build capacity to be able to compete globally

    Industry stakeholders recently reviewed the decision of the federal government to adopt the principle of reciprocity as response to the countries that barred Nigerians from their shores due to the COVID-19 pandemic.

    Some of the stakeholders argued that the decision had resulted to increase in airfares by foreign airlines, while many others insist that the federal government took the right decision.

    They argued that Nigeria should not allow other countries to run roughshod on her, noting that the country should be given the respect it deserved if it adopts the principle of reciprocity in its diplomatic policies.

    They noted that there is no better place to start than in the aviation sector, where foreign airlines dominate international operations and while Nigeria “pampers” the airlines, their countries are allegedly harsh on Nigerian carriers and where Nigeria easily makes concessions in her diplomatic relations with other countries; the others are very rigid against her and her citizens.

    Poor Capacity

    The stakeholders acknowledged that foreign carriers have upper hand because they dominate the Nigerian routes and they do that because Nigerian carriers do not have the capacity. As they dominate the Nigerian routes they decide the prices and comparatively, Nigerian travellers pay the highest fares in West Africa. Some of the stakeholders argued that it would be difficult for Nigeria to control airfares on its routes because it does not have strong carriers that can effectively compete.

    Industry consultant and CEO of Belujane Konsult, Chris Aligbe acknowledged the above fact and conceded that one protracted problem of Nigerian airlines is effective operations to international destinations.

    Aligbe said that it was even difficult for the defunct Nigeria Airways to successfully flying international destinations, remaking that whenever Nigerian carriers start international operation they begin to flounder.

    One key reason is lack of capacity and the inability of the Nigerian government and the airlines to respond to the strategies adopted by foreign carriers to dominate their routes.

    Having the right aircraft, charging the right fares and scheduling the operations at the right time is the responsibility of the airlines, but an airline can coax its government to introduce policies that will infringe on its rival airline and make it difficult for the foreign carrier to operate. They do this regularly against Nigerian airlines. That is where the Nigerian government comes in.

    If for example, Senegal Civil Aviation Authority says that any African airline coming to operate in Senegal must operate a young equipment in order to disqualify Nigerian carriers, for example, the Nigerian government will react and through the Nigerian Civil Aviation Authority (NCAA) introduce a policy that any African carrier that wishes to operate into Nigeria must have current International Air Transport Association Operational Audit (IOSA) certification.

    So while Senegal keeps a Nigerian carrier from Senegal, Nigeria will keep Senegal airline from Nigeria. But over the years, Nigeria has not been able to respond in that way until recently.

    Aligbe noted that in talking about capacity it is not only having the right aircraft but also having the operational funds to pay for charges and other exigencies.

    “What has been the bane of domestic carriers is international operation. Anytime they operate international routes they start going down and this include the defunct Nigerian Airways Limited (NAL). This has been a major problem.

    “NAL had government support but being a carrier owned by government it had government support but also being government airline had negative impact on the airline,” Aligbe said.

    Government

    He suggested that to overcome this major challenge, government should invite at least two major Nigerian carriers that are desirous of effectively operating international routes and government and the airlines would look at this major challenge and find ways to solve it. First the airlines would chose the routes they wish to operate and have the capacity to operate them; then government would give them the needed support.

    Aligbe said that government should no more see Nigerian airlines operating international routes as carriers owned by private investors, but government should see such airlines as representatives of Nigeria and Nigerian citizens and protect them as such.

    This would help to secure similar respect by other countries and other airlines on those international routes.

    “Government should sit down, call two airlines that are ready to operate international service, look at their challenges and allow them to decide the routes.

    “Even though national carrier will come in the future, national carrier is not coming to kill existing airlines; rather, they will work in synergy. Nigeria needs at least three major airlines with capacity in order to effectively have presence in international operations,” the industry analyst said.

    He also noted that currently Nigerian carrier, Air Peace has the highest capacity in the country and suggested that government should sit down with the airline and find ways it can help it and the airline would in turn table its problems before government and solutions for the problem would be sought with the objective to make Air Peace a more successful Nigerian carrier.

    Past Failures

    Aligbe said that any Nigerian carrier should not go into international operations when it does not have the capacity, the finance and other logistics that will keep it on the chosen routes for long. This will weaken the airline when it begins to owe accumulated debts and would be forced to withdraw from the routes and eventually go under, noting that this has been the bane of the airlines that tried and failed to operate international services in the past.

    He said that airline operators must agree to come together if they wish to succeed in domestic, regional and international operations.

    Aligbe also said that although there is aero-politics but such should not deter Nigerian carriers. All they need is to train some of their personnel on aero-politics and international relations and alliances.

    “Part of the knowledge an operator needs to acquire is international relations and alliances. I expect that Air Peace should have personnel that specialise on this and it should have personnel that are well trained on this. I expect Air Peace to be a member of African Airlines Association (AFRAA).

    “The airline should get consultants to train its personnel and also ensure they attend conferences because it is at such aviation fora that negotiations are made and contact and alliances and reached. AFRAA is important because it represents African airlines and represents them in IATA, African Union and other organisations so Air Peace and other Nigerian airlines should be very active in AFRAA,” Aligbe advised.

    Enabling Environment

    Managing Director of Aglow Aviation Support Services, Tayo Ojuri told THISDAY that the major way government can help domestic airlines is to create enabling environment for them. He said this would enhance their operations and this could be achieved through policies.

    According to him, such enabling environment will encourage foreign investors to partner with local airlines and more funds would be made available for investment in the industry. This will enable operators to expand their operations, acquire more fleet and position themselves well to compete in the international market.

    He advised government to forget about floating airlines but to concentrate on providing social and basic amenities such as water, health system, rail and other infrastructure and encourage the private sector to develop aviation business, including airlines; then government can control the industry through effective regulation.

    He noted that because of undulating foreign exchange, cost of aircraft spares is high; the same with the cost of maintenance, so government could facilitate the establishment of maintenance facility in a free trade zone where spares and services will not be taxed in order to have lower prices

    “Government should focus on security, provision of water, medicare and others but should create enabling environment for airlines through change in policies. If the policies are right in terms of structure it will encourage people to invest, including local and foreign investors. This will enable Nigerian operators to play in the big league.

    “Government should facilitate the establishment of maintenance facility to reduce flight of foreign exchange. This will be located at the free trade zone in the airport environment so that their activities will be excluded from taxes and charges. To ensure that fares are competitive, the Central Bank of Nigeria (CBN) should make forex available to airlines at discounted rates,” Ojuri said.

    The Chief Executive Officer of Mainstream Cargo Limited, Seyi Adewale, said Nigeria already has a major airline with capacity, but needs the support of government and Nigerians to position it in a more advantageous position to compete with international carriers.

    Adewale acknowledged that the risk appetite of many top rated foreign carriers has been tempered by Covid-19 and the resultant strategic control of entry point and frequency allowed opens up a new vista of opportunities for capable domestic airlines.

    “With the assistance or support of the Federal Ministry of Aviation, local airlines could codeshare with these foreign airlines and ‘feed’ them or take up opportunities for potential slot increase through a partnership deal that is supported by the Ministry in order to meet up huge market demands in and out of their countries. For example, Delta has huge traffic and backlog into Nigeria till Dec 2020. Delta could partner a domestic carrier with capacity to access more slots/ frequency into Nigeria to meet this huge demand. This is possible with negotiations that is supported by the Federal Ministry of Aviation,” he said.

    With government support, domestic airlines can grow and become very strong to compete with other airlines that fly to Nigeria. Experts say no airline can thrive without government support. It is so with Nigeria.

    .thisdaylive

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