Sanusi: Direct Flights to Brazil Will Open New Opportunities

Deputy Managing Director of Arik Air and Head of Flight Operations of the airline, Ado Sanusi, said Nigerian airlines need government backing to grow. He also said direct flight between Nigeria and Brazil will open new market for the country, among other issues. 

He spoke to Chinedu Eze. Excerpts:

Lucrative Brazil-Nigeria Route
First, you look at the historic cultural ties between the two countries, you will see that an air link between the countries is a must because Brazil as an emerging market with a very strong GDP. And Nigeria is an emerging market too, so there is need to connect these two countries economically. If you look at the market now, how people from Brazil travel to Nigeria, you will see that there is traffic, but they have to go through South Africa or Europe and that takes so much of their time. So now if we are making a direct travel link which is about six hours, it is going to cut their travel time by half. It is a good market and I believe that we will not have any issue with traffic at all.

FG Back-up
Apart from the Bilateral Air Service Agreement (BASA) that was signed between Nigeria and Brazil, there is no other help from government. We are the nominated airline to fly the Lagos or Nigeria to Brazil route and we have that already from the BASA agreement. The BASA was signed almost two years ago

Other Support
Naturally what happens is that the home government will also put pressure diplomatically on the government of the country where we are going, that is, Brazil to make sure that we have the same treatment that Gol Airline was given here by removing the problem of having slots, removing the problem of obtaining the flight operations permit (FOP) to make it very easy for us to go into that country. Gol Airline from Brazil has already gotten a landing right from the Nigerian government.
Naturally, what they do is that they don’t give the other country everything until we also have everything. But indications show that Gol Airline has got everything from Nigeria and we have not gotten yet what they have. They have the landing rights, and they said as far as regulation is concerned they have gotten all the rights to fly into Nigeria. We have filed in our papers about four months ago to the authorities of Brazil and we are still waiting to hear from them.

Nigerian Embassy in Brazil
The Nigerian Embassy has been very helpful to us. They were the ones that helped us to translate our documents and to find the right personnel to represent us with the ANAC; that is the Brazilian Aviation Authority. They are also the ones helping us to push to ensure that we get the FOP as quickly as possible.

Cities of Operation
The initial city we are looking at is Sao Paulo. But it might change because our business plan is always undergoing review. It might change, we might go to Recife, and we might go to Rio de Janeiro. But the initial one we have chosen now is to go to Sao Paulo.
Sao Paulo is the biggest city in the Southern hemisphere, and the airport is very busy, so you need a slot to go into that airport, especially if you are going to land there and also make sure that your passengers have connecting flights so you must have a particular time to land to enable your passengers connect easily with other flights so that they can get to other countries or cities.

Appeal to the Govt
We are still waiting to see what the Brazilian Civil Aviation Authorities will reply us. We don’t anticipate any problem but if we do, we will have to go back to the government and let them know that they must think of revisiting their own approval for Gol Airline if there is any problem.

Market Potential
I told Gol, which is the airline that would be flying into Nigeria, that the market is not that huge, so we have to guard it and make sure that it is not diluted. I don’t think 14 frequencies a week will be profitable at the beginning. I feel that seven frequencies a week would be ideal.

Agreement on Frequency
Yes we discussed that and we are going to look at the market. You know in everything you do, you have to test the waters first, if we test it and see that the demand is there we will increase the frequency.

Partnership with Brazilian Airlines
We don’t intend to have only point to point flying to Brazil, that is flying to Sao Paulo or Rio de Janeiro. We intend to offer our passengers the ability to fly all over South America. What we will do is to try and see the best network as offered to us either by TAM or by Gol, then we will have interlining agreement or code sharing and have a good partnership and they are very willing.

Flight Services to Brazil
We plan to start before the end of this year. And as you know, everything depends on the Brazilian Civil Aviation Authority. If they give us the approval to start, we will look at their conditions and then based on that we make the decisions when to start but definitely we are looking at before the end of the year.

Acquiring New Embraer Aircraft
We have been in discussions with Embraer in the past four months and now it is time to move the discussions further. That was why we went there to take a look at all options of purchasing executive jets. We plan to have between 10 to 15 Executive Jet (E-Jet) planes to be delivered over a period of time. We met with the CEO of Embraer, we met with their Chief Financial Officer and also with the Brazilian Export-Import Bank that is BNDES and the initial meetings that we have done are very successful and we are happy about the outcome. It looks promising and Embraer has very good products that will fit well in the Nigerian market. Those were some of the discussions we had.

Brazilian Export Bank
First of all we tell the Brazilian Export Bank our success story since we started seven years ago. We give them our story and give them our financials by the time they go through it they always know that this is a genuine case and a good business strategy; they will be very interested in investing in Arik. That is also what happened with the import export bank of Brazil. We gave them our story, showed them our financials and also showed them how we intend to use those airplanes. We showed them the routes and the study we have done on those routes over a period of time. We showed them how we will start from the losses to breaking even and how we are going to go from merely breaking even to making profit. We also showed them how will repay the loan over a period of time. So it was the good presentations that we make to these organisations internationally.

Unfortunately, with banks in Nigeria it is sometimes difficult to sell our story because banks and other financial institutions find it rather difficult to buy what we are selling them and with interest rates very high it is difficult to secure those kinds of facilities and you cannot make good business with interest that are double digits. So the moment we do that outside the country and they access our financials they agree it is a good plan and often give us the facilities.

Cost Analysis of Leasing
It is actually cheaper to operate new airplanes over time. What Arik has done is to do a study to determine whether to make an initial investment of say, $2-3 million that will just serve me for maybe three years or maybe four years and with lots of maintenance problems or do I make an initial investment of $30-40 million that can serve over a period of time 10-15 years and with less maintenance problems and it is actually safe. If you look at a lot of international airlines, they do that so that they can have less maintenance cost, they are more efficient, and more so they are safe and comfortable for passengers.

Using Old Aircraft
Let me give you a scenario. If you are starting an airline, you intend to have that airline run for up to 30 or 40 years or for a very long time. So why would you invest your money to start an airlines with airplanes that are 18 or 21 years old? While you are very sure that your company will last more than those years. At least what you should do is have a business plan that will start with new airplanes which you can use for at least 15 years before changing them and go ahead and use new ones. But if you start with old airplanes let’s say about 20 years old and after five years, which is the first gestation period for an airline, the airplanes are already 25 years old and you already thinking of changing them. That is too early in the lifespan of an airline to start making fleet changes. Usually, airlines should consider change of airplanes or fleet renewal after 10 to 15 years of operation. So if you are looking at that it is not economical for any airline that is starting to start with old airplanes. It doesn’t make economic sense.

Growing Nigerian Aviation Market
The market can be grown in different ways. You can make the passengers experience to be seamless from the time he is buying the ticket to the time he is going into the terminal building to the time he is getting his bags and leaving the airport. If we make this memorable experience for him, an experience that is really enjoyable, he will like to come back and also talk to other people to come.
We have a population of over 160 million people, if we can target about 10 per cent of that number to fly locally, that means we have 16 million people per year. We have the capacity.

Also fuel prices are very high. Government can make the environment less harsh for the airline operators. They can look at the airline industry as an infant industry, then support it and nourish it so that it can grow and taxation can be removed, VAT be removed, it is only aviation sector that is still paying VAT in the transportation industry. A lot of things can be done to help the airlines grow because the sector is still in its infant stage. We don’t have any airline that is more than 50-60 years.

If the federal government can provide the enabling environment to grow, it will also bring about growth in passenger traffic, and you would have growth in the economy. Then after the airlines have grown, they can introduce the taxes. What we seeing now is that the airlines are having a very hard time because the environment is very harsh and they find it hard to grow.

Source: Thisday