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
