African airlines need a viable business plan, a competent management and an enabling regulatory environment to succeed, the former Secretary-General of African Airlines Association ( AFRAA), Nick Fadugba, has said.
Fadugba spoke in an interview in Addis Ababa, Ethiopia.
He said airlines needed a large pool of aircraft and air traffic route networks to operate profitably, adding that the scale and size of an airline’s operations were important because many airlines failed in the past due to lack of control over their revenues and cost of operation
He said: “Running a successful airline is a very difficult job. You need deep pockets, a viable business plan, a competent management and an enabling regulatory and economic environment to run a profitable airline anywhere in the world.
For airlines to survive and prosper, they need a critical mass of aircraft and air traffic and an optimal route network, he said, adding that a look at some local carriers showed that they have most of the ingredients to be effective and efficient.
“They have a sizeable number of aircraft with a large route network and almost certainly a large revenue turnover. So the size and scale of an airline’s operations are important. It is very hard to compete against bigger African and international airlines with just a handful of aircraft.
“I believe the message for Nigeria, especially if we take Ethiopia, Kenya, Egypt and South Africa as examples, is that airlines need a reasonably large fleet to be able to compete effectively. On the other hand, all airlines must start somewhere. Smaller airlines can succeed if they keep very tight control of their revenues and costs, or focus on niche markets.”
He said many Nigerian carriers were struggling to survive because they are competing on the same routes, stressing that such a development would make it herculean for them to operate profitably.
He said he would like to see a situation in which airlines in Nigeria enter into mutually beneficial partnership and joint ventures with others, saying it would make them more efficient and profitable.
He called on the Airline Operators of Nigeria (AON) to champion the cause of partnership, noting that all the domestic airlines in the country are owned by shrewd business people who, in addition to wishing to provide safe and efficient air services,also want to make a decent and significant return on their investment.
“Combining forces could help achieve these two objectives. I would like the airline owners, at least, those that are willing, to sit in a room, lock the door, and ask themselves: ‘How can we work together?’
‘’If two or three, or more Nigerian airlines joined forces they would have a larger fleet size and combined resources and would become more bankable and more formidable.
“Sincerely Nigeria has all the ingredients for a successful airline industry but many of the players are too small, weak and undercapitalised to take advantage of the market opportunities.
‘’I believe our airlines need to achieve a critical mass so as to benefit from economies of scale. I believe Nigerian airlines should come together and work together for the common good, no matter how difficult this may seem in the early stages.In the past, I have heard some airlines in Nigeria say that it would be difficult for them to work together, as they have different owners and philosophies, and they are competitors. I agree that at the moment it would be too optimistic to envisage equity swaps among the airlines,” he said.
He also observed that several airlines in Nigeria operate the same aircraft and engines and advised them to form aircraft spare parts pools and engine pools so that they could achieve significant cost savings as well as greater operational efficiency. “The same approach could be applied to in-flight catering, reducing costs through joint purchasing. Of course, each airline would have to ensure that it meets its payment obligations on time, otherwise such schemes would rapidly fail. Through such cost-saving arrangements, Nigerian airlines could maintain their individual identities, whilst working closely together.
“Even when it comes to negotiating with aircraft and engine leasing companies, airlines planning to acquire similar equipment could work together to obtain better pricing. Two or three airlines negotiating together for a larger pool of aircraft are likely to obtain a better lease rate than one airline negotiating on its own for one or two aircraft,” he said.
