Airlines can do better in a conducive operating environment. But with low access to capital, double digit lending rate, multiple charges, lack of sound business plans and operational models, many domestic carriers may be on the verge of collapse. To the Chairman of Air Peace, Mr Allen Onyema, if the right model is in place, financial institutions will fund airlines. Running a ‘’lean operation’’, he tells KELVIN OSA-OKUNBOR in this interview, is critical to the success of any airline.
Running a domestic carrier in Nigeria could be challenging. Are there ways government could assist operators?
There are many ways government can assist domestic airlines. If government cannot build an aircraft maintenance hangar in Nigeria, it should assist any operator willing to invest in that area. This would be important for many reasons. If any operator shows interest in building a hangar, government should support such an individual or operator to secure a large parcel of land around any airport in the country. Such a project will create more jobs for Nigerians.
Why are aviation agencies not cooperating to allocate land to airlines?
Civil servants should change their ways and stop frustrating private enterprise through unnecessary bureaucracy. For over one year, Air Peace has applied to the Federal Airports Authority of Nigeria (FAAN) to allocate it land to build an aircraft maintenance facility, but the authority has not granted the allocation. If FAAN had allocated land to the airline at any airport in the country, the project would have been completed by now. If they had allocated land to us, many banks, given my integrity and track record would have funded the project, because they know that I am credit worthy. There wouldn’t have been any default in paying pack the money for the project. If we build an aircraft maintenance centre in Nigeria, our country would become a hub where other African countries would fly in their aircraft for repairs. That would generate huge money for country. People say aviation does not generate enough money. That is not correct, Ethiopia as a country is generating huge foreign exchange from its airline, Ethiopian Airlines. It is the mainstay of her economy. Why can’t we replicate the Ethiopian model in Nigeria? That would create massive jobs. FAAN should be told to give us land. Having an aircraft maintenance hangar in Nigeria will assure safety. It will bring investment into the country. FAAN should help this country; I am tired of begging for land. The airport authority should serve the people of Nigeria, but not to lord it over the people. You pay FAAN for offices, you cannot get the offices you have paid for. You pay FAAN for offices, the offices are not allocated to you. The airport authority should create facilities for people. This country belongs to all of us. Some people do not own the country. There is sufficient land around the airports; they do not want to give it to serious people who can invest to develop the industry. Instead, FAAN is giving land to people who are not ready to develop the industry. An organisation such as Air Peace that is ready to develop the aviation sector is denied land at the airports by FAAN.
What could be done to encourage FAAN to allocate land to serious investors?
The Minister of Aviation, Mr. Osita Chidoka, should direct FAAN to allocate land to committed investors in the aviation sector to enable them set up aircraft maintenance facility. That will assist the development of the sector. If FAAN is skeptical about our capacity to utilise the land, they should ask for our feasibility and bankable evidence on how we intend to develop the facility. We have banks that can finance the projects. The minister should talk to FAAN to release land and we are ready to give evidence of finance. I do not think it is good for airlines to be carrying out aircraft maintenance at the ramp. It is not enough. Even the Air Force facility is not enough. There are airlines that want to have their own hangar.
Airline business is capital-intensive, in what ways can banks assist domestic airlines?
If airlines are properly run, they could become money spinning businesses, and the banks would be in a good position to gain from that through huge cash inflow that would be generated. The truth of the matter is that integrity is in short supply in the Nigerian business environment. That is the main reason many local banks are skeptical about giving out money to fund aviation projects. Again, the banks see the sector as turbulent. The banks should look inwards and see how they could protect themselves. In the case of my airline, I sign off my planes as collateral with other collateral as guarantee in case I am unable to pay back the money I took from the bank. Before any bank manager could give money to any airline operator, he has to look at the background of the person deeply. Where is he coming from? Can we trust him? The banks that gave Air Peace considered all these seriously. The bank gave me a moratorium. The banks can extend this to other airlines to restore confidence. The problem with Nigerian airline operators is that they borrow money and run away. They divert the money. Banks should only come in to assist airline operators after they have carefully studied them that they have integrity to pay back the money. Assurance that the money would not be diverted into any other venture is very important. The banks should lower their interest rates. At the same time, we also have to consider the rate at which the banks are getting their deposit. In this respect, the Central Bank of Nigeria (CBN) has a role to play. This implies that the apex bank must lower its withholding deposit with the commercial banks to enable them achieve the interest rate to the benefitting airlines.
Stakeholders have compalined about dearth of infrastructure at the airport. How can this be addressed?
Lack of air field lighting system has been a challenge affecting the growth of domestic airlines in Nigeria. This is affecting the growth of aviation. A situation where only three airports are accessible at night is not good enough. It does not augur well for the development of aviation. Government should try to provide night landing facilities in all the airports. This is important because of safety and security. In the event that an aircraft is flying and there is a technical problem, there should be alternate airports with night landing facilities. When people talk about safety in America, what people are referring to are available at airports everywhere. Even private airports, there are facilities for aircraft to land anytime under any circumstance. In Nigeria, we need landing facilities that are working 24 hours everyday. This would boost the development of the nation’s economy. This would not only create additional jobs, it will provide revenue for the government. A bigger Nigeria with airports fitted with night landing facilities is better for business.
What motivated you to invest in the aviation sector where returns on investment are very low?
My interest in the aviation sector is driven by an unsavoury experience. In 1998, a group of people met me and we had a robust discussion to consider investing in aviation. The people talked me into buying a cargo plane, and the potential of making money in that line of business. They packaged it as a cargo airline. I sold some of my property on Lagos Island to enable me raise sufficient capital to get into such huge capital outlay venture. Having sold my property, I brought the money to the table; nine months after, I did not see any aircraft, as they promised me. It took me another nine months to get my money back from them. After that bad experience, the desire to get into the aviation sector at that time died.
However, in 2007, I started thinking of going into aviation, again. My interest this time around was fuelled by what someone told me: Investing money in the purchase of one aircraft could create jobs for about 100 people directly, and that indirectly, it could create up to 200 jobs. In that case, I was inspired to invest in aviation so that I could create jobs for Nigerians.
Are there other considerations for investing in airline business?
The primary motive is because I could use Air Peace to create jobs. I also invested in aviation because it can generate revenue for me. This is very clear because of the low returns on investment. If I leave all the money I have invested in aviation in the banks, it could fetch me much more because Nigerian banks are offering double digit interest. That is a good way to make money by sitting down at home. But, I have gone ahead to invest in aviation not because it is profitable, despite the unfriendly business environment, huge capital outlay, required financial turbulence, I am motivated that investment in aviation would create jobs.
As I moved with the investment, thankfully two Nigerian banks came to my rescue. The two Nigerian banks are supporting me because of my integrity. I did not know it will be like this, because the business is gulping a lot of money that I initially did not planned for. But, there was a rescue plan. What you see in Air Peace today is the power of God and integrity.
What operational model are you utilising?
We are bringing a whole world of difference with Air Peace. One of the driving modules for Air Peace will be safety. This is a key ingredient for running a successful airline anywhere in the world. One of the motivating factors that pushed me into investing in aviation in Nigeria is to change the face of air travel, with priority on safety, which has become imperative in view of the spate of air crashes that occurred many years ago. Going further, we are going to model Air Peace after the operational model used by South West Airlines in the United States. We want to do something unique in air travel. We want to fly from Warri to Port Harcourt, from Abuja to the smaller airports. We are using very strong Boeing jets.
We want to see flights connecting passengers from Benin to Port Harcourt, from Kebbi to Abuja. The whole idea is to bring peace to the country. In Air Peace, we are not driven by profit, but to create jobs for Nigerians by ensuring that qualified indigenous professionals are engaged. That is what we want to do. Air Peace wants to open up the entire country’s air link by going beyond the traditional point of flying from Lagos to Abuja, Port Harcourt and a few other routes. We want to have a good operation that would be profitable, we are not cut corners, we are getting it right, since we started our flights last month. We do not want to cut lives; we are running an airline that passengers would feel safe and secured and have peace. We are running a ‘lean‘ operation that would be profitable. By lean operations we mean focussing on a few routes, and we will expand our route network in line with our business plan. South West Airlines in America that we are copying their model is very profitable. We have brought in a new style of doing the business. Since we started, our flights have been phenomenal. We hear that aviation business is very turbulent, but with a lean operation, we would survive and open up the entire country and link up all the airports. We want to access the smaller airports with our Boeing jets that could land at smaller airports with shorter runways. Our plan is to revolutionise the air travel business.
Are you looking at a nationwide carrier?
From our model of lean operations, we will expand flights nationwide. By that means, we would become a nationwide carrier. Since last month that we commenced operations, we operate flights between Lagos to Abuja, Owerri, Enugu and Port Harcourt. There are also return flights between Abuja and these cities. Our plan for Air Peace is to run a nationwide carrier that would fly passengers into smaller airports including Benin, Kebbi, Makurdi, Gombe, Port Harcourt, Lagos, Abuja, Kano, Kaduna, Sokoto, Yola, Warri and many other airports. We want to promote national air line to create jobs in Nigeria and link up secondary airports with the major airports. Our mission is to ensure we use air travel to stimulate the growth of the economy. Our service compact is reliable service. Our planes are fitted with wifi facility. We have zero tolerance for delayed flights. Our overall goal is to foster inter connectivity within the country, to reduce the problem of people traveling for hours to link up airports from one state to another.
What has been your experience since you commenced scheduled operations?
It has been a wonderful experience for the almost one month’s that Air Peace started operations in four major routes. Nigerians have been so wonderful in their patronage of our flights. Nigerians have shown love to us, the patronage has been so tremendous. Like. We always say. We have scored so many firsts in the airline industry already. On our first day of flight October 24, 2014, we had 14 flights into Lagos, Abuja. Port Harcourt Enugu and Owerri airports flying over 370 passengers on the inaugural flight, no airline had ever recorded such feat. Since, October 24, 2014 have not stopped doing 14 flights per day. Within the first 10 days of our commencement of scheduled flights we flew over 5,000 passengers. This is evidence of live Nigerians have shown towards Air Peace as their airline. In some locations, some passengers have adopted Air Peace as their airline of choice. We are very grateful to Nigerians for their patronage and can only promise better days ahead. With their support we should expect more to come from the airline. The airline has a huge acceptance from all parts of Nigeria, this evidence of our prompt and reliable services. This is also evidence of the calibre of pilots we parade, our schedule integrity, by keeping to time. We have safe landings, and our pilots are under instruction to avoid bad weather and weather related issues. Our goal is to give the flying public peace of mind and the best services.
What is your immediate expansion plan for the airline?
From December 1, 2014, we are expanding our operations with flights from Lagos into Asaba International Airport. This is not just plan for December, but we have had it in the pipeline. We consider Asaba Airport an important route. As more of our aircraft arrive, we would go beyond Asaba Airport and extend flights between Lagos and Warri. We will also extend flights between Warri and Port Harcourt and a return flight from Port Harcourt to Warri. We will also do Warri to Abuja flights.
What about partnership with state governments?
We have scored history as the first airline within one month of its existence to sign agreement with a state government in the northern part of the country. The agreement is in the form of a contract to provide aircraft and develop the new airport. We have also scored another first as the newest airline to sign an agreement with the Kebbi State government to develop the new airport just completed in Birnin Kebbi.This agreement would entail our developing the route and attracting traffic to the new airport from Abuja and a return flight to Kebbi. The agreement has been signed and sealed in Kebbi. Part of the terms of the agreement would involve development of that route. We intend to extend the flights from Abuja to Kebbi to include Kebbi to Kano and a return flight from Kano to Kebbi . The agreement with the Kebbi State government is part of efforts by the governor to open the state to all parts of the world through air link, which he has started with the construction and completion of the airport. The airport would accelerate the socio economic development of the state. The airport is expected to generate jobs for people of the state. It would attract investment in many sectors of the economy. We are going to put some aircraft on the routes and share some costs on both sides. We are looking at deploying our DORNIER Jets on the routes and as the route expands, we would deploy the Boeing Jets. With the airport. Kebbi State has joined others using aviation as a catalyst to facilitate trade and business. The place is very safe. Air Peace is going to galvanise the the development of Kebbi State. We are very excited over the partnership with Kebbi State, and Air Peace would play its role accordingly. It is important to clarify that there is nothing like unviable airport, state governments must give operators the opportunity to help open up airports. If you do not start it, the airports would not be open. We have plans to sign similar agreements with other state governments, which we would disclose at the appropriate time.
What impact has Air Peace made since it commenced scheduled flights?
You will agree with me that Air Peace is already a success story. We have made a lot of difference in the industry. Air Peace has made all the airlines to sit up. We are excited about this because it is our goal to change the face of air travel in Nigeria and exactly that we have done. Since we started, we have altered the equation; some operators are now adjusting to flight delay because of us. That is part of what we have achieved in the industry. Other airlines are now trying to adjust to ensure they minimise flight delays. What about customer service, other carriers who did not value their passengers now that they have changed. Not the template has changed and competition is hotting up, which is good for the business.
Are you comfortable with ongoing discussions over airport charges?
It beats my imagination that we are still talking about airport charges. This is strange given the fact that in Nigeria we do not produce anything used by airlines. I mean aircraft, spares, and even aviation fuel is imported and paid for in dollars. Now that the exchange rate has increased it is adversely affecting airlines. Yet, some government agencies are still interested in collecting between ten to fifteen per cent of the ticket value as charges. This is unacceptable. If they collect such high per cent, what is left for the operators to use? Too much charge is the reason why airline are cutting corners. When the charges are too high why operators would not cut corners, they do not have money to remain afloat. If the high airport charges are transferred to passengers, it would discourage them from flying. If passengers are not flying, the airlines cannot break even. They cannot meet their operating costs. Imagine, after five days of commencement of flight, I was given a bill of over N45 million as the cost for aviation fuel. I was alarmed, I could not believe it. My eyes opened wide. Aviation agencies should not collect more than one per cent of the value of the ticket as charges. Airline operators are just working for the agencies to profit. Airlines do not make up to five per cent as profit. Where do they expect the airlines to get the five per cent ticket sales charge and others the agencies collect? We should not be talking about moribund issues like airport charges, the agencies should come down from their roof tops.
