Allen Onyema: No Airline Can Grow without Government’s Support

As the chairman of Air Peace, what is it like running an airline?

It is a very difficult business terrain. Airline business all over the world is not everybody’s call. In Nigeria over the years, airlines have come and gone. I learnt that over 50 airlines had existed here and have decided not to exist again. Out of over 50 or 70 airlines that have been established in this country only about four or five are in operation. And when you look at the health of those five, there is nothing to write home about. Could this mean that the owners of these airlines, who must have succeeded in other business endeavours, got it wrong? Could it be that they were responsible for the failure of their airlines? I think I disagree with that assumption. Inasmuch as I will accept that some of these failures could be traced to the owners, majority of them were out to do business, but some of the policies that they met on ground were not quite helpful.

So, running an airline in Nigeria is a very tough call and it is not something that gives joy to any of the operators. We operate in a very harsh environment. It takes the grace of God for some of us to continue doing what we are doing. The challenges are enormous; they are too wide and many. You don’t even know where to start from. So it is a tough one. It is a very difficult terrain.

What has been the relationship between the regulatory body and the airline?

The relationship between the aviation agencies and the airlines is that, for example, the NCAA is doing its job well. I have said it over time that, in fact, we are strictly regulated because of the tragic incidents and accidents of the past. The Nigerian Civil Aviation Authority tends to make sure that they bring up stringent measures to assure safety, which is good. But we overdo it at times – they are doing a good job when it comes to regulating the airlines, though there is still room for improvement in some areas which we have always been pointing out to them. But when it comes to their oversight function as regards the airlines, they are doing it even better than the EASA (European Aviation Safety Agency) and FAA (US Federal Aviation Administration). But because we come from this part of the world, people don’t believe that such things exist. I gave an example sometime ago about my flight having a bird strike in Kano and when my engineers got there and finished whatever they were doing – to do the test flight, NCAA insisted on being on that flight. Abroad, they don’t do that, all they need to do is for you to fill your papers to say you carried a repair on the airplane and they are satisfied with whatever must have been done.  

But NCAA said no that they wanted to be onboard the aircraft to look at the parameters or the performance of the aircraft in flight. So they joined the flight, the pilot, Capt. Enahoro, took the plane into the sky and they flew with NCAA, when they were satisfied they brought the aircraft to the ground – that pleased me. The current leadership in NCAA is doing its best to make sure the airlines are up to speed in safety. Then, the other agencies too like the Federal Airports Authority of Nigeria (FAAN), they are trying. For example, the airport infrastructure is still very poor in Nigeria and that is a very huge challenge for us.  When passengers complain of delayed flights, they don’t know of some of the things that contribute to these delayed flights. They think it is just the airlines. The airports should be expanded, that is the first thing we should be thinking of in this country – to expand the airport infrastructure. FAAN is limited to what they inherited except they plough back whatever they are getting from the airlines and with the help of the government and banks or the private sector to develop our airport. Airlines don’t make hubs; airports do. So it is very important that we pay serious attention to our airport’s infrastructure. The best airport in Nigeria today is MM2 which is a private terminal and that is why it is being run the way it is run. It is the best in the country. Then if you talk about infrastructure, you go to Kebbi Airport. It is one of the best in the country. The airport should be any airline’s delight.

The Nigerian Airspace Management Agency (NAMA) is trying with whatever they inherited, but we need to improve our landing aids – navigational aids – in the country so that we can even land in zero visibility. They are trying to improve the navigational aids. They need to continue doing that so that minimal weather conditions should not be our problem. The government agencies also should understand that they are providing services, some of them are acting like lords over the airlines and that shouldn’t be. In fact, I give the Minister of State for Aviation, Senator Hadi Sirika, kudos for coming up with airport concession policy. Unless we do something like private, public partnership (PPP) for our airports, we are going nowhere. So I support concession, but it must be done in such a way that it is transparent. It must be done in such a way that the current workforce is not sacrificed. I don’t want people to lose their jobs. But to say because we want to keep these jobs that we must continue the way it is going, then of course we are not going to make any improvement in this country.

So I support government’s decision to either privatise the airports or do PPP kind of arrangement. That is the only thing that can save Nigeria’s airports. The government alone cannot equip all the airports; the government alone cannot make all the airports world-class. Even abroad, governments don’t own some of these things. The government has no business actually doing core business. What government should be doing is providing enabling environment for business. So I support government’s call to privatise these airports or call for PPP to improve our airports. But to say we should leave the airport in the hands of people the way it is being run now, we will not make any progress.  

In specific terms, what do you propose to get out of this crisis?

To reform the aviation sector, the PPP system should be brought into aviation sector to invest, to change situations. It should not be left in the hands of the government alone. Government might not have the resources to run business. The government might not have what it takes to run business – the government all over the world; it is not only in Nigeria. What governments do is to provide enabling environment and allow investors to come in for the sector to thrive. I support government’s stand on concession even though I know the unions and other people are fighting the government. They should understand that the bigger stake is better for the entire nation. We don’t have to be selfish about it. Like I said it must be transparent. I don’t want people to lose their jobs. I am even in this business to create jobs, so they must do it in such a way that the interest of those workers is protected. But it is going to be run under a different platform so that you will understand that you don’t come to work to sit down and do things the way you like. Imagine if governments are running the banks: what do you think would have happened? Have you seen anywhere in the world where the government is running the commercial banks? It will collapse. The  navigational aids also must be improved upon. A situation where our airlines are flying from 7am to 6pm in most of 90 per cent or 80 per cent of the airports is not good. 

In many countries, you can easily link the aviation industry to tourism. In Nigeria, there is nothing like that. What is your opinion?

Aviation is a major economic driver or should be for any country. There are so many factors that come to count why that correlation is not there between the aviation industry and the tourism industry in Nigeria. First of all, the advent of oil has destroyed everything in this country. Nigeria has not actually tried to tap its tourism potential, that is why we have neglected tourism so much and that is why we have neglected the aviation sector so much. All over the world, the government support airlines. The support is not just about giving airlines financial aids. There are so many ways to support airlines. This is because the movement of people from one place to another is very important in any economy. Our airports cannot attract tourism to this country the way they are at the moment. Our airports cannot attract that hub everybody is looking for. Nigeria can never be a hub under the present dispensation of our airport management.

Look at what Ghana is doing – that is why everybody is going there. Most foreign airlines will prefer to use their hub because you have a conducive airport environment to operate. So, until we improve our airport infrastructure, Nigeria can never be a hub for anybody. If you like, have the best airlines, Nigeria can never be a hub. And tourism begins and starts from the airport – that is your number one face to the outside world. The impression you get about Nigeria starts from the airport. If you get a bad impression it sticks and you know we don’t have good press outside Nigeria. They try to paint us black and now when people come to our airport, the first thing they see is the confirmation of that even before they now meet the good people of Nigeria. So we need to address our airports’ poor facilities. That is the most important thing to do. The government must seek ways to address the issue of improving on our airports’ infrastructure – once that is done it will attract tourism. Then the airlines – people will want to invest in the airlines business. It is not a profitable business that is why most people don’t want to go into it. It is business that you must have passion for. It is the passion that sustains you. It is not the business that sustains you. So, for someone like me, the passion and the creation of jobs, touching lives is what gives me satisfaction.

In the area of aviation fuel, what are the challenges and what are your recommendations for overcoming them?

Outside Nigeria, in aviation they will tell you that all over the world aviation fuel takes 40 per cent of your income. That tells you that this is not a profitable business, if fuel takes 40 per cent. If you make N1 million today, N400,000 goes to fuel alone. You have not talked about spare parts, staffing and don’t forget this is a highly regulated industry. That will tell you that it is not a profitable venture, but it drives every economy. So they tell you that it takes 40 per cent overseas, but in Nigeria I disagree. In Nigeria it takes almost 70 per cent of your income. I don’t even know what the price of aviation fuel will be in the next two hours in Nigeria. We cannot plan; every day we get different prices and when you refuse to go on with that, you don’t get fuel and your flights are delayed. The next morning you wake up, you get a mail from the fuel vendors that the price has changed – say Lagos, N250 per litre; Port Harcourt, N300 per litre – just like that. So a lot of people don’t know what Nigerian airlines are going through. I keep on saying it, bring British Airways, Delta Airlines and other legacy airlines of the world into this country to run domestic operations, they will not last 72 hours.

Let them come and do what we are doing. Nigerian airlines should be given kudos. People don’t know what we go through. Aviation fuel takes almost 70 per cent of our income. For goodness sake, we produce fuel in Nigeria; aviation fuel is more expensive in Nigeria than in America and in some countries that don’t have fuel. So why are we in this? The airlines are bleeding. One spare part takes everything; spindle alone from Boeing is about $187,000. So if you want to maintain safety – if you want these airlines to ensure and assure safety of operations – we must begin to listen to the cries of these airlines. Let nobody deceive the government: we must begin to hearken to the cries of the airlines concerning some of these issues. And the way forward on the issue is this: the refineries should start producing aviation fuel. We don’t have any business importing this. If we have 2,000 refineries all over the place, it is good for the country. It’s painful that we have to import engine oil – our crude oil will go out and they will refine it into seven to 20,000 different products and we start importing those products. We don’t have any business not being a great country. So what we need to do is to start refining this particular Jet A1 fuel in Nigeria. 

You have recently increased the number of aircraft in Air Peace’s fleet. What is your aspiration?

First of all, why did I even float the airline? I set up this airline just to create jobs – I didn’t set it up just to make money. I have never worked for the government – with my own funds I started on my own. I trained myself and over 200 of my staff to go into the Niger Delta to start discouraging militancy. I brought non-violent education into this country for the first time. I employed Americans to help me to do this because I know non-violent education is very powerful. Mahatma Gandhi used it to bring down British colonial rule in India without encouraging his people to take up arms. My mentor, Dr Martin Luther King Jr., brought down official segregation in America without encouraging his people to take to violence. The fact still remains that I didn’t set out to make money from it. So I am a good example of giving back to society. Somebody now told me that if you want to create massive employment, go into the airline business. One Boeing jet will give jobs to over a 1,000 people and indirectly more than 3,000 people will benefit from that – that was how I went into aviation. I called Gbolahan Abatan, the owner of Air First, as my consultant to come and help me – he told me the same thing. First of all, we started buying Donnier jets. So I asked him if these small jets will make money. He said yes that I will make money from charter with the Donnier jets. But I said this is not what I wanted – that was how we travelled to the US looking for planes. Abatan said but this one you want to go into is not profitable and it has a lot of hassles and I asked, but it will give jobs and he said, yes and I said, that is what I want to do. That is how I went into buying Boeing 737 and when we went to Douglas Jaffe in Texas, that man sells aircraft in hundreds – he buys in hundreds. He leases planes to all these legacy airlines in hundreds. He said, ‘Why do you want to go into aviation?’ And I said, ‘I want to create jobs in my country for the people.’

He said that was the first time he had seen a Nigerian who is for his people – thinking about his people. And he said, ‘Young man, I am going to help you.’ Jaffe asked me where I wanted to fly and I said Nigeria. He went to the computer – there is a live screen in his office and he showed me and said: ‘this is your country.’ Then, he did something on the computer and came up with information. He said the farthest distance in your country is from Lagos to Maiduguri which is one and half hours flight. So he said, the Boeing B737-800 aircraft I was requesting was too big for the routes I would be operating. He said the first success is that your type of equipment must be in tandem with your operating environment. That this B737-800 is an aircraft made for at least four hours or five hours’ flight before it lands. I didn’t understand what he was saying then. He said because with the engine of your aircraft, the cycles, that is, each landing comes at a maintenance cost. Jaffe said the aircraft is supposed to be landing every four hours. ‘In four hours in your country, it has landed five times because some of your flights are one hour or 40 minutes or 30 minutes, so that means you will be going to engine shop more than usual.’

So he advised that I should start with Boeing B737-500 because I was a new carrier. B737-500 will carry about 114 passengers. And you don’t have problem of running to the engine shop every time – that one, you can use it to do six hours flight. It has long range and at the same time, you can use it for 30 minutes journey. The man is alive and he could be contacted by anybody – that was how it happened. So he gave me four planes. That was how I bought the first four planes. And he has continued to help our business. Another thing I did was to outsource my maintenance to a British company so that I can assure safety of my fleet.  It is very expensive. It comes at a very high cost but I needed to do it. Another thing I decided to do was that my pilots must be top-notch. They must not be just any pilot. We must pay well to get the best – that was what we did. We have increased our fleet and to God be the glory today we have about 24 aircraft. We are the biggest airline in the whole of West Africa. And we are bringing more Boeing B777s. We are going for more aircraft. We are not relenting. The banks are there to support us. We want to reduce the cost of Nigerians flying abroad. Air Peace will give them what those legacy airlines are giving them – even better and at a very affordable cost. This is because Nigerians have been short-changed for years now. 

Nigerians should look forward to Air Peace starting international operations. But we need the government to support us. I am not asking the government to give us money. We need the government to make it easy for us to get to where we want to be.

What new routes do you intend to open and what are the prospects of the regional and international market?

First of all, the domestic market is saturated already. There is what we call ‘over-capacity’. Why did I say so? If I say this, a lot of people will think we don’t want airlines to come – no, that’s the truth. The ones that want to should go and look at the statistics of passengers the existing ones are flying. On Fridays, you see huge number of travellers at airports. You see everybody coming out of Abuja and when you go to the airport you see a lot of people and they will think that the airlines are making a lot of money. That is what is making some people to cause problem for us. They see crowd of people, they begin to calculate how much the airline is making. When I said we are going to increase our capacity, I am talking about the international routes. But our expansion will be well guided. When I say international routes I am talking flights within the African region and outside the African continent. Those who are advocating that each airline should have between 10 to 20 aircraft in its fleet should think again. This means that Dana Air will have 20 planes; Air Peace will have 20 planes; Arik will have 20 planes; and Aero will have 20 planes – where will they park all the planes? Where will they even fly to? Already, the only viable destinations in Nigeria are Abuja, Lagos and Port Harcourt.

Those three destinations are the most viable. Airlines are struggling to get a piece of the market and that is why you see fares like N23,000. How can you maintain your plane with N23,000? Some airlines are even charging N18,000 and N16,000 respectively. I stopped Sokoto flights because of very low load factor –I will resume soon now that we have acquired Embraer jets. With such a low load factor you can never pay salaries. You cannot. You cannot even buy your fuel on that journey. And people are propounding 20 aircraft. All over the world, this thing is regulated in such a way that if you know you can do two-aircraft operation, then you do it. There are so many airlines in the world with only two planes. What you should be telling the airlines is, plan your operations to suit your capacity. You can decide to remain on three aircraft for the rest of your life – it doesn’t concern anybody. I am not ready to merge with anybody. I pay salaries on time. I told fuel vendors, when you sell fuel to Air Peace, please within 48 hours make sure we get your invoice. We want to pay immediately. So you want me to merge with somebody whose philosophy of life is different from mine? You want me to merge with somebody who is over-invoicing himself? Merger is good, but that should be the decision of airlines.

You are not making profit yet you are acquiring more aircraft. How are you able to do that?

Let me tell you this: I have not failed in anything I do. Airlines do not give you the kind of profit that matches the kind of investment you put in. That does not mean that you will never make profit in the long run. But you don’t make profit in your first five years. You start making profit from your sixth year, if you manage your processes very well. And how do you manage it? You have to create capacity and that is what Air Peace is doing.

 It is not that we are making money now, but at least we are getting money to pay off our bills. We may not have our own money to pay up – that is why we borrow money from the bank. I borrow money from the bank to buy instead of leasing planes. Another problem is when you lease planes in Nigeria it is even more expensive at the end of the day. 

When you buy your own equipment, it is better. But you don’t have the money to buy so you run to the banks. The bank will have to be convinced that you have the integrity as no bank wants to lend to anything aviation in Nigeria because of their antecedents. But they lend to Air Peace. When they lend to us, I create a sinking fund for them.

So what we are doing is that we are expanding for the future. I studied the South-West Airline model and I started to educate myself. So I am giving myself the sixth year I will start making profit and I could see the handwriting on the wall. But now, we are building. Yes, your question is right: if you are not making profit why are you buying more planes? We are only projecting. We are seeing where we are going to be in six years. Just like the experts told us, don’t expect to make money in your first five years, you have to invest and invest. So with the goodwill of our customers, we can see where we are heading to. Recently, we won ‘Best West African Airline’ in Accra, Ghana. I think we won because we are more consistent than any other airline in West Africa. We are more consistent on the West coast more than any other airline. At Air Peace, we don’t cancel flights. Recently, we had AOG (aircraft on ground) in Yola and you know that, that is a wrong place to have AOG. If you have AOG in Lagos, well, your engineers are here and it will be sorted out quickly. And that aircraft that went to Yola was supposed to come and do 1:20pm Abuja-Lagos and also go to some other places. We dispatched another aircraft immediately. That is where capacity comes in. We are building for that sixth year. All over the world aviation gives about three per cent or five per cent profit in more advanced environment – in such places like America where people pay through their nose to fly. So, if they can be making three per cent to five per cent that shows you that the aviation industry is not a profitable venture. Then, in Nigeria, where you buy your generator and you run it for 24 hours – I have about five giant generators on this premises – running because your warehouse must be air-conditioned. The spare parts of the airplane are not kept in just any place. Temperature is regulated; your tyre warehouse must be air-conditioned, so the costs are enormous.

What is your reaction to the recent announcement that the federal government has exempted the transport industry from payment of VAT?

It was one of the best news I have heard in years. The Airline Operators of Nigeria took this matter to the then acting President, the Vice President, Prof. Yemi Osinbajo, and he called for a meeting and we met with him and gave him details of our grouses. And he called for an enlarged meeting of all the agencies and the Ministry of Aviation and the airline operators. We held a second meeting where we presented our issues. Osinbajo set up a committee to look at these issues. We did not give up. There was a time the airlines met with the Executive Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler, and Sirika showed uncommon commitment to see that airlines were exempted from paying VAT. I commend the federal government for giving us the waiver after many years of clamour and after many regimes were served the same. It also shows that President Buhari wants Nigerian companies to survive. President Buhari loves indigenous companies. Every year, Nigerian airlines pay several billions of naira as VAT. 

You said leasing is in the long term costly especially in Nigeria. So what is the correlation between leasing, aircraft insurance and then talk about this issue of Cape Town convention?

It is very unfortunate that the international community looks at Nigeria as a dangerous place to operate aircraft. They look at Nigeria as a place lacking integrity. It is up to us not to confirm their fears. Somehow, I blame the international community for toeing that line. But we share significantly in the blame for the kind of attitude we have exhibited over time that must have given rise to these presumptions. Airlines all over the world subsist on leasing. They sustain their operations with leased aircraft even Emirates – 80 per cent of their fleet are leased. All these American airlines, Delta Airline and the rest have over 800 aircraft – some of them can boast of over 500 aircraft each.  But Nigerian airlines find it very difficult to access leases. 

When they want to allow you to lease, they do wet lease. Wet lease is like charter, which is very expensive for any operator – and it is not advisable. Dry lease is the one that you will be given the plane and you manage the plane yourself and you will be paying monthly. You find out over time that Nigerian airlines default. 

They default in payment and when the lessors come to take their planes, we find one way or the other to make it impossible for them to take their aircraft.

This is not in line with the spirit of the Cape Town Convention that Nigeria is signatory to. Cape Town Convention allows a lessor to take his plane once you default. One of the airlines even took the lessor to court and got an injunction in Nigeria preventing the owners of that aircraft from taking their plane away and the international community is watching. Such are the things that led to the blacklisting of this country by lessors. Even when lessors want to lease to you, you pay three times more than they will charge any airline flying in the West and that is very discouraging too. Insurance is another thing that is eating deep into our pocket. The Nigerian insurance law says that you must go through a Nigerian insurance company to get your insurance from abroad. We are not allowed to go directly and insure our aircraft. Nigerian insurance companies don’t have the capacity to insure our aircraft – that law should be changed.

Nigerian insurance companies have yet to build strong goodwill and trust. Our airside spare parts warehouse got burnt almost two year ago. We have not been paid our claims. And these are part of the issues. God forbid, assuming it was an aircraft, you and I know the situation we will find ourselves in. Sometimes, you pay money to them and they don’t even remit – so the insurance law should be changed. Let airlines be allowed to access whoever they want to use abroad to insure their aircraft without going through the Nigerian companies. And all these chain of moving through one middleman to the other is making insurance premium more expensive. What we use to insure one aircraft in Nigeria is what they use to insure three overseas. It is not easy for somebody to put his funds into a business that is very risky, not profitable and operating in a very harsh operating environment. It is not easy – people don’t know what we go through. So insurance is one of the banes of our development in the aviation sector.