The Many Challenges of Nigerian Airlines
Chinedu Eze examines the challenges airlines are facing in providing services amid uncertainty and rising cost of operation
On Monday the management of a new entrant into the aviation industry, United Nigeria Airlines held a press conference with Aviation Correspondents at the Murtala Muhammed International Airport, Lagos to mark their three years as schedule airline operator.
United Nigeria Airlines used the opportunity to expose the difficult terrain in which Nigerian airlines operate.
The Chief Operating Officer of United Nigeria Airlines, Mr. Osita Okonkwo, gave a briefing on what the airline has achieved in the three years of operations and recalled that the airline started flight service in February 2021 and has been operating ever since without suspending operation for one day. He said that the airline employed about 500 fresh personnel who hitherto did not have aviation experience, and the airline funded their ab initio training and engaged them to work in the company, disclosing that some of those personnel have been poached by other airlines.
Okonkwo said providing jobs and getting jobs for fresh hands was in tandem with the philosophy of the new carrier because “human capital development was major pillar of our strategy. With 500 direct jobs that must have created, about 1, 500 indirect jobs made possible by the airline.”
Speaking about the difficult terrain in which Nigerian airlines operate, Okonkwo said most airlines had been struggling to survive the harsh aviation environment in Nigeria. According to him, the challenge besetting the airline and other domestic operators is the uncertainty surrounding their operations in terms of cost of aviation fuel, the exchange rate, which impact on other issues involved in their operation, including airfares.
“For example, when United Nigeria Airlines started operation in 2021, aviation fuel was N300 per litre but today it has risen to N1, 300 and there are indications that it would rise further. Then average airfare was about N25, 000 but today base fare is about N80, 000. So, the run-away inflation and the fact that tomorrow is very, very uncertain deflates the zest and the commitment the operators have, which propelled them to go into airline business,” Okonkwo said, while describing the changes as ingredients for disaster and concluded that only miracle had kept the airline in business.
IOSA
He said that after one year of operation, United Nigeria Airlines started the International Air Transport Association (IATA) Operational Safety Audit (IOSA) Programme, which is an internationally recognised and accepted safety evaluation system designed to assess the operational management and control systems of an airline. IOSA uses internationally recognised quality audit principles and is designed to conduct audits in a standardised and consistent manner. United Nigeria Airlines passed the audit.
“Two years ago, we became IOSA certified. We are now IOSA member airline. This means that we can interline with other airlines who are IATA members and we can enter Billings and Settlement Plan (BSP), which is a system which airlines settle transactions through one central system,” Okonkwo said.
He also spoke about the spring alliance in which six domestic carriers decided to work together and support one another. For example, if one airline’s aircraft is grounded for tech or any other reason, another airline in the star alliance will airlift that airline’s passengers to their destination. Instead of two aircraft leaving, for example, from Lagos to Abuja with few passengers, the airlines would use one aircraft and record a full load and after, they will settle the fares.
“Spring Alliance was supposed to be a very formal structure but it is more informal and we must admit that it is not a perfect interline agreement. It is now more of a cooperation agreement but we are still working on it. At the moment, only two or three airlines are currently strong in that aspect, that is, United, Air Peace and we work very closely with Dana Air. There is the problem of capacity in the market and many people would not be able to bail you out if you have issues because they don’t have the capacity to do so and not that they don’t want to do so.
“Also, the person must be going to the destination you are going to in order to help you. So, you find out that the coverage of many operators is not as widespread as one would have expected. Some days ago, we had an agreement with Aero that did some of our flights. We also had one with Arik, NG Eagle because we didn’t want to do outright cancellation for passengers to find their way and in one day, we were able to sort out the flight of 300 passengers. We are committed to developing this alliance because the local airlines must collaborate before they expect others to collaborate with them,” Okonkwo further said.
He used the opportunity to urge journalists to use their articles in educating Nigerian passengers who become violent when flights are delayed or cancelled, noting that it is airlines that lose when flights are cancelled. He reiterated that the major reason why airlines delay or cancel flight is due to weather, stating that since November last year, bad weather has impacted so much on flight operations in Nigeria which led to series of flight delays and cancellations.
Route Expansion
Okonkwo said that United Nigeria Airlines is ready to explore new grounds like opening new destinations, as the airline did with Bayelsa and Abakaliki, where they pioneered scheduled service.
“We are ready to go into markets where others have not gone. That is why we went to states like Ebonyi, Bayelsa and that is why we are exploring other airports because there are people there who are willing to pay for air travel regionally and internationally. We are making final preparations to start our Ghana operations and we also focusing on other regions of Africa.
“We are grateful to the Ministry of Aviation and Aerospace Development and the Nigerian Civil Aviation Authority (NCAA) for giving us a designation to places like London, Netherlands, Amsterdam, Italy, Milan, Houston, Dublin, among others. But these are opportunities we want to develop gradually and systematically. We don’t fly for the sake of flying, we fly because the route is viable and we can sustain whatever we but in there,” he said.
Okonkwo said air travel remained very critical because it is a catalyst to economic development of any nation and it promotes tourism, which flies on the wings of aviation.
“Aviation industry is essential service driven industry. All over the world, it contributes to a country’s GDP and ours should not be different. We need to promote local tourism with aviation. I lived in Kenya for over 25 years and one of the things they have is the Mombasa migration. When that happens, the President moves the entire cabinet out of Nairobi to Mombasa and that does so much to the economy of Mombasa. We need to begin to do something that would retain forex in the country. Apart from the migration to the South East during the Christmas celebration, what other migrations do we have? Even with the insecurity, without the annual migration, the economy of the South East would not be what it is.
“So, we need to create markets and opportunities for movements. We really have a lot of work to do and we are committed to supporting any initiative that would help to develop internal travels which we think is still very low. We are major players and are ready to do the heavy lifting and hard work that is required to unite our customers across the globe. We look forward to an aviation market that is fully developed. We need investments in all the subsectors of the industry,” he said.
New Aircraft
On aircraft acquisition, the management of United Nigeria Airlines listed the challenges Nigerian airlines face in their effort to buy or lease aircraft and said that the process is fraught with inherited problem and others which could be solved through the intervention of government.
“We said we would be bringing in new aircraft every quarter and it was supposed to be dry lease or outright purchase. What we did last year was to bring in two Airbuses in keeping with our plan. When the ones we had planned to acquire were being delayed, we had to opt for wet leasing, which is a short term measure. We are hoping that by the time the lease terminates, we would have something to replace them. We have ongoing discussions to lease three more aircraft and we have placed an order with Embraer for five new aircraft and we are finalising the negotiations,” he disclosed.
According to Okonkwo, the Minister of Aviation has met with the international lobby group to prompt the lessors to remove Nigeria from their blacklist and this include Aircraft Leasing Group (ALG) comprising the two largest aircraft makers, Airbus and Boeing.
“Our appeal is that we don’t miss out opportunities. Nigeria is the largest market in Africa. The potential is there. The market is large. The Minister is on top of this issue. It would help that Nigeria is removed from country risk on aircraft dry lease. The country risk rating has hampered our operations and we are exposed to wet-lease which is very expensive,” he said.
High Handling Charges
Recently, handling companies in cognisance of the inflationary trends, increased the cost of their services, which many airlines described as exorbitant. The Chief Operating Officer of United Nigeria said that everyone is increasing tariffs and charges except the airlines.
“Handling companies have announced an outrageous increase in their charges. All the airport owners have increased their rates except FAAN (the Federal Airports Authority of Nigeria). Asaba airport has increased its Passenger Service Charge to N8000, Anambra has also increased theirs, MM2 is at N7, 000, NCAA is still collecting five percent charges, so if they are talking about reducing air fares, they should also reduce theirs because it is all additional cost to the passenger. We are buying aviation fuel at a minimum of N1, 300, forex is N1,700, so, if we are leasing, how do we pay for the aircraft and spare parts?
“The truth of the matter is that the minimum cost of airfare should be $100 and I don’t see how you can fly for less than N150,000. Once the cash runs out, you will start seeing people parking their aircraft. In fact, some have done so because if not for the parked aircraft, you would not have been able to use someone’s plane to do 300 passengers. Today, we had another operator telling us they want to transfer their passengers to our aircraft because it doesn’t make sense to fly with 50 passengers in a 160-seater aircraft,” he said.
Okonkwo also stated that the minister and policy makers need to also intervene on behalf of airlines because airlines need cheap loans, forex, lower country risks “so that lessors don’t put more money on you because you are from Nigeria, whereas someone from Lome is getting cheaper prices.”
“If you fly into Asaba airport by 7.05pm on a 50-seater, it would cost you N500, 000 extra. They would tell you they close at 7pm, so, if you land at 7.05pm and leave at 7.10pm, you would still pay N500, 000 per hour. If you tell them you are landing at 8.05pm, it would cost you one million. If you tell them to leave the airport open for 10; 00 pm, you are going to pay extra N1.5 million for three hours. So, what does the operator make? We have to have a conversation around the idea that air fares are expensive. When we started, we were charging N25,000 but the exchange rate was still at $100. Now, we are not even getting $50, yet 90 per cent of our expense is in dollars. It is a discussion that is very important,” Okonkwo said.
The airlines seem to be in a precarious situation and until the uncertainties occasioned by hiccups in Forex and ever rising cost of aviation fuel are resolved, Nigerian carriers will find it difficult to plan and make projections in their operations.
