‘Nigerian Airlines Need Mergers to Survive’

04 Jan 2013

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Keith Williams

The Chief Executive of British Airways (BA), Keith Williams has said that for Nigeria’s airlines industry to survive it needs to have fewer but bigger airlines through acquisition and mergers. Williams, who visited Nigeria recently, spoke to some journalists. Chinedu Eze was there. Excerpts:
There was a report that British Airways (BA) would help Nigeria develop the aviation sector. Can you tell us specifically what you will do to achieve that?
If I give you a little bit of background on aviation globally, I think that is a good starting point and you look at where BA pitches with the global picture. I look at the world of aviation and if you look around the globe, the aviation industry has been in a difficult time for most carriers in most geographies. In the United States (US), many airlines go through chapter 11. If you look at Europe, it is facing difficulties today. If you then look at the Far East and Asia, it is more of a growing market.

The European landscape and American landscape have really been drawn by the effects of slow economic activities. The economies of US and Europe have been slow. At the same time we have had very high oil prices and we have had the entrance of Middle East and Far East carriers and at the same time there has been the growth of low cost carriers. So if you try that landscape it is a very different one from what existed five years ago and each carrier has to adapt to that new world.

In the case of BA, in the case of European airlines, we sense what is happening in the US. In the US there is great deal of consolidation between major carriers and so, many carriers emerge, essentially domestic carriers, which provide feed network capability into those major carriers. If you look at the European landscape, it is going somewhere towards that. In the case of BA, we merged with Iberia two years ago.

And that came about because the European landscape was consolidating and that will continue. I think what you can see in Europe is the emergence of more alliances, more mergers between airlines and you will see other airlines feed into those major international group. In the case of BA, the international group is International Consolidated Airlines Group (IHA) which owns BA and Iberia and it is built around the presence in major hubs. The two major hubs in London that is around Heathrow and Gatwick. In the case of Iberia it is built around Madrid.

Now, what IHA has done recently is to have an airline, Vueling, a low cost airline and that is a new departure of the group, to bring a low cost carrier into the overall group. To me, that is the way the European landscape is going to develop.

If you then look to Africa, it is clearly a growth region. There is more growth in Africa today if you look at Gross Domestic Product (GDP), than it is in Europe. Africa is clearly an important market, a developing market but I would have thought that over time it will develop hubs and major carriers and feed into those hubs. That is the way I see the landscape in Europe and that is the way I see the landscape eventually in Africa.

In Nigeria there are issues such as absence of a national carrier and even in the domestic services we don’t have very strong domestic operator. We are thinking that along with your commitment that one of the things you will be offering will be like BA helping to groom an national carrier. Or BA will assist a local carrier to get to a point where it can be strong enough to help Nigeria develop an airline. Is there anything like that in the offing?

No. if you look at what we do in the UK…

Has Nigerian government at any time approached BA to be part of its national carrier programme?

No. If you look at British Airways business today, we are an international carrier. We are also an international carrier to Nigeria. In Africa we serve 16 countries and 19 destinations. So, we are a big player in this market. And we are a big player from London. If you look at the way BA operates from London, essentially we are international carrier. We are European business and domestic business.

If you look overseas, the one interest we have in Africa is with the company called Comair which is in South Africa and we have a shareholding in Comair. That shareholding is historical and Comair operates as a franchisee of BA. It operates BA colours and BA standards and operates in South Africa. We used to have such in the UK with franchises but we don’t anymore. And if you look at the regional business in the UK it is with independent carriers other than BA. So we are domestic carrier, European carrier and spreading our international network.

How fair is BA fare, particular on the first and business class?

We went to see the Chairman of the Senate Committee on Aviation and we also met the Minister of Aviation. I thought we had a sort of extremely cordial meetings. We were asked about the fare issue and I explained that for BA there are two aspects and one is that we will always pay our fair share of taxes and pay them as when they become due. In terms of the fares, the fare issue is linked to capacity. Fares reflect demand and demand is driven by capacity. So capacity will always help in fare issues. But if you look at the fares generally, there are not really big differences in fares between Nigeria and other parts of Africa. If you look at the fare differentials, sometimes, they are higher, sometimes, they are lower. They reflect the market conditions at any time.

At different times we have actually spoken at length about fares and I think eventually we are succeeding in getting through to the government to make them understand that fares are not something they can really regulate in any sector. Example, we are in a hotel now. If you take all the hotels in Lagos, it does not take government or anyone to dictate or to be specific to any hotel on how much they are going to charge.

As a commercial manager, if your hotel is empty, no one needs to tell you that you need to do something about your charges; otherwise you won’t keep that job for a long time. So fares are very specific. One other point I made to the Senate Committee chairman is that fares are not static. You cannot have a fare from January to December. For example, when Nigeria celebrated her independence BA introduced fares as low as $352. We also launched our Christmas tactical: Abuja has $260; Lagos $263, Abuja is even lower than Lagos. So fares keep on moving, reacting to the market and the situation. Having finished Christmas and the New Year, we are already thinking of what fares we are going to have for Valentine.

Fares are never static. They are a function of so many things. If we have more frequencies…if we can operate more then there are chances for the fares to actually go down.

About two years ago I had very clear objectives around what I call the Four Ps. The first is brand positioning. We have done a lot of positioning of our brand in the last two years. This is why we brought ‘Flight to Serve’ which was what we developed, which is the new brand of BA, to go back to that brand resource. The result of that you can see very clearly. In 2011 we were voted in the UK the most improved consumer product brand, product brand, super brand in the UK. And in June of 2012 we were voted in a major UK poll as the airline most people wanted to travel with.

The second thing was about product. In terms of product, we started a major change programme. We started with the Boeing B777-200s, which you see frequently on the rout to Abuja. We want to refresh the interiors and in-flight entertainment with those B777-200s. We have got 18 of them. We have now refreshed 10 of them. We are going to refresh some by summer. So you will see a completely new interior of the B777-200s.

If you fly the B767s, they are also going through refreshing. We have 14 aircraft there. And then on top of that we got delivery of new aircraft starting 2013. We have got 12 Airbus A380s and 24 Boeing 787 (Dreamliner) aircraft into the fleet. So you see a lot happening on the aircraft side. At the same time there is a lot of working going on with the cabin crew in terms of learning to serve the customer better. The best example is the iPad. We introduced the iPad so we can better serve the customer. We look at our customers on the iPad so we can serve them better. That is our second product. The third one is flight service.

I am a great believer that the culture you exhibit internally is also the one you will exhibit externally. We are spending a lot of time internally to go through what we do and the flight is service part of that. If I look at the customer satisfaction over the last two years, it has increased by two to three per cent each year and there is still progress we can make because a many things are going on with the customer.

We acquired British Midland (BMI) earlier in 2012 and that gives us 42 additional slots in Heathrow. It was 55 initially but eventually 42. That 42 slots give us the capability to fly to more destinations, to new destinations. There is a lot going on that front as well. So in terms of the question on value for money, I think that what we do is building value for money, really on safety and security. Life is at the heart of everything we do.

Ideally what is the number of frequencies you wish to operate into Lagos?
We are restricted at the moment in terms of number of flights. We believe that the demand is not only for point to point flight but also for the transfer market. Heathrow has developed something of a reputation. If you look at Heathrow, it is both the world’s favourite and Terminal 5 is a major base in Heathrow. We think we got very competitive transfer traffic through Heathrow. If you look at Terminal 5 today, about four out of 10 passengers travelling through Heathrow are transfer passengers through the route network. Isn’t that a tremendous opportunity, not only for point to point business with Nigeria but also for transfer traffic.

They arrive in Heathrow in good time to take up traffic into Europe and intercontinental, particularly to the US. I think we got the capability there. We want to provide a high level of customer service and a standard level of customers for all our customers.

Keith Williams became British Airways’ chief executive in January 2011, following the merger with Iberia. He also sits on the Board of the two airlines’ parent company, International Airlines Group.

As chief financial officer of BA over the previous five years, he played a leading part in the airline’s achievement of a record operating margin in 2007, before steering it through the worst recession in its history and masterminding a solution to its long-standing pensions’ deficit.

After joining the airline in 1998, he became BA’ group treasurer and head of tax. He was heavily involved in restructuring the airline’s finances after the aviation slump that followed the terrorist attacks of 9/11 and in the plans that brought the company back to profitability. Keith’s previous employers included Apple, Arthur Andersen and Boots Plc.

Tags: Business, World, Nigeria, Keith Williams, Airlines Need Mergers

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