Olateru: Industry Expertise, Management Skills Sustain Aviation Business
The Chief Executive Officer of Omni-Blu Aviation Limited, Akin Olateru, speaks about the need for investors to engage professionals that have both industry knowledge and management skills, in order to stem the frequent failures of business in the aviation sector. Chinedu Eze presents the excerpts:
The challenge over the years for Nigerian airlines has been how to secure credit facility to acquire aircraft at long-term, single digit interest rate from either local or foreign financiers. How can this problem be solved?
Yes, so like I said, I have been both in the private and public sectors. I have almost four decades of experience in the aviation ecosystem spectrum with an M.Sc. in Air Transport Management. I am an investor in this business as well, this space. So, I can speak objectively with a balanced perspective to this subject matter. That is why I had to give you a brief introduction about myself.
When you look at operating airlines in Nigeria, we are being challenged by so many issues and that is why I don’t want to just speak about aircraft acquisition as a stand alone issue.
So, we need to be calculative and deliberate over how to grow the entire aviation ecosystem. That is what we need to do. It’s way, way beyond what one Minister can do. It has to be a team. We need to agree on what kind of finances, what kind of guarantees can the government give? Can the government give sovereign guarantees to back the airlines? We have to look at all the possibilities. Can the government take a loan at a single-digit, 5% interest rate any of the EXIM Banks, AFDB, World Bank etc? This will go a long way in supporting the industry.
It will not be a gift, it is not a bailout, but it is just access to a much cheaper fund, just like you have in the Agriculture sector. If you want to do Agriculture business in Nigeria, you have a bank for Agriculture or Agric Development Bank. There are so many opportunities for people. But even that, how well are we doing in the agriculture sector? When you check a bunch of plantain price in London, Southeast London and compare it to Lagos, the price difference is not much. You start wondering, in the UK do they grow plantain?
So, we have to be deliberate in Nigeria. Maybe the government needs to put a team together and sit down and come up with a designed programme, which the Minister would then champion, probably take to federal executive council to say, listen, Mr. President, we have sat down, we have looked at it, this is how we can increase the GDP, aviation contribution to GDP in Nigeria. This is how we can increase ease of doing business for aviation sector to grow.
This is how we can bring in much, more opportunity for our airlines to have access to cheaper funds. This is what we can do to help our airlines to increase their utilization. This is what we can do to make sure, take for instance, if the government can say, I am going to take a loan of 200 million dollars, we can say this is going to be for the MRO at 6% interest rate with a 2-year moratorium.
No company should take more than maybe N40 million. By the time we have four, five MROs in Nigeria we would have advanced the industry. One is designated on engines, one is designated on avionics equipment, one is designated to a particular OEM (Original Equipment Manufacturer); you know, different, different setups. Because it is a deliberate act, we will change the face of Nigeria. We will change the face of West Africa. We will shock the world that, wow, Nigeria has woken up.
Based on what the government has done generally, do you think domestic carriers can easily get aircraft that can be secured on dry leasing so far?
Well, what he has done, like I said, he has done so much. Well, the last time I saw him, I gave him the credit and the flowers he deserves. I am not a praise singer. I don’t bootlick. I told him as it is. And I told him, sir, you have done very well in this area.
That policy direction of the Cape Town Convention, that is a very, very good one. That’s giving operators a good leverage by giving the lessors a bit of comfort. But what I am saying is, if the lessor comes to Nigeria, they give you aircraft, and you can’t really fly to make money to pay for the lease. Are we not going to come back to the same state? That is what I am saying. We have to deal with this issue in an all-encompassing manner. It is not a stand-alone thing.
Aviation is never stand-alone. There are so many things that are interwoven. That is what makes aviation very, very technical, and that is what makes it very, very expensive. It is not a cheap business, but you really have to be knowledgeable. You really have to have what it takes for you to design the right strategy to drive it. So that is why I am suggesting maybe a team of experts can come together, people that know what they are doing. I am sorry, because there are a lot of ‘experts’ in this industry. We have them. I read so many things on the (WhatsApp) platform.
People go to ChatGPT to give remarks on issues, but you can see through them. There Is no depth. Having a theoretical knowledge of one thing, but having a practical sense in doing things is a different ballgame.
So, I am talking much deeper. That is why I am saying this. It is like I am a pilot. You are flying. I have 40 years’ experience. That doesn’t mean anything. You are just being trained as a pilot. You have zero knowledge about transport economics. You know nothing about airline business. You know nothing about the marketing of the business. So, you are being trained to fly. Simple.
And all you have been doing in 40 years is to fly aircraft. So, we need to start to understand that in this business, it is a highly, highly technical business, whereby we need to start aggregating resources. When you talk of ATC Air Traffic Controllers, that requires certain expertise. You need to have been in that system for you to be able to speak about it. So being a manager is one thing, being technical, hands-on person is a different thing. We need to be able to marry and understand and decipher who is really an aviation expert and really understand the topic we are talking about.
What is your advice for an investor that will enthusiastically establish an airline, become optimistic, but get frustrated over time when the realities begin to unfold?
I don’t blame some of these entrepreneurs. If you are from Osogbo, for instance, you want to set up an airline. You have from your area, you have this pilot that has been flying for 40 years that you know, he has been a captain, he has flown you many times. To you, that becomes your natural default.
You go and meet that captain and tell him, I want to set up an airline, what do you think I should do? But the thing is, aviation is much deeper than that. People need to start understanding that there are individual roles in this business. I took my time to study why do airlines fail in Nigeria.
Nine out of 10, they have been led by people that knew nothing about aviation. Forgetting that it is a very complex business. We have the Okada Air, we have the Kabo, we have the Chanchangi, we have all these. Look at who called the shots in those airlines at the time. Even some that were being run by some pilots. The question is, how much exposure do they have in terms of management? You know, it goes beyond that. That is what I am saying, it goes beyond I am an aircraft engineer, it goes beyond I am a pilot.
If you want to manage and lead an airline, please go and study air transport business or go study an MBA. So, you understand the economics, right? I am looking forward to the day we will do what the banking sector had done, fro You really have to have what it takes for you to design the right strategy to drive m the AGM and above, for you to be appointed as an AGM and above in any bank in Nigeria today, the CBN needs to approve. And when you go to the CBN, there is no man know man there.
They have set criteria for who should occupy the position of an AGM, who should occupy the position of a DGM, who should occupy the position of an MD, even the boards, who should be in the board. I know the late Ibadan man, he was the singular largest shareholder in First Bank, but he was never on the board, because he couldn’t meet the criteria. So, because you are an investor, it doesn’t mean you should lead.
Allow the professionals to do their job, set the targets for them and do your review from time to time. If they are not meeting the target, you fire the person, bring in the next person. Because we need to change the narrative in aviation, because in aviation in this part of the world, we are being seen that we don’t do good. That is why nobody wants to put money into this business, because they say, ah, once you go to aviation, you are going to fail. No.
Okay, before we talk about Omni-Blu, I want us to look at the issue of taxes. Is there any way government can manage its taxes in the industry to help airline survive?
Let me say this. Yes, we have argued about taxes, government taxes, government taxes, government taxes. That will go a long way, if government can look into how to reduce this tax burden. Don’t forget one thing, these taxes are not the airline’s money.
It is for government. The airline is just collecting on behalf of government. But the argument is, if you put Lagos, Abuja to be 200,000 and taxes there for argument’s sake is 50,000. Now, you have put a barrier. But, if you say it is 150,000, there are more people that will likely fly, because that flying becomes affordable. That is what the airlines are saying. It is not that it is going to put more money in the airline’s pocket directly, but indirectly, it will put more money in the airline’s pocket, because now you have more people that will fly. And to me, one of the KPIs (Key Performance Indicators) of any government of the day should be how much growth is being achieved.
How many people now fly? How many people flew five years ago? How many people are flying now? Because that is a number. That is the real growth in the sector. Because when people don’t fly, then that becomes an issue. So, to me, that should be one of the KPIs. So, we need to be deliberate about growing this sector called aviation. It is a big enabler.
You have not spoken about Omni-Blu. People don’t know what you do. Can you tell us about your activities?
Well, Omni-Blu, we started operations in 2015, and we have done quite extensive programs within the industry. We have serviced the oil and gas sector, with AW139 and S76C++(helicopters). We have moved money for CBN, flying a Boeing 737, for example. We have engaged in aerial agriculture with an Air Tractor for Olam Nigeria’s 9,800 hectares rice farm, and for 3 years plus in a row, calibrated Nav. Aids (navigation aids) across Nigerian Airports for NAMA (Nigeria Airspace Management Agency). We have done, and currently we are operating some helicopters supporting the UN-WFP (United Nations World Food Programme) in Maiduguri.
And we have two helicopters, one coming in shortly to support the oil and gas activities. One is already here, so we are waiting for the second one coming from Germany. We are coming to change the system, I don’t want to let the cat out of the bag but something big is coming very, very soon that will change the face and the value aviation brings to the table, where every Nigerian will benefit.
That is coming very, very soon. We are working on that. We also do VIP movement as well, operating a 10-seater private jet. So that is what we do.
For us, it is about innovation, value creation and solving problems. A peek preview into what we are about bringing on board the aviation value chain is novel; in the history of aviation in Nigeria, there is nothing like it ever. We intend to lead through creativity; we are very creative people, and we like to solve problems. We normally approach proffering service offerings by creating niche that provide valuable solutions to problems. We don’t want to join the bandwagon. It is not everybody doing this. We look at our own niche, we look at our own space, and then we look at our capability and we zero in to do just that.
The Minister invited me to Airbus, and incidentally Omni-Blu’s been engaging Airbus prior on a programme. Just as well this visit fits into part of what we’re coming up with soon. Enough said but watch this space. I think we will just leave it at that.
