Onyema: Operational Challenges May Force Airlines to Close Shop



Chairman of Air Peace, Allen Onyema said the current economic recession is hurting air transport business in Nigeria, positing that unless government comes to the aid of domestic carriers, some of them would go out of business. He spoke to Chinedu Eze. Excerpts:

Talking about challenges of operating in Nigeria, particularly, the fuel issues, oil marketers are saying that the local carriers are reluctant to pay for fuel they buy, so they prefer selling to foreign airlines that pay promptly. Is that true?

I said in one forum that if foreign airlines are faced with the challenges, we as local operators in Nigeria are facing, those foreign airlines would not last 72 hours. So we have to actually give it to owners of these airlines. It takes a lot for somebody to invest in this sector; it is a critical sector of the economy and we deserve our dues. We deserve assistance, we deserve understanding and I am happy government is beginning to appreciate what we are doing.
The major challenges the foreign airlines have faced and are all scampering out of the country. These problems are the fuel issue and forex. And the fuel and forex are maybe just 40 or 50 percent of what we go through, yet they couldn’t stand it. These foreign airlines are fair weather friends. If we are going through recession or going through any problem here, they should understand because these foreign airlines have really ripped this country to stupor. The kind of fares foreign airlines charge in this country are outrageous and they have been charging these fares over the years. The fares Nigerians were paying foreign airlines before now were so obscene. So they have gotten their fair share, now it is the time to help the country and they are running out of the country because they couldn’t stand it. Nigeria has been their best route ever, so these foreign airlines are fair whether friends.

They should remember that this situation is like force majeure, they should remember that Nigeria didn’t deliberately refuse to give them the dollar equivalent of their money, they should be patient with the country and not the other way round. They should be patient with the country and understand with the country that we are undergoing changes. If not so I call all of them fair weather friends.

So because of forex and aviation fuel issue they are all running out of the country. I am not saying that that is right; we are also facing the same problem. But don’t forget that when you to travel to London from Nigeria, somebody from South Africa that will do about eight or nine hours to London pays less and this have been happening. They will give you all manner of reasons that Nigeria is unsafe that they need to pay more allowances to their staff, but it is all a ruse. So the challenges we face as airlines in the country are enormous. One, nobody talks about insurance. They use peanut to insure aircraft abroad, in Nigeria I have to cough out over a million dollars to insure my aircraft for one year. For goodness sake how do I get this money back? And you are supposed to insure it at the London market.

They will tell you that the Nigerian operational environment is unsafe; this is what they continuously use to demean this country. There is no country without its own problems. So why are they always running to Nigeria if Nigeria is so unsafe? So they use insurance to rip us off that is one. Two, you have the fuel issue. The aviation fuel price all over the world has tumbled downwards, in Nigeria the cost has spiraled upwards; it has quadrupled. Instead of going down, it is like four times over, so it is cheaper to even buy the aviation fuel in the United States than in Nigeria. So we are facing all these. When we were buying fuel at N97 to N110 to a litre we were complaining that it was too much but now it is up to N250, N240, N230; how do you want to make ends meet?

The fourth one is that the aviation fuel itself is even scarce, making you to cancel some of your flights and continuously dwindling your revenue, making you always not to be able to keep on to your on-time departures. Making pilots run out of duty time so easily without flying. Because they will be there waiting for fuel before you know their duty time is gone. Now you have to employ more pilots in order to get over this kind of issue. For example I am going to Owerri, the marketer in Owerri does not have fuel, the only three places you have fuel now is maybe Port Harcourt, Abuja and Lagos. At times they are scarce or they don’t come when you want them. So going to Owerri or Enugu, you have to tanker fuel from here, you have to carry more than you need from here because you won’t get any fuel there. And when you do this you have to look at the weight of the aircraft, you start dropping bags of passengers and this has caused us a lot of name-calling.

Because when the passengers land and they don’t see their bags they get angry and they may not understand. Some of my staff has gone home with broken heads but it is not their fault. And this is associated with issues of fuel scarcity. Now we have talked about the cost of procuring the fuel and the scarcity of the product, those two are challenges too.

Have you been talking with the federal government on these challenges?

Recently the Minster of State for Aviation held a meeting with us and he has been proactive. That is why when you don’t know people you criticise them. Some of our colleagues who are saying the Minister did this or he didn’t do this, how many of them have bordered to go to him and say this is what we are facing. Instead what we do is bad mouthing each other. I am a witness to what he could do. When we needed to get international designation, the Minister acted immediately. He saw reasons that Nigerian airlines should be empowered to have international access and benefit from the Bilateral Air Service agreement (BASA). This is one thing he has done which was not there before and instead we are giving the foreign airlines destinations. But he did it, he gave Air Peace, Azman and I am sure he gave Dana and others routes. So he wants these airlines to do well.

How are you dealing with aircraft maintenance?

Another challenge is the high cost of aircraft maintenance. We don’t have any maintenance facility in Nigeria. It then means that you must take your aircraft out of the country at any given time. One of my aircraft is with Lufthansa now, it is coming out today from Lufthansa. And when I talk about the amount we pay for our C-check a lot of people say it is a lie, they say C-check cost about $300, 000 or $400, 000. You know C-checks are done according to the work scope; you have to develop a work scope. It is what you tell them to do that they will do. There is what we call C-check work scope, if you limit yourself to that Boeing C-check programme where you have to look at the flaps; no. When the aircraft is opened you discover that more things are to be done and you have to pay for it. If you really want to have an aircraft that you can sit down and be sleeping you have to do pay for it. I used to have phobia for flying, so I make sure that my aircraft continuous airworthiness is number one.

They can find that out even from the regulators, I clean out my aircraft whenever they go for C-checks.

At this time when most airlines are finding things difficult, we are also finding things difficult but because of the premium we place on safety, we have sent about five aircraft out for C-check this same period and none of them is coming back with less than $2.1 million cost procured at N400 to a dollar. A lot of money is being lost out of this country to maintenance. I will call on the government to place a lot of premium on establishing aircraft maintenance centre in this country.

Government will rake in millions of dollars every month from the maintenance of aircraft. Not only airlines from Nigeria but also others from the sub-region and beyond; just like in Ethiopia, they have a maintenance centre there.

I have an aircraft that is due for C-check, which is parked at the airport now. It is due for C-check because it has clocked 18 months, so once the 18 months come then it is due, so I grounded it.

We are waiting for slot, from the Maintenance, Repair and Overhaul (MRO) Company because they will tell you that they are booked at this time or that time, so we are waiting for or slot.

The question everybody was asking was why not put it into service? I said no that the aircraft is due for maintenance. And we have kept this aircraft there for the past three weeks. Even when the engineers advised against parking it there, I said it is due. As at last night, (August 25) one MRO has given us a go ahead to bring it next week, so by next week that aircraft will leave the country for its own C-check. About six aircraft have gone this period because of the premium we place on the safety of our equipment and crew and passengers.

We gathered that you have recently acquired more aircraft in your fleet. What is the aircraft type, Boeing B737-500?

Yes it is Boeing B737-500 but it is different in sense that this one is a 142 passenger capacity aircraft and this is the second aircraft we are bringing in the last three months, even though we did not announce it. And both of them are the same capacity. The other one is 126-passenger capacity.

How many do you have on your fleet now?

Right now we have nine Boeing aircraft and one Dornier Jet, so we have 10. Actually this is our 12th aircraft, the one that arrived on Monday is our 12th aircraft. You remember I sold two of our Dornier jets off to British Airways’ Sun Air in Denmark, now we are left with 10 aircraft.

Are you going to deploy all of them in the domestic route or are you thinking of doing regional or international?

You are aware we have been designated to do the international routes and at the same time sub- regional routes, though they will do domestic for now and later regional routes. So we are going to deploy them, we have been given right to fly to Abidjan, Duala, Accra, Niamey and Dakar. So we are going to soon announce our commencement to those routes. At the same time we have been given international designation to, China, Atlanta, Dubai UAE, Mumbai, India and Johannesburg, South Africa. Everything is on top gear to start the routes. We have visited these countries and we are closing in. We want to give Nigerians the best international experience.

We are not afraid to compete with the big airlines of this world; it is a matter of service. We are going to provide Nigerians with the same kind of aircraft they see in Emirates and nothing less Boeing B777; that is what we are going to deploy in our international routes. At the same time one thing we are going to boast of is that we are going to put in our cockpit the best crew ever. As it is happening in Nigeria now you can attest that Air Peace has the best pilots in the land flying for the airline, it is not about marketing Air Peace. Customers will tell you their experiences flying Air Peace even in the worst of weather. We have the Air Peace Standard Operating Procedure (SOP). And I have to give it to our head of training and Chief Pilot, Captain Egonu; the man knows what it takes to produce a pilot.

Talking about training and acquisition of your new aircraft, I know a lot must have gone into to it in terms of finance, I will like you to shed more light on how much you have sunk into this and who are your credit partners in the aircraft acquisition?

Of course, the airline business is very capital intensive, no doubt about that; no airline can do without borrowing at one time or the other, it is highly capital intensive. It is unlike when I started, when I went for seven aircraft and almost fully financed everything myself. Now I have to rely on my integrity to do the job for me. So what is happening in Air Peace is just the power of God Almighty showing us a lot of favour. Having said that, another thing is the power of integrity, a lot of people are scared of lending money to the aviation industry, a lot of banks especially in Nigeria do not want to deal with airlines in Nigeria. The question is why? Our forerunners will have themselves to blame for not leaving up to expectations and making people scared in investing in aviation. A situation where you take billions and you don’t want to pay back and you are siphoning money out of the country giving the industry a bad name.

It is very annoying that I cannot go out of this country to get financing. They will refer you to airline X, Y, Z in Nigeria, airline A, B, Z from Nigeria and airline Q, B, Z from Nigeria that got their reneged on their acquisition agreements. So nobody wants to give a Nigerian airline any help towards funding; meanwhile, all over the world airlines are supported by the financial institutions, which are ready to invest, using their equipment as collateral but here in Nigeria the banks are not ready to deal with you.

The banks outside our shores are not ready to deal with you because of the negative pedigree of our predecessors. So we have been battling this and it has not been easy because of the records these airlines have set in the past. You take money from a financial institution and you are not ready to pay. Now Air Peace has come to change all that.

The very first time when I was buying my seven planes the money I took from Zenith Bank I paid it back. The ones I took from Fidelity Bank I paid them back. Fidelity is here supporting us all the time.

When I came into aviation in 2014 October 24t, I told the world that aviation will never be the same and you are witnesses to that; that Air Peace has changed the status quo in aviation. We have made everybody to sit up; everybody is struggling to do on-time departure now, thanks to Air Peace, because that was what Air Peace brought in. and when we started it was difficult for Nigerians to adjust to our time. For example, in a 1:00 O’clock flight, you see somebody coming to the airport at 1:30pm. And they will come there and be making noise. “I am only 30 minutes late and you people have taken off”. And they will ask him, what did you say? 30 minutes late and he will respond by saying, yes. But you don’t blame him; that was their experience before Air Peace started. Flights were usually delayed. Before now when you get to the airport you can wait for another maybe three hours and nobody tells you sorry. They could waste you time for maybe five hours, and passengers were treated with so much levity. For you to get ticket to even fly you have to know somebody at the airport to help you. It was coming to that. Touts had a field day because of the porous system. So things were being made deliberately difficult and airlines didn’t care. But I promised the world that I was going to change all that and we started doing our online, on-time departure and a lot of people didn’t like it at first but now they are all enjoying it. And others now started playing the catch up.

So what I will ask other people in the industry to do is first of all to show integrity so that if anybody wants to come into this business the person can come relying on the resources of the banks to operate, because you cannot really do this business alone without some level of financing from outside. It is done like that all over the world.

How about aircraft leasing; are finding any challenge there?

If you go to America you will see Delta Air Lines leasing about 200 aircraft. All over the world even Ghana here they could easily lease planes from outside. For a Nigerian company to lease an aircraft, just one single aircraft you might wait some eight to nine months. They will go back and forth with you because they don’t trust you, because they had experiences. In the past when Nigerian airline leased planes from them, to pay the monthly rent is a problem. They would earn revenues but they would not want to pay remittances, the next thing the lessors will be struggling to come and take their planes out of the country. One particular airline in the country, the lessors came and took about two aircraft from them recently. These things should not happen, they are creating image problem for this country.

So it is not just criticising the government all the time, the airlines themselves are creating image problems for Nigeria and that should stop. They should leave up to their billings and do things that will continue polishing the image of this country and not the other way round. So leasing is a big problem, and you need to lease to operate long haul flights.

I know that the recession has depleted passenger traffic, although many travellers now prefer Air Peace, so how is the recession affecting your load factor?

The purchasing power of the people is very low, everybody is affected now, the recession is all over the place not only in Nigeria, it is affecting even traffic. Even some of the foreign airlines also are not having it easy even though they will not tell you, the Nigerian travelling public is no more there for them. It is the same thing in the local scene; it is affecting everyone. Everything about commercial flight operation is in dollars. We buy this dollar at N400 to a dollar, you do your maintenance abroad, you pay for engineering. For example Air Peace, you know we outsourced our maintenance to a British company, VCT Aviation Maintenance Company of Britain. They are here 24 hours maintaining our fleet daily; it costs us a lot of money to do that. So when you put all these together, coupled with the cost of fuel, cost of procuring it and cost of forex, the least ticket fare in this country should be about N40, 000 for economy ticket. I wonder when some people say they have been to America. It is very easy for Nigerian to quote America, Britain; sincerely I don’t know where they are quoting. Atlanta to Miami is one hour, 10 minutes; go there to buy a ticket the same day it will cost about $400. Go to Delta to buy their ticket, if you buy a week plus you will get about $150 or thereabout, if you buy two three weeks ahead. $150 how much is that in Nigeria? That is almost N70, 000 for a ticket. Here we are still having N12, 000 ticket. How much is that in dollars? Nowhere in the world do you use $10 or $20 to fly in an aircraft even if it is 10 minutes journey, but it is happening here.

Because the purchasing power of the people is very low, you can’t force it on them. If you want to increase the fare now a lot of people won’t fly. So what we are doing now is to continue keeping our customers and gradually introduce little, little changes upward because you need to maintain these planes. Again, the issue of competition is not helpful. It is not that Nigerian passengers will not be able to pay something a little bit to the amount that may give you breakeven point but rivalry, I have some airlines because they want to take Owerri they were fighting Air Peace on the Owerri-Enugu axis. They reduced their fares to N12, 000 and N11, 000. It is even unsafe for them to do that because there is no way you won’t cut corners at that fare. So when you do things like this because you want to get passengers, you are dealing with yourself. Or you tell yourself you will make up from other places. Other places, are you the only one going to those other places? You still have Air Peace and other people to contend with there. So the earlier the airlines come together to chart a course together the better for them. What you have in the system is devilish rivalry instead of healthy rivalry. And because we have not been able to come together to articulate our position to government, everybody has been trampling on us and it is not helpful.

The airlines should be blamed for what is happening in the aviation industry, the airlines should be blamed for it. The owners of these airlines should be blamed because they have failed to come together to articulate a position that would be helpful to the flying public, the government and themselves. Instead they allow unhealthy rivalry to becloud their senses of judgment that is what is happening. If only they can come together and articulate their points and meet the government in good faith and say this is where we are, this is what will help the industry, help the nation, help the government to generate revenue, help the flying public to have seamless traveling experiences, it will become a win, win situation.

It is my prayer to have younger people to come into this aviation business, those who could meet together and have a drink and not wallow in the old ways of doing things, trying to be diabolical or looking for ways to demean each other. You know the younger generations are open and that is what I miss about the owner of Discovery Airline, Mr. Babalola. I pray that he should have a rethink and come back some day. This is because we were talking a lot about code-share and other ways of cooperation. Another person is Azman President, he has no problem, he is not fighting anybody, these are the kind of people you need in this industry. Captain Edward Boyo, owner of Overland Airways has nothing against anybody, the younger ones have nothing against anybody. So they should look at themselves and tell themselves the truth about what they have been doing. The older people in this industry should carry us along so that we can help the country and not the other way round. The sky is so big for everybody to operate.

Not having maintenance facility in Nigeria is a major challenge we have, would you be willing to partner with some of the domestic carriers to build one?

Of course, yes. Not even partner with them, I am ready to go it all alone. I asked for land for me to build a maintenance hangar and I was asked to pay over N650 million to the Federal airports Authority of Nigeria (FAAN) for a hangar space, for an airline, which wants to do the right thing. Now, all of us are maintaining our planes on the apron; that is untidy. It doesn’t give confidence to the flying public. I don’t need to pay a dime to anybody for a land space. They were not going to give the land forever; it is for rent for 15 years for N650 million? So what they were telling me was that we don’t want you to build any hangar. If they give me a good land space today I will start the project, I have the integrity both within Nigeria and outside this country to attract people who will come and finance it.