The Chief Executive Officer, Belujane Konsultant and industry stakeholder, Chris Aligbe, in this interview, says even when flight operations resume post COVID-19, it will take about a year for the aviation industry to record high load factor. Chinedu Eze brings the excerpts:
Don’t you think it is high time government took a decision on Arik and Aero to chart a future for the airlines?
Does the government own the two airlines? The government does not own the two airlines. If you look at the instrument with which AMCON (Asset Management Corporation of Nigeria) acquired it, they acquired it for the purpose of acquiring debts that they owed; that is the objective. Have they recovered these debts that they owed? They will recover all of them. It is only recently that I realised that AMCON did not acquire the debt owed to FAAN (Federal Airports Authority of Nigeria, NCAA (the Nigerian Civil Aviation Authority) or all the other agencies, the only debt they acquired basically was the debts owed the banks and some other institutions. So, the debts they owed parastatals and others are still there. So, they didn’t acquire all the debts. Their sole objective was to give the banks a clean slate. It is not to pay the debt of these agencies and other creditors. Why shouldn’t AMCON acquire the other debts?
Do you think if the two airlines were given lifeline instead of being taken over by AMCON, they would have been more successful?
If they had reached that arrangement they would have been more productive. I tell you why. AMCON’s vision in the two airlines is debt collection. The mission was to collect the debt and leave. The original owners had a vision for the airlines. Don’t mind that they had their challenges and faults; you cannot say they have no blame, but they had visions for the airlines. I know that that Joseph Arumemi-Ikhide (owner of Arik Air) had a vision for the airline; I know that Aero Contractors owners (the Ibrus) had a vision for the airline. Aero’s new management wanted to bring in some investors into the airline, but the Ibrus told the management that it cannot do it. This is just to show you that the owners are still there. So, we don’t want these two airlines to collapse, how best can we do it? What is your position? We are ready to move forward.
We can merge them, if we agree. We could rate your shareholding. You still have a shareholding up to this point but this time it is not only you, it is a new entity, we get new shareholders so that these two airlines together will survive.
They can sit down and make that arrangement. That is normally what they should have done. The only way those two airlines will survive is, one, call the original owners and tell them that this is what we want to do, how do we go about it? Let us work together so that we can save both your investment and our investment. That will be the best way. Otherwise, like I said, those two airlines need a major turnaround and they need turnaround managers. I am not talking about the integrity of those who are managing but I do know that they need turnaround managers to be able to do this thing.
Captain Ado Sanusi, the Aero CEO has managed to see a window of revenue and the window of revenue is in the maintenance. The money is not being made from flights; the money is being made from their MRO (Maintenance, Repair and Overhaul). That is where they can grow and make good money. That window does not exist in Arik.
With the COVID-19 situation, what do you think will happen in the case of passengers’ ability to buy ticket and travel by air?
It is not going to be easy. The expendable funds that will be available to the public generally will be low. It may not be there and so it will take a while before the airline industry will pick up. What you will find is that fares will go down because the airlines have to operate. They won’t leave the aircraft on ground particularly if they try to stimulate them to get back to operation. But then, because the passenger traffic will be low, they will look at their fares again and bring it to the barest minimum. When they bring it down, then passengers can begin to fly. But it will take almost one year provided the economy don’t go into recession. It will take almost one year before you have passenger traffic picking up after the COVID-19 pandemic.
And the first thing is that people will still be a little bit careful to travel. They would want to know that the COVID-19 is not resurging and that they can travel safely. They want to make sure that it is cleared in the world. I am sure that even after this, many countries will be asking if a vaccine has been developed. Many countries will be asking that you carry a yellow card to show that you have been vaccinated against COVID-19. I won’t be surprised if certain countries will be asking you to arrive for test, that when you come in you will be tested for COVID-19. So there will be so many things that will happen but it will take about a year for air passenger traffic to start returning to what it should be.
Do you think airlines will lose their workforce?
If and only if the government does not provide grant to get the airlines. Part of the terms of the grant will be like, we are giving you this grant so that you can keep your operation and so that you can keep your staff until things pick up. We do not want you to retrench staff or send them back into unemployment. It is the responsibility of the government to keep people in employment. We already have a challenge about unemployment and those you have employed we don’t want you to throw them out. And that is one of the conditions why you are giving this grant.
Do you think the economy, which may slip into a recession, can birth a new national carrier?
I tell you this, a recession economy cannot have the funds for a national carrier, most unlikely. Although it depends on the quantum of funds you are talking about. If the original thing they talked about is N24 billion, if there is intervention fund that the airlines can take from with low interest rate, single-digit and long term, a national carrier being floated can access and take from that. But I do not see only a recession; the government may not have a budgetary allocation earmarked for that purpose.
Government can still draw from the remaining intervention fund, a remnant of the fund given to airlines some years ago. At least, I know as at last year, the balance of the intervention fund that was given from the Central Bank of Nigeria (CBN) showed that it was still remaining. From all, what I know is that at the time the national carrier project was coming up before it was aborted, the CBN had said it had the intervention fund. so it was there. The national carrier that will be created should not attract any grant. Whatever form it takes must be funds that should be repaid or funds that eventually will constitute equity.
The grant that will be given to operating airlines is different because they are in operation, because they have responsibility, it should be given to them. But a new floatation should not have it; any airline coming now should not have it because the airline that must benefit from it must be in operation, it is not a product of stimulating to continue again or start again. But they should have access to a loanable fund like low interest rate and long term. So it is still possible; it depends on the government, but I do not think that with that kind of budgetary provision in an economy that is suffering recession, there won’t be that.
Before now Nigerian airlines operate very old aircraft and leasing is difficult because of the mismanagement of leasing trust and agreement. Now Air Peace has a new order of about 13 aircraft and then they want to change the aircraft type. They have realised that Boeing 737 may not be the best aircraft for the distance, in term of consumption of fuel and operational cost. Do you think after this COVID-19 these airlines will be able to re-fleet and do you have any issues about the existing fleet?
There are issues about existing fleet, many of the aircraft being used by domestic carriers cannot operate on Category 3 ILS (Instrument Landing System), they can only operate on Cat 2. That is one. We are advancing, with Cat 3 being put in place; it comes largely for foreign airlines. So except our airlines begin to acquire modern generation aircraft that have the ability to operate Cat 3, which we need, even the Cat 3 that is going to be operated is level A, not even level C. Level C is when you have zero visibility landing. Level A will at least get you down up to 300 feet visibility. Only about three or four domestic operators can operate Cat 3, all others cannot operate Cat 3.
So, we need to get them changed. Sadly, two operators had messed up the entire things about leasing aircraft, they had messed it up by what they did, refusing to adhere to the Cape Town protocol on mobile equipment by going to court to try to stop the equipment from being returned to the owners. And with that it has taken Nigeria decades upon decades back to its earlier position where Nigerian operators cannot lease any modern generation equipment, cannot even lease equipment.
Now they cannot even give you aircraft on lease. In the past they could give you on lease with high repossession cost. Now the repossession is not even an issue again, they will not even give you any lease. So, Nigerian airlines will have to buy equipment which is a much more difficult thing to do. And as you are buying, you are paying out rightly. Or you have a bank guarantor that will say; if he doesn’t pay I will pay. So those two airlines messed up the system, they have done tremendous injury not only to the Nigerian economy today, but also tomorrow. That is because we have stopped new operators from coming in except the operators have enough money to buy aircraft out rightly. That is a very dangerous thing that has happened. In fact, I am sure if NCAA is reviewing its regulation, if I was in a position to make input, I will ask them to have a rule or regulation within the NCAA Act that whoever goes to corner this protocol will lose his operating license and will never operate an airline in the country. The law has to be much more stringent. New entrants cannot come in easily except you have money to buy your equipment. This is a severe damage to the country and those operators should never be allowed to operate any airline in the industry.
Let’s look at non-aeronautical revenue possibilities. Is it possible to establish a discotheque and other similar businesses at the airport in order to attract people to such airport to boost its revenue?
People don’t know that non-aeronautical revenue depends on the level of operation at an airport. If there are many flights coming, I invest in and operate a taxi system in that airport. But if there are only two flights coming there is no need for me to buy a lot of taxis and put at the airport. How many people will come? Those flights that will come may be half of those that arrive have their own private cars waiting there. So the level of operation in an airport determines the level of businesses that will account for non-aeronautical revenue. If an airport is not functional, nobody is going there, few persons are coming out there, it is not attractive for any business no matter what, even if it is just sitting by and selling oranges and Suyas, people have to come out to buy. When people are not coming out to buy and remember much of the revenues are derived from not just those who are travelling but people who come to meet and greet people as well. These are the people that come and spend time in the restaurant waiting for the passenger to come, they eat. If you have an airport with 10,000 through put, the number of meeters and greeters will be almost twice that, almost 20,000. So you find that that the total number of people around the airport will be almost 30,000 because through put is 10,000 but meaters and greeters and those who do business around there will make up the rest figure.
Is it possible to build an event place at the airport?
It is possible if there are enough space around that airport. It is possible that you can do such things around the airport but when you do that you are beginning to look at the kind of airport city concept where people can have anything that they want within the airport city. But if that is the only thing there and it is far from town, how many persons will drive to that place to go and do that? They rather stay in town, so that is the situation. Activities around the airport will depend on the level of operations around the airport. If the operations are low, it doesn’t make any meaning establishing any business there. But if the operations are high then you can establish business because you are going to have customers both from passengers and then from meeters and greeters.
Harmattan haze has been a very big challenge and recently there were diversion of flights. What do you think is the problem with navigational aids in Nigeria and what advice will you give to the Nigerian airspace management agency?
The last thing that happened was a very sad accident. I call it an accident because it was a timing element in it. Because the Cat 3 ILS had been there, it has been installed or they have started installing it. But after installation, two things are required – some little of training for those who will handle it, both in FAAN and NAMA, particularly NAMA. But then you also have to make sure that the runway lights are there. You know there is Cat 2 runway light and there is Cat 3 runway light, they are different in colours. The runway lights have to be there, you make sure the power is constant and then the airlines themselves have to have training on utilisation of Cat 3 approach. And the aircraft has to be equipped. Like I told you earlier many of the aircraft are not so equipped but there are a few that are, but by and large, foreign airlines are equipped. But what happened is that after they installed it they needed to calibrate. The government had acquired a calibration aircraft but you need to train calibration pilot. That has not been fully done for the calibration, so those ILS 3 were not calibrated. After they are installed they were waiting for calibration, unfortunately they had removed Cat 2 ILS that was there before. So the place became blind as it were. It was between this period that the harmattan haze came, not until they now had to look for a calibration aircraft. Because I think it was not the aircraft that they bought that calibrated it, they had to get a private service provider to calibrate it. That was when it started working. It was a kind of unfortunate accident because there was timing element, it has been installed, they are waiting for calibration, calibration had not been reading, they had removed Cat2 when the weather came and so we had a blind situation, that was what happened. Virtually Abuja and Lagos are Cat3, they have also moved to install it at Enugu, Port Harcourt and in Kano. But all others are Cat 2. So, it is not that they didn’t know what to do or they were not doing what they should do but, they couldn’t finish it when the bubble busted. But it is operational now, but we need our domestic operators, we need newer equipment that can at least utilise Cat 3 and eventually we are hoping that we will move from Cat 3 A to B and to C, so that some time in this country we will be talking about zero visibility landing. Many of the foreign airlines many of the aircraft have capability for that Cat C but our ILS must be upgraded to that point for them to be able to use it so that they can at least achieve zero visibility landing in our country.
The hardest hit by Coronavirus seems to be the air transport industry, and every country is coming out to support their airlines. Looking at our airlines, what do you think the government and others can do so that Nigeria can still have local air transport?
When things like this happen that is when people realise the role that the airlines have been playing in our country. When things don’t happen this way, people never understand. But now, people understand the role of airlines. People say these are private airlines, but these airlines have contributed immensely to the economic development of the country using their own resources, putting their own efforts.
You are talking about stimulus; that is, how do you stimulate the economy? How do you keep the economy running? How do you stimulate it so that after the coronavirus we don’t go into another recession? We must realise that one of the greatest catalyst in any economy is the airline industry, moving people from one place to the other, moving goods and providing those services. After this coronavirus, the only way we can get back is to hold on to the catalyst, reactivate them again so that the process of reactivating the economy will begin.
If you don’t reactivate them, then the economy will remain where it will be. I heard government saying it would support SMEs, factories to make sure that they get back. Some people are talking about tax cut, tax relief; some people are talking about some intervention fund. Yes, the intervention fund will not be the kind of intervention fund for the airlines. I heard Central Bank of Nigeria (CBN) said it would be five per cent interest rate, but I don’t think that is what should be the first thing. The intervention fund should be a kind of a grant to airlines. Government will look at the size of the operation of each airline and determine what amount of money to grant to each airline.