The way domestic carriers reneged on their plan to shut down operations last Monday confirms why they cannot work together or collaborate to ensure their survival, economy of scale and improved service for air travellers, writes Chinedu Eze
While the threat to shut down flight operations on May 9, 2022 by the Airline Operators of Nigeria (AON) attracted both local and international attention and provided the platform for oil marketers, the airlines, the National Assembly and the Nigerian National Petroleum Corporation (NNPC) to discuss and negotiate the price of aviation fuel in Nigeria, it also reconfirmed that Nigerian carriers cannot work effectively together.
After agreeing last Friday they would shut down operations, some of the airlines that signed the statement to stop operations began to renege by releasing separate statements that they would not adhere to the general agreement. It started with Ibom Air, followed by Dana Air, Overland Airways, Aero Contractors and Arik Air; until AON issued statement cancelling the planned shut down.
However, the threat to shut down operations yielded benefits for the airlines by waking up the consciousness of Nigerians and the federal government to the fact that airlines might ground their operations if they continue to pay highly for aviation fuel.
One of the major factors attributed to why Nigerian airlines are not doing well is their refusal to cooperate and work together. Many industry stakeholders have attributed the short lifespan of Nigerian carriers to their go it alone attitude, the cut throat competition and the tendency for them to undermine one another. Nigeria’s international aviation consultant, Nick Fadugba had at different fora canvassed for merger and collaboration of Nigerian airlines.
In 2017, Fadugba who is the CEO of African Aviation Services Limited, Chairman, African Business Aviation Association (AfBAA) and former Secretary-General of Africa Airlines Association (AFRAA), explained to THISDAY why Nigerian airlines would do better if they work together.
He attributed the stunted growth of the aviation industry in Nigeria to the small size of the country’s airlines, describing them as unprofitable with very short lifespan.
He said the survivability of the domestic airlines could only happen, if the airlines pool their resources together and benefit from the economy of scale in their operations, training and maintenance.
Fadugba who is also the publisher of African Aviation magazine observed that Nigeria has too many airlines, which are too small, so the market is fragmented. He noted that none of the airlines have a critical mass in terms of fleet or route network to become effective and to make money.
“When you look at Ethiopian Airlines, the combined fleet of all Nigerian airlines is about 40 percent of the fleet of Ethiopian airlines. We have approximately 40 aircraft as a country, all our airlines. Ethiopia at the moment has about 90 plus (2017) aircraft and the most modern. And not only that, in the next few years they will operate about 130 aircraft. So you see Ethiopian is taking on a bigger scale,” Fadugba said.
He noted, however, that it could be said that Ethiopia Airlines has a monopoly, which is very different from Nigeria that has a very vibrant economy, adding, because of this, Nigeria has many airlines, which could be described as a good thing in a way, whereas none of these airlines could be described as profitable.
“So what I would recommend for our Nigerian airlines is that they need to work together, they can compete, for example on Lagos-Abuja or Abuja-Port Harcourt but they can work together on training, on maintenance, on spares pooling, on spare parts purchasing, there are many areas where they can work together. They can still compete, it is done in the rest of the world, airlines can compete and collaborate,” he said.
Cutthroat Competition
When the first statement against the collective agreement to ground operations on May 9, 2022 came out, one industry stakeholder noted, “A stand alone commercial airline amongst all domestic operators? How about loan of spare parts like brakes, lubricants, and tyres in outstations? How about share of weather and security information? How about rescue missions in case of emergency? Best approach should have been to respond to inquiries by all their other platforms that they will continue to operate. Issuing press statement as this shows members of AON are not united with the executive.”
But it is however, heartwarming that airlines like Azman Air, Max Air, United Airlines and Air Peace stuck to the agreement until AON issued a statement cancelling the plans to shut down operations. Industry observers note that the airline sub-sector is pervaded by animosity, bitterness and anger, which are tools, which they use to undermine one another. Investigations also revealed that when one airline is involved in an incident, another airline would want the public to know about it and when late in the day it seemed the public might not be notified, another airline would surreptitiously release the information.
“There is too much backbiting. It will be difficult for them to work together,” an industry insider said.
In 2018 some text messages went virile, where passengers were being warned not to fly Air Peace and Dana Air. One of the messages was credited to pastor Johnson Suleman, the general overseer of Omega Fire Ministries International. Suleman had to issue a statement denying the earlier message. Later another airline was fingered for circulating the message against the aforementioned airlines.
THISDAY spoke to the then Director of Consumer Protection, the Nigerian Civil Aviation Authority (NCAA), Adamu Abdullahi and he said, “It was a desperate de-marketing strategy, caused by this intense competition among the airlines. We believe that it is the airlines that were fighting each other to the extent that they went ahead to damage each other’s name. There were even posts on social medium, Whatsapp by pilots, telling you not to fly an airline they just left; that they left the services of that airline because they don’t maintain their aircraft. But that is not true because all the pilots and crew of the accused airline would have left if there were any of such danger. This is because no one would want to go and commit suicide if by any chance the aircraft is not maintained, and they go and have an accident. People should think twice about all these fake news that go on air. NCAA has given assurances that any aircraft you see in Nigeria’s airspace is safe and airworthy.”
Working Together
Hours before AON cancelled the planned shut down last Sunday, the CEO of Aero Contractors, Captain Abdullahi Mahmood was interviewed on Arise TV where he spoke on behalf of all the airlines, explaining why the prices of aviation fuel had to be reviewed downwards.
He said if the airlines continued to source fuel at the cost of N700 per litre, they would continue to incur debts with the oil marketers and pile up debts for the airlines, which might drown the airlines from existence.
He requested that the marketers should review the current cost of the aviation fuel so that the domestic carriers would return to normal operations.
“If we continue operation we will be doubling the debts of the airlines. We already owe marketers. If we pay them now we would just be defraying the old debts we owe them while the new debts remain. This will lead to consistent flight delays because the marketers who are doing business for profit will refuse to sell to us without payment so our passengers will be waiting while the airlines will be begging marketers to sell fuel to them. At a time you just decide to end it all and this is what we have done,” Mahmood said.
On that same day, in another interview on Arise TV, the Chairman and CEO of Air Peace, Allen Onyema confirmed that airlines were now heavily indebted because of fuel, adding that universally, fuel constitute 40 per cent of operating cost but in Nigeria, “it is now up to 95 per cent of operating costs”, stressing that no airline could survive this in the next three weeks, as airlines have been subsidising costs for passengers in the last three months.
Onyema explained the impact of the fuel price increase, noting that a Boeing 737 burns about 4,365 litres of fuel for one-hour flight to Abuja; when multiplied by N700 per litre, it amounts to over N3 million.
He said for airlines to recover this N3 million, airlines would charge N60, 000 per passenger for fuel alone.
Onyema said: “This is without the cost of insurance, maintenance; taxes, Passenger Service Charge and NCAA five percent on tickets, NIMET charges, Nigeria Airspace Management Agency charges, staff salaries, and bird strikes amongst others,” adding that when all these costs are included, passengers would need to pay nothing less than N150, 000 for an hour flight ticket for airlines to break even.
Compromising Safety
Working together and fighting together is deemed desirable because collectively the airlines would protect their interest. Aviation insider said that when the airlines don’t work together they go under as individual experience.
The Managing Director of Flights and Logistics Solutions, Amos Akpan examined the consequences of airlines literally getting drowned in high aviation fuel prices. He wanted to know whether if stretched financially by the high cost of aviation fuel, whether airlines wouldn’t succumb to the temptation of cutting corners.
“This question needs to be addressed in the light of current effects of the high price of aviation fuel. Whatever strategy will be adopted to solve the issue, subsidy is not part of it because we can’t retrogress. The airlines have observed the wide gap between the landing cost of aviation fuel(ATK) and the pump price at the tarmac. Nigerian domestic airlines are saying the price of aviation fuel at N700 per liter makes their cost of operating each flight higher than the income they earn from operating that flight.
“The airlines cannot request the government to force down the price for ATK by saying it is too high. The airlines should want to increase the prices of tickets so that income from sales will pay for cost of production of the service. This is a very simplistic approach but may not solve their problems. The purchasing power (money for travels) of the existing and potential air travelers has its elastic limit, which is determined by the country’s economy,” Akpan noted.
He observed that there is a point the airlines fare would cause low patronage of their services because the economic realities would force current air travelers to look for purse friendly alternative mode of traveling within Nigeria.
“The security situation may have forced more people to choose air travels. But virtual meetings and electronic transactions have become alternative to physical travels. These alternatives will cause low patronage, which will cause low yield, which will constrain airlines to provide lower capacity per route. This may lead to limited frequency and could constrict size of domestic operations.
“Government cannot force airlines to a price ceiling but economic realities can. But where is the correlation with safety?
“Safety is not a selling point for airline operations. Safety is the base entry point for all businesses in the aviation industry. An airline cannot bid me to come choose her flight from point A to B because it is safe. Safety is taken as granted in airline operations,” he further stated.
Akpan also said that an airline needs money to build, support, and sustain safe practices continuously as long as it operates, safety cannot be separated from the airline’s financial status.
“An operating airline that the inflow from sales cannot fund the cost of flight operations is likely to compromise safety standards,” he added.
