by Chinelo Obogo
Captain Ado Sanusi was the Chief Executive Officer of Aero Contractors and has now been designated as the Managing Director of Nigerian Eagle, a new commercial airline that would soon commence operations. In this interview, he speaks on how the COVID-19 pandemic has changed the industry but predicted that there would be increased capacity for many domestic airlines. He also says that one of the most challenging issues domestic airlines face is access to foreign exchange, a situation he says is a big problem for any airline in Nigeria. “Even if we have capacity, increase and everything; if the dollar keeps rising or if the airlines cannot access foreign exchange, it will hinder their growth, it will also increase the ticket price, it is very simple,” Sanusi says.
Post-pandemic performance
We will see a lot of growth in the capacity of the airlines. Because if you look at 2020, especially immediately after the lockdown, most airlines were a bit skeptical in bringing out lots of capacity for the local market. Fortunately for the airlines, our prediction of after the lockdown that people would be a bit scared to fly didn’t come through because people were very confident in flying despite the COVID-19. So, the demand in seats was high and that actually cumulated in high prices of tickets, which I predicted in the beginning of 2020. Where tickets for Lagos-Abuja were being sold for at about 90,000 one-way for economy. There will be growth of capacity, there will be new entrants into the market and then those airlines that are already in the market will try and increase their capacity.
Airfare hike
When FAAN increased the passenger service charge, it transferred to the passengers because the airlines cannot absorb that. There was VAT in the ticket because they are government taxes, when you say a government tax that is where the VAT is, the 5% ticket sales charge, and then the VAT and all that, are all put on government charges. So there was a VAT there but it was just lumped together with the rest of the taxes.
So, yes, the ticket fares will increase by the same amount that FAAN has increased the passenger service charge and Bi-Courtney by that same amount. But I think what we should be asking ourselves, rather than saying oh, the passenger, have we gotten better services for the money that we are paying as passengers? I think those are the questions that we should be asking and those are the things we should throw back at FAAN and Bi-Courtney. Has my experience as a passenger changed when I entered the airport? Are the air conditioners working? Are the toilets not smelling? Are the places okay? If that is not the case then we should demand for better services because we are paying for more.
Foreign exchange
Foreign exchange will remain a big problem for any airline in Nigeria. Because that single component can cause an airline to go under. We have discussed the issue of the foreign exchange and availability and the rate. So, even if we have capacity, increase and everything; if the dollar keeps rising or if the airlines cannot access foreign exchange, it will hinder their growth, it will also increase the ticket price, it is very simple. There is nothing that we do in aviation that is not dollar-related. So that means whenever there is a spike in the exchange rate, it will translate into a spike in either the spare parts we are buying or the consumables we are buying or whatever we are buying because the aviation industry is dollar related. And if you don’t even have that, that means if you don’t have access to the dollar, it affects you, because if you are a person that has leased aircraft or leased engines or leased landing gears, you are paying definitely in dollars. And if you cannot get access to that dollar then it becomes a major challenge for the airlines to survive.
International routes
The main problem that we find ourselves which I experienced when I was even at the Nigerian Airspace Management Agency; I used to say that we must look at the charges that you give to a particular region. Nigeria is covered by the Agency for the Safety of Air Navigation in Africa and Madagascar (ASECNA), the airspace management company owned by French speaking West African countries and the charges there are killing for flights across national boundaries. Because when you are flying from Lagos to Accra, you are going through ASECNA countries until you land in Accra. And then all those countries you are going through you are paying navigational charges to ASECNA, which increases your cost.
But I think that NAMA should engage ASECNA so that they can come up with something that is sustainable for the aviation sector. Now, why would AWA be making so much money and they will like to have more frequencies to Lagos or into Abuja, and then our local airlines in Nigeria don’t have the same. I can only speculate, maybe AWA is enjoying some kind of relief from the Ghanaian government or from the authorities because they want to encourage them to connect to the neighbouring countries. Maybe they are enjoying that, I don’t know. But I can tell you one thing that the West Coast is a very good market if you have a very good business model that will fit into it and you can make money out of it.
Yes, they are using the Embraer 145s and, of course, Air Peace has Embraer145s and it can actually compete with AWA and make money too. But again you have to look at what AWA enjoys from their home and what Air Peace is enjoying from its own home. And if they are both enjoying the same, then they can do it but if Air Peace is not enjoying anything and other airlines are enjoying some kind of waivers then it becomes an uneven playing ground.
Passenger traffic
The International Air Transport Association (IATA) has a projection of passenger growth within the region and I think we are keeping to that projection. Yes, there has not been any significant increase because of the insecurity and the bad roads that we have; that means people will fly more. Reason being that one, the ticket fare has also increased, the disposable income of the average Nigerian also decreased. So the economic power for him to buy ticket has been reduced. So that means we have not deliberately stimulated the market for passengers that would ordinarily go buy road to say oh, let me buy the ticket.
If they wanted to buy the ticket for instance at N25, 000 and all of a sudden they hear that the ticket has been changed to N50, 000 that is almost twice the amount they have budgeted for. So the disposable income that they have has been reduced drastically and, of course, the cost of the tickets also has gone up. So I think that is one of the reasons that have manifested and we have not seen any drastic increase in the passenger traffic, despite the fact that we have challenges on the roads and everything.
Also you have to take into consideration that the railways have been coming up, Ibadan-Lagos, Abuja-Kaduna and some other places. So, the rails have also contributed, because if I was flying let’s say Abuja-Ibadan, now the passenger will just come to Lagos and then go to Abuja.
Lack of airfield lighting is also something that affects some of the airports. You know not all the airports are within the town. And so if they are not within the town then it becomes a security challenge when you fly in the night. But places like Kano, places like Lagos, Benin and Asaba where the airports are quite close to the town, I think airlines in the coming months or maybe years to come will be doing late flights to these places.
MRO facilities
Maintenance Repair and Overhaul (MRO) in West and Central Africa is the last frontier in aviation investment. So AJ Walters or any other company that has an opportunity to come in to do Maintenance Repair and Overhaul (MRO) is a gold mine. And I think it will go a long way, just look at what we did in Aero Contractor, we upgraded the maintenance facility. And I know how much we have saved a lot of airlines both in Nigeria and within the region. So for another company to come and set up an MRO, it will go a long way to save a lot of money for airlines that are here and then of course for the region.
Before I left Aero, we had lines of aircraft trying to come into our hangar and we were struggling to keep up with the demand, so, the market is there. I don’t think there will be any fear that Aero is going to lose the market share because of a new MRO coming in. We need at least two to three MROs in the country and we need specialised MROs, we need paint shops for instance. So I believe an MRO is one of the last frontiers for aviation investment in the country.