By Chinelo Obogo [email protected] 07064781119
Since the Asset Management Corporation of Nigeria (AMCON) took over Arik Air in 2017, many of its leased aircraft have been returned to their owners while others have been repossessed through court orders.
Four planes were returned to France. Two classic airplanes abandoned in Europe were seized by a European supplier. Out of the two A340 planes, one is parked at the airport in Lagos while the other is in storage in France. So many creditors are trying to seize as many of the assets as they can lay their hands on.
Despite this, Arik is still considered one of the biggest airline brands out of Nigeria. It has three Q400 aircraft, two CRJ-900, one B737-700 and another B737-700.
However, the Managing Director of the airline, Captain Roy Ilegbodu, says many airlines make very little profit and are still grappling with the devastating effect of the COVID-19 pandemic. He said airlines are appreciative of the bailout provided by the Federal Government, but more help is still needed to keep them afloat.
What I would say is that what we got was definitely not enough, we certainly could have done with a lot more. The impact of the pandemic has been quite significant, as you follow news from all around the world, you would see that it is the same situation everywhere.
Government has come massively in support of airlines, so we did expect a bit more from them. However, that said, we also understand that government itself faces significant challenges from all other sectors of the economy. Therefore we do not think of ourselves as unique. So we appreciate the little we got because something little is better than nothing, so I think that helped in its own little way in supporting us to surmount some of the challenges we faced.
We still face significant challenges going forward, and we are still grappling with them, more so, we have challenges of foreign exchange, which is one big issue. The exchange rates have virtually gone up significantly and is approximately 40 per cent since COVID struck. You realise that our industry itself is quite tied to the supply from outside Nigeria. To support an aircraft with spare parts you need all sorts coming in. So significant sums of monies are spent on maintenance, the airplane on a daily basis must be maintained. You can’t compromise on that. Some people don’t realise how often we change the tyres of an airplane. You can’t use an aircraft tyre the way you use your car tyres till they get burst. You have to change them regularly whether they look old or not. So you see that happening on daily basis. It’s quite significant for us to face all this and now coupled with the exchange rate, so we do need more help from government. As much as government cam give, we will appreciate, especially if the issue of foreign exchange can be resolved.
Passengers are not really travelling as much as before, we’ve seen that however, some airlines may not notice that now because the capacity has also dwindled. What I mean by that is the airlines have suffered so much that the fleet sizes have gone down, therefore normally you not notice that passenger numbers have dwindled. Until airlines start to recover, it will become apparent that people are no longer travelling as much as they used to do pre-covid. But the good news is that the vaccines are here and so it gives everyone hope, I do expect that in the next couple of months, there will be a lot more movement and things will start to come back to normal.
Connection between NG Eagle and Arik Air
In reality, there is no connection between the two. That said, you are aware that NG Eagle is solely owned by AMCON and of course you know that Arik Air itself is in receivership and the receivership was instituted by AMCON which is based on the fact that Arik is significantly indebted. So if you can infer from there that’s the relationship.
The two newly painted aircraft you saw is what we call recovery in the industry. So they have been recovered. Those airplanes were actually mortgaged to AMCON and it is very clear that at some point they would take their assets and that is what was done, So, the fact that they carried the name and logo of Arik doesn’t mean they belong to Arik, the owners have taken their property.
Cost of aviation fuel
I can’t give you that information accurately here but suffice it to say that aviation fuel is tied to the exchange rate. Our aviation fuel is imported, so anything that is imported is affected by enumerations in dollar/ naira exchange rate. If we say FX has gone up about 40 per cent then it is safe to say prices of jet fuel have gone up too by about 40 per cent.
Savings from aviation fuel
There would be significant sums of savings, I can’t even begin to quantify. It is actually a huge drain on not just Ari, but all the other operators that have do night operations. That can be resolved by installing the Runway lights at the local runway but yes, huge sums of money can be saved. An airplane cycle starts when you start the engine and you are burning fuel, the wear and tear is on the engine. So, for every cycle, it doesn’t matter if that cycle is from here to Benin or from here to London or from here to the US, it is one cycle. So it costs money and that cost is the same whether it is London or Dubai, it is one cycle, it is one cycle.
For instance, the engine when it is brand new, you say it has 20,000 cycles of life and so you fly 1000 cycles every year, which means that you expect those engines to run for 20 years at 20,000. If it goes to zero, you cannot use those engines until it goes back to shop for overhaul and those materials that are time related are replaced. The cost for this is much. So that trip for us starts from the international airport, 10 minutes sometimes more across runway. It is something we calculate daily and anytime after six, you know that that is additional cost for the airline.
We continue to engage the Federal Airport Authority of Nigeria (FAAN) because anything that brings savings to an airline, we will likely pursue vigorously, but we also note that FAAN themselves face challenges in respect to funding. I think the entire industry is in a situation in which a significant sum of money needs to be injected into the system to assist. The US airlines even when not flying at full capacity, has government support with funding. It is important to make the government aware that an airline itself is a pride to a nation. It is not necessarily about an airline because most airlines do not make much profit apart the so- called low cost carriers. But when you take the entire network of services they provide as a portfolio, hotel chains, other support services on ground, ground handling and all that that are profitable because the airline exists, that overall contribution to the GDP of any country is very critical, which is what government should consider when looking at an airline. How does the airline contribute to the economy? For instance, the vaccines for COVID-19 came by air. So you can’t quantify the contributions of airlines to the economy. Just take so many service providers like ground handlers’ caterers, etc. The effect on the entire system is very important. So those nations that realise that, take advantage to make sure that the airlines exist. It keeps the economy going, tourism all sorts.
If you go to Ethiopia, the country is centered on aviation. They built one of the biggest hotels in Africa as an airline and they’ve taken over the terminal fully. You can see what they are doing, they are actually taking care of cargo transportation in and out of their country. They have a huge network, they may not necessarily have a robust domestic network like us here but I think their global network is quite interesting.
Until government becomes aware of that and someone is able to say this is what the airlines contribute to the economy, until that is clear, that is when they will see why you need to keep the airlines alive.