Nigeria sits on huge untapped MRO gains–Fadugba

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*Fadugba

In this interview, the chief executive officer of Aviation Services Ltd and former secretary general of the African Airlines Association (AFRAA), Mr. Nick Fadugba, speaks on some topical issues in the aviation sub-sector including the gains of having a maintenance, repair overhaul (MRO) facility, the national carrier question, cooperation among the domestic airlines and some other issues.

Ime Akpan

Gains of MRO

When you look at the MRO trend, aircraft around the world are being modernised. There is no maintenance facility in West Africa and ECOWAS has done a study. In Africa, we are good at doing studies with no follow-ups. If you are a potential MRO company the most important thing you need to know is what aircraft are coming in. We complain about foreign airlines coming into Nigeria, yet, on the other hand it is a business opportunity. Who is doing the line maintenance for these aircraft that come in everyday? Is there any well-established Nigerian company offering line maintenance for these aircraft? So, it is amazing when you see the business potential. We are sitting on a goal mine. We just have to work out how to actualise it. Of course, if we have our own MRO in Africa, particularly in Nigeria, it means the airlines are going to get a better deal. Why ferry an aircraft outside Africa when you can do it in Lagos or Abuja?

Partnerships

Look at the partnerships around the world today on MRO. MRO is a partnership game. We need to work with sophisticated, knowledgeable and capable partners. It t is all about joint ventures and Nigerians are smart business people. MRO industry, specifically for Nigeria is over N2.5 billion. Nigeria is an important component of that market; therefore, there is money there. However, MRO is capital-intensive and high technology. I believe the best way forward for Africa and Nigeria is through cooperation, collaboration and partnership. Nigerians are hard working people.

Ibom MRO facility

I was filled with hope when Akwa Ibom started the hangar facility. It was filled with optimism, but it has been lying there for many years. They did not get the business plan right and up till now they still have not got the business plan right. And that is about $100 million invested in an empty hangar today. Why haven’t Nigerian airlines come together; there is a hangar right there, why don’t they come together and get that hangar up and running? And I’m very sure Akwa Ibom State government will welcome Nigerian airlines saying, ‘right, let’s make this a 737 facility or whatever’ but it is an opportunity.

The Akwa Ibom government needs to get someone or a company to put a business plan together because they have a facility. So, they need the right business plan, the right management and investment behind to make it work. I believe that facility can be profitable and viable. At the moment it is a white elephant. There is no need for that when we are lacking MRO facility in Nigeria; it is a golden opportunity. And you know for me, when I look at Akwa Ibom State, it is a tremendous source of jobs for the state and youths. I really urge the state government to pursue that project to make it viable. And if there is anything I can do I will be much willing.

Location

The location of the facility is not a problem. Nigerian airlines are ferrying their aircraft to Europe for maintenance. What can’t they ferry it to Akwa Ibom State? What is the difference? If you have a facility there that can do the job I know the cost of labour will be much cheaper than in Europe. ADC was an airline of choice in those days. I know that facility nis far-sighted but the strategy did not succeed because there was no continuation, there was no follow-up. But know that I is lying idle and fallow, it can be revitalized; it can be made to work with the right business strategy, right global contact in the MRO world. Nigerian carriers are ferrying their aircraft to Europe; so I still believe it can still be made viable if the stated government really wants to push it. But they need to engage the right partners, strategic partners whether African of foreign; but it must have the Nigerian element because the business will be here. The facility can also serve the West Africa market. You can imagine people ferrying aircraft from West Africa to Akwa Ibom; I can be done but you need a feasibility study and a good business plan and then you go out and source MRO expertise and funding. But if anyone creates an MRO in Lagos or Abuja, that one is gone. So, now is the time to move in quickly. You can say you are responsible for a certain aircraft type; we are going to be the champion for B737. Just look for the most popular aircraft type in Nigeria and focus on that before anyone else can start in Lagos or Abuja or elsewhere.

Synergy among domestic carriers

Cooperation and partnership, Nigeria is blessed with the biggest domestic aviation market on the Africa continent, bigger than South Africa, Kenya, Ethiopian and many other countries. And yet we have not been able to harness this market for our own benefit. The beneficiaries are foreign airlines; our airlines need to work together. If you have five aircraft, 10 aircraft, it is nothing in the world of aviation. We need a critical mass. If you look at Ethiopian Airlines, they have a 100 aircraft. That is one airline, yet we have 10 airlines here with maybe five aircraft each. We need to work together otherwise the economics of the business are not in favour of the operators. They need to come together to scale up to get a critical mass. They can work together in training, maintenance, in spare pooling, aircraft acquisitions. There are many areas African airlines and Nigerian airlines in particular can work together. So we need more cooperation in Nigeria among our airline brothers and sisters.

Resolving Arik and Aero issues

I think the government and the ministry of aviation need to sit down and really think carefully on what they want to do with Arik and Aero because they have used public fund to maintain these airlines. Effectively, the government owns 60 per cent of each of them and now you have created a national carrier. So there is a little bit of contradiction here. So we need to, as a matter of urgency, resolve what is happening to Arik. If you want to sell it to investors please go ahead and do it. Aero the same thing, I would love to see the three airlines working together. I think that will be a good strategy for Nigeria.

National carrier

There are many questions that need to be answered in terms of the management, the funding, and the fleet. So I believe the government now needs to brief the Nigerian people on the national carrier. Rather than doing it abroad we need to come home and explain to the whole nation what the concept is. More importantly I am interested in how the national carrier interfaces with all the other airlines in Nigeria. Because remember that the government is the de facto owner of two other airlines: Arik and Aero. So this is the first time I have seen one government own three airlines. So the government needs to coordinate its airlines strategy n terms of moving forward.

Making Nigeria a hub

We have a choice in Nigeria between Abuja and Lagos but the economic hub is definitely Lagos because that is where the economic activity is, which generates air traffic. So what we need to do is to completely radically improve the infrastructure at the Murtala Muhammed Airport. It is a great airport but it is not coping with the current challenges of growth. There are many things which are wrong with the airport right now in terms of infrastructure. If I had my way I will build a completely new one but maybe we can’t afford it.  Therefore, when we talk about restructuring, we have spent a lot of money over the past five or 10 years on restructuring airports and I can’t really see meaningful, tangible benefits. There have been improvements but not in a meaningful way and if Nigeria is to move forward, if we are to build an effective hub, to improve connectivity, then we need to radically improve the infrastructure of airports in Nigeria.

VAT waiver for airlines

I want to congratulate the federal government of Nigeria for waiving value added tax (VAT); it is long overdue and I think the government listened to the aviation community in Nigeria and acted favourably and they deserved to be commended for that. You know the airline industry is a very high cost industry; nobody around the world imposes VAT on air ticket. So, it was an anomaly; so the government has corrected the anomaly.

Fadugba granted the interview at the 22nd edition of the League of Airport and Aviation Correspondents (LAAC) held in Lagos recently.

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