Banker, aviation analyst, president, National President, Aircraft Owners and Pilots Association (AOPA) and former managing director of the defunct Associated Air, Capt. Alex Nwuba has not been comfortable with the idea of Nigeria Air since its logo and tagline were unveiled by the minister of aviation, Mr. Hadi Sirika, at the 2018 Farnborough International Airshow, London. In this interview, he raises some issues about the embryonic airline saying among other things that with the government’s approval for three wet leased aircraft for its takeoff, the carrier offers cold comfort to job creation drive and will eventually collapse the existing domestic airline sub-sector.
Ime Akpan
Challenges of the domestic airlines
Let’s start with the solution the airlines chose which is to import fuel themselves which I clearly stated that was not completely thought through because the airlines cannot do it better than the oil companies that have been doing it for decades. So that wasn’t completely thought through.
But there are other mechanisms available to the government itself to find fuel at cheaper sources that can be brought into the market to ameliorate the problem.
So there are solutions. There is nothing that doesn’t have a solution. It is just a matter of having the discussion around how can we solve this problem and provide solutions.
Let’s be sincere about business. Business in its very nature is competitive. So distress will take out a lot of competitors. When you take out competitors, it allows breaking that flexibility in your business conduct. That conduct allows you to push prices in the direction that is more suitable for you to make your business more profitable.
Cooperation among airlines
Businesses are first and foremost responsible to their shareholders. Asking airlines to cooperate to sustain business is anti-business in a way of looking at it realistically.
Look at what happened. Two airlines have jumped and fares have jumped almost 50 per cent. That’s more money to mitigate the challenges the industry is facing. The truth is that we can’t run away from the fact that prices will go up. Prices will go up simply because the dollar has gone up. Fuel price has gone up. Operation cost has gone up.
So naturally, those costs must be absorbed by some mechanisms either the consumers paying or the government providing support through subsidy. So there are many ways to look at the same problem but asking airlines to cooperate to sustain each other may sound good, altruistic and for the benefit of the economy but that’s not the way business functions.
Sourcing aviation fuel, engaging marketers
I think as an industry, if we re-engage the marketers, the cooperation can come, you can provide solutions for them that make the product cheaper.
There is something in aviation called tankering. There are some economics in the world where fuel is one third the cost of what it is in Nigeria. So in those markets, the airlines from there would have fuel to come and fuel to go back.
So if I have places where fuel is available, the engagement has to be with sourcing this product in the market place in a far cheaper manner through an engagement between the airlines and the oil companies.
But for the airlines to take it up as a competitive project from the oil companies, they will fail ab initio.
Nigeria Air and what it holds
I’m excited to hear something is happening but I think it is completely warped.
The reason being this: The federal executive council is like a judge that sits in a court. He makes judgement on the basis of the information that is presented to him. So an agreement is presented that we need three aircraft of two brands to come into the market to serve the domestic market. It sounds like a good idea.
But let’s ask some fundamental questions. The market exists. Airlines are operating in this market; they have challenge with the price of fuel; they have challenge of foreign exchange to pay suppliers. You even have the challenge of airlines that are selling tickets, hundreds of millions of dollars that cannot repatriate those funds. How will these three planes operate on the basis of wet lease?
What’s a wet lease? Wet lease is an arrangement where the government has engaged an airline outside the country to bring airplanes and crew. So how does that solve our problem as a nation in terms of creating employment as an industry? How does that solve the problem of foreign exchange that we are already facing because we have to pay for that wet lease in foreign exchange?
How does that solve the problem of availability of funds through the Central Bank or will the national carrier get its money through the black market to fund its operation? It is absurd; it is essentially an absurd proposal made to a group of people that have no knowledge of what’s going on and they are acting like I said judges receiving information on which they judge without basic facts.
Growth of the airline
It can happen. In fact anything can happen. I remember seeing a video of somebody that used to toe airplanes. One day, he jumped on board, started the engine, taxied to the runway, came up and crashed the aircraft.
That’s essentially what I see in this process going on. There is really no benefit from wet lease when we pay for the airplanes in forex, pay for foreign crew; we don’t create any employment. So this is not what we want as a national carrier. We are not addressing the challenges. This national carrier, as noted, holds nothing but decimate the existing domestic airline industry and that’s not the job of the federal ministry of aviation.
Making the airline survive
One of the ways is to go to the market and sell the 51 per cent for the Nigerian public through the stock exchange. That would invigorate the stock exchange. It will get the stakeholders’ buy-in. The average Nigerian will be able to put a few dollars that they put in MTN share and buy into the national carrier. They will have access to the money to actually buy airplanes or enter into a dry lease arrangement which is essentially a finance lease and make payment over a period of time even though in the finance industry which I work in, doing a finance lease in dollars for a domestic operations earning naira makes no sense at this age of the economic cycle that we are in.
Maybe we pay cash for the airplanes and bring them in. Otherwise, you do a lease of an airplane by N700 to a dollar and by the end of the year, it’s N1000. You can’t make those lease payments. So we need to take this product to the market, get the stakeholders buy-in, create new jobs within the Nigerian economy, and create new solutions. Bringing in wet lease airplanes from abroad to fly domestic business makes absolutely no business sense.
