CEO interview: Why local airlines are dying –Onyema, Air Peace boss

 Chairman/CEO of Air Peace, Mr. Allen Onyema, says the local airline industry is not getting the right support it should to stay profitable because of the failure of past private sector investors to build the requisite trust and integrity among creditors and other key stakeholders.

Onyema, in an interview with Daily Sun, lamented the high mortality rate of Nigerian airlines, saying at present, most creditors (home or offshore) are scared of doing business with local airlines, a trend he noted was inimical to the growth and prosperity of the industry. 

He listed the absence of a maintenance hanger in Nigeria, the scarcity of foreign exchange and aviation fuel as some of the other challenges facing the local airline operator. But he believes that despite these harsh challenges, Air Peace has maintained a strict culture of safety in its operations similar to what can be found in any of the world’s best airlines.

Excerpts:

Financing challenge
It is very important for me to say that the airline business is very capital intensive. In fact, no airline operator can do this business without having to go borrowing at one time or the other. That means you need the banks to be on your side. And that is the situation where I have found myself these days. It is unlike when I started, when I went for seven aircraft and almost fully financed everything by personal resources. Now, we have to rely on our integrity to do the job in terms of sourcing finance. So first, what is happening in Air Peace is just the power of God Almighty showing us a lot of favour.

Having said that, another thing working for us is the power of integrity. I must say that a lot of people are scared of lending money to the aviation industry; a lot of banks, especially in Nigeria, do not want to deal with airlines in Nigeria. Even overseas, it is the same thing. 

The question is, why? Now, this is one of the the reasons. Our forerunners will have themselves to blame for not living up to expectations and thus making people scared of investing or granting credits to the aviation industry. A situation where you take billions of naira and you don’t want to pay back and you are siphoning money out of the country ends up giving the industry a bad name.

So, it is very annoying for me that I cannot go out of this country to get financing. Immediately you approach them, they will refer you to airline X, Y and Z in Nigeria. They will talk about what happened between them and  airline A, B, C from Nigeria and airline Q, D, W from Nigeria that reneged on their acquisition agreements. So it has got to a state where nobody wants to give a Nigerian airline any help towards funding.
Meanwhile, all over the world airlines are supported by financial institutions, which are ready to invest, using their equipment as collateral.  

But here in Nigeria, banks are not ready to deal with the local airlines. And that’s a very big problem. So we are in a situation where the banks in Nigeria and the ones outside our shores are not ready to deal with local airlines because of the negative pedigree of our predecessors. At present, we have been battling this bad perception and it has not been an easy battle all because of the records these older airlines had set in the past.

It’s not a good thing at all that you take money from a financial institution and you are not ready to pay. It is because of things like this that we had 97 per cent of mortality rate in the Nigerian industry. And you ask the question, why are the airlines dying. 

No one wants to support Nigerian airline because of bad debt. So we need the power of integrity. But the good thing is that immediately we came on board, we said  Air Peace has to change all that. And I can proudly say that that is what we have succeeded in doing. 

The very first time when we were buying seven planes, the money we took from Zenith Bank we paid it back. The ones we took from Fidelity Bank we also paid them back. And that is the reason Fidelity is here supporting us all the time.

Changing the industry
When we came into aviation on October 24, 2014, we told the world that aviation will never be the same in Nigeria and the industry is now a witness to that. Air Peace has changed the status quo in aviation. We have made everybody to sit up; airlines are  struggling to do on-time departure now, thanks to Air Peace, because that was what Air Peace brought in and when we started, it was difficult for Nigerians to adjust.

So what I will ask other people in the industry to do is first of all to show integrity so that if anybody wants to come into this business the person can come in relying on the resources of the banks to operate because you cannot really do this business alone without some level of financing from outside. It is done like that all over the world.

If foreign airlines were made to face  the challenges local operators in Nigeria are facing, I can tell you that those foreign airlines would not last for more than 72 hours. So we have to actually commend owners of these local airlines. It takes a lot for somebody to invest in this sector; it is a critical sector of the economy and we deserve assistance. We deserve understanding and I am happy that the Federal Government is beginning to appreciate what we are doing.

You would have noticed that only two challenges (forex and fuel scarcity) that the foreign airlines have faced, and they are all scampering out of the country. And the fuel and forex challenges are maybe just 40 or 50 per cent of what we go through and still remain in the country, yet the foreign airlines couldn’t withstand it. It all shows that these foreign airlines are fair weather friends.

 If we are going through recession or any problem in Nigeria, the foreign airlines should understand because they have really ripped this country off financially. The kind of fares foreign airlines charge in this country are outrageous and they have been charging these fares over the years. 

 The fares Nigerians were paying foreign airlines before now were so obscene. So they have got their fair share, now it is the time to help the country and they are running away because they couldn’t stand it. Nigeria remains the best route ever for foreign airlines but the way they have treated the country shows that they are fair weather friends.

But they should remember that this situation is like a force majeure, they should remember that Nigeria didn’t deliberately refuse to give them the dollar equivalent of their money, they should be patient with the country and not the other way round. 

They should be patient with the country and understand that we are undergoing changes. If not so, I call all of them fair weather friends, if because of forex and aviation fuel issues they are all running out of the country. I am not saying that is right, we are also facing the same problem. 

But don’t forget that when you to travel to London from Nigeria (which is at most six hours), another passenger from South Africa that will do about eight or nine hours to London, pays less on these foreign airlines, and this has been happening all these years. 

They will give you all manner of reasons that Nigeria is unsafe that they need to pay more allowances to their staff, but it is all a ruse. So the challenges we face as airlines in the country are enormous. One, nobody talks about insurance. They use peanut to insure aircraft abroad, in Nigeria we have to cough out over a million dollars to insure one aircraft for one year. For goodness sake, how do we get this money back? And you are supposed to insure it at the London market.

They will tell you that the Nigerian operational environment is unsafe; this is what they continuously use to demean this country. There is no country without its own problems. So why are they always running to Nigeria if Nigeria is so unsafe? So they use insurance to rip us off, that is one. Two, you have the fuel issue. The aviation fuel price all over the world has tumbled downwards, in Nigeria the cost has spiralled upwards; it has quadrupled. Instead of going down, it is like four times higher, so it is now cheaper to even buy the aviation fuel in the United States than in Nigeria.

 So we are facing all these. When we were buying fuel at N97 and N110 per litre we were complaining that it was too expensive but now, I tell you that the cost of aviation fuel has gone up to N250, N240, N230. How do you want the airline to make ends meet?

The impact
What the high cost and aviation scarcity has done is that it has forced airlines to cancel some of their flights and this has resulted in continuous dwindling of revenue. 

The problem also makes the airlines not to be able to keep on to on-time departures. It also creates a problem for the crew. Pilots run out of duty time so easily without flying. Because they will be there waiting for fuel for the aircraft and before you know it, their duty time is gone. Now you have to employ more pilots in order to get over this kind of issue. For example, I am going to Owerri, the oil marketer in Owerri does not have fuel, the only three places you have fuel now is maybe Port Harcourt, Abuja and Lagos. At times they are scarce or they don’t come when you want them.

Now, let me explain the difficulty we are now facing. If I am going to Owerri or Enugu, I have to tanker fuel from Lagos, which often means carrying more fuel than you need from Lagos because you won’t get any fuel in Enugu or Owerri. 

And when you do this, you have to look at the weight of the aircraft because of the volume of fuel. So, you start dropping bags of passengers and this has caused us a lot of name-calling. Because when the passengers land and they don’t see their bags, they get angry and they may not understand what you did. Some of my staff have gone home with broken heads because of situations like this but it is not their fault. And this is associated with issues of fuel scarcity.

Aircraft maintenance
It is so sad that we don’t have any aircraft maintenance facility in Nigeria. We don’t have a Maintenance Repair and Overhaul (MRO) facility and it then means that you must take your aircraft out of the country at any given time it is due for any form of major maintenance. 

One of our aircraft was with Lufthansa MRO but it has been released. And when I talk about the amount we pay for our C-check it is a lot of money but people say C-check cost about $300,000 or $400,000 on an aircraft. That is not true! You know C-checks are done according to the work scope on an aircraft; you have to develop a work scope. It is what you tell them to do that they will do. There is what we call C-check work scope.

SOURCE:-sunnewsonline.com