With High Aviation Fuel, Increase In Airfares Inevitable – Chairman, United Nigeria Airlines
Your airline commenced flight operations with Embraer brand of aircraft. Why this choice?
For the choice of aircraft, we had a thorough due diligence before we decided on Embraer; the fuel saving capacity is an advantage, the passenger load is also an advantage.
We had actually thought that as a new airline, it might take us a whole while to fill the aircraft.
So, we felt that with an effective fuel utilisation, with not too huge passenger load, we might be able to manage the good and the bad days.
But, to our surprise, we got our Air Operators’ Certificate (AOC) and other certified true copies at 6p.m of a Thursday of that our first week and we fixed immediately our inaugural and other commercial flights for the next day from 6:45a.m.
It might surprise you to know that on that first day, within 12 hours of opening our portal, we had full passenger load, and I can tell you that it has been so in some routes all this while. This is to confirm the fact that the opportunity is huge, the market is large.
I think we are probably blessed than others in the industry. From my understanding, it took some people a while before they could get to where they are today.
What are your maintenance plans for the aircraft brand you are flying and your plans for the airline?
We have our own maintenance system and in-house engineers who are quite experienced in the system and can maintain our aircraft from One A to Three A in-house. So, that is our starting point.
But, on a very short time, we have started a process of acquiring land space with the Federal Airports Authority of Nigeria (FAAN) to set up our own Maintenance, Repair and Overhaul (MRO) facility.
In fact, it is something we should have gone on far by now. As you know, our operational base is in Enugu State and the place is more appropriate to locate our MRO.
FAAN is currently having some issues with space at that airport and clearing the available space there.
So, we are still in touch and talking with them, hoping that not too long, they will be able to allocate us the necessary place that we need to be able to start our own MRO.
But, on takeoff, we gave ourselves 24 months to be able to do our C-Check in our own facility and also offer that help and service to other stakeholders in the industry.
So, with that, we are already two months behind the scheduled time and we hope FAAN will be able to clear that road for us and we will embark on that project. So, that is our medium and long term plans. When that is done, we will be saving ourselves also some foreign exchange and other operators in the industry.
On the long term basis, we intend to increase our fleet; we are at a stage of finalising the other two Embraer aircraft.
By then, we will have consolidated on some certain routes, we would have consolidated on some passenger load and we have plans to probably consider a wide-body aircraft.
As you may know, ERJ145 aircraft may have all its advantages, but it also has its own bit of disadvantages in terms of luggage and all that. A typical Nigerian will want to travel with a lot of things.
These challenges are there; we will want to do something that will accommodate that and so far, we are coming around those challenges and dealing with them.
It is observed that airlines charge very high fares at the moment, which seems to discourage some people from flying, why is this so?
I am tempted so say there may not be any amount of money that is paid for a ticket that will be too much. When you have high fare rates, it is surely determined by the demand.
You might find out that when you go back again to book on same route another day, you may buy at lower price. You should know that when you have to fly full to a route and come back empty, you may have to find a way to cover the cost of empty flight.
So, people should understand that operating an airline requires a lot of costs. So, when that comes your way, people should understand that it is for the interest of the business.
The fuel price has just moved to N275 per litre from about N230 a few weeks ago, how has this affected your flight operations?
This is of a grave concern; we started operations when Jet A1 was about N160 per litre about two months ago and as you know, aviation fuel takes the cost component of about 30 to 40 per cent. From N160 to over N270 within a space of two months, one ordinarily should expect that minimum ticket sales will almost increase by 50 per cent, especially when the cost component is between 30 to 40 per cent.
It is a grave thing of concern. I don’t know what is leading to that, but I know that a whole lot of things in Nigeria are going up, but surely, for the industry to remain operational I am not talking about viable now, certain cost components must have to be adjusted.
The only way you will take it back is through the ticketing or cargo if you are doing cargo or courier.
You cannot lose your aircraft and sell to make money, the aircraft are serviceable. You have also people that work in the industry and want to be competitive in their pay. So, the staff will not want to hear your cost is going high and you want to reduce their salaries.
The media team in the industry should help to educate the public that for this industry to be able to service them and viable for more people to come in, they need to understand and cooperate with the operators.
I want to believe the operators will not be unreasonable. There are rooms by which people can take advantage of low price; go to the websites, book your tickets in advance and save your time. If you have to go there in the peak time and later hour, you have to pay more. This is not only in aviation, but also in hotel businesses and others.
It is my wish that all the excessive costs are addressed in one way or the other through government policies and actions so that the service will be available to more people who might need it because there is so much risks now going by the road.
Scarcity of foreign exchange is crippling a lot of business organisations in the sector, how has this affected your operations since you came onboard?
Foreign exchange is a big problem for operators. If you look at the rule and regulations of the Central Bank of Nigeria (CBN) today, you go for official or open bidding, which is a bi-weekly thing, which means if you have to approach your bank to get you forex this week, if you don’t get it, you have to wait for additional two weeks.
As at two weeks ago, the information we got from our bank indicated that they have not got any dollar allocation from the CBN since February.
So, if you rely on that to make things happen, it means you can’t just fly. It’s a big stress to operators. And as you know in this airline business, you may take off without any challenge, but any snag can disrupt your business. Unfortunately, you can’t get any of these spare parts locally.
I advocate continuously for a special window for the aviation industry. This should be considered and this window will keep the industry and the airlines alive.
I think also, a support system beyond that window is required. Similar businesses overseas are easily supported by their countries and governments with different policies.
Of course, I know there are good plans, projections and intentions by the government, but I think it might never be late yet to actualise some of these things because there is the need for us to be stronger on our feet.
Sir, can you shed more light on the Customs duty waivers granted airlines a few years ago by the Federal Government?
Yes, there is a Customs duty waiver regime that exists for operators and we have benefitted especially from that regime for the acquisition of our aircraft.
I know the regime exists, it is cumbersome to access and we are still battling to benefit from the spare parts regime. For every spare part, you have to go back and get a particular clearance. When you go to the Ministry of Finance, you have it, but there should be integration with the Nigeria Customs Service (NCS). When there is a misinterpretation of what it should be or what it ought to be, it is very frustrating for the operators.
I want to commend the Federal Government here that the waiver regime and the policy is good for the industry because if anything to the contrary is done, we will ground this industry. Imagine if you were asked to pay 10 or 20 per cent as duties to customs on every aircraft that you bring in.
I will rather prefer to sell aircraft and make money than flying. But, accessing it easily and seamlessly will only justify the good intention of the government. So, all the government agencies that are relevant in this process should look into that; synchronise and synergise so that we can actualize the regime.
Source: Independent Ng