Notwithstanding the economic setbacks occasioned by the COVID-19 pandemic, Nigeria is seeing a boom in new carriers, writes ANTHONY AWUNOR.
In the past two years, more airline start-ups have continued to join the league of domestic operators in the country. Records from the apex aviation regulatory agency, the Nigerian Civil Aviation Authority (NCAA) have shown that many airlines are coming into operation, going by the numerous Air Operator’s Certificates (AOCs) applications being processed by the agency.
Scramble For AOCs
An AOC is the approval granted by a National Aviation Authority (NAA) to an aircraft operator to allow it to use aircraft for commercial purposes. This requires the operator to have personnel, assets and systems in place to ensure the safety of its employees and the general public.
THEWILL investigation shows that as at August 2021, there are no fewer than 25 airlines seeking AOCs from the NCAA, notwithstanding the impact of the COVID-19 pandemic that has seen many countries lose viable airlines.
As at the moment, there are about 10 operating commercial airlines. They include: Aero Contractors, Air Peace, Arik Air, Azman Air, Dana Air, Ibom Air, Max Air, Overland Airways, United Nigeria Airlines and Green Africa. This is in addition to potentially 25 other carriers which would increase the number of the total number of airlines in the country.
The Controversies
Disturbed by the difficulties they experience, most operators have recently called on the NCAA to review the process of operating an AOC by airline owners.
While delivering his welcome address at the just concluded League of Airports and Aviation Correspondents, LAAC, 25th Conference in Lagos, the Chairman, West-link Airlines, Captain Ibrahim Mshelia, said there was need for the regulator to review policies and regulations that were stifling the growth and development of the aviation industry.
He said the frequency at which operators were renewing their AOCs constituted a heavy financial burden on the airline operators, adding that the issuance and renewal process was cumbersome.
He further said that with the ”lopsidedness in the procurement procedures and the operational limits of AOC holders in Nigeria”, there was an urgent need to amend the Act and policy in order to empower the Nigerian Civil aAviation Authority to also break down the certification process of the airlines’ commercial operations.
Mshelia said, “The word AOC has been so over-valued like a village masquerade that appears once in five years. This is not supposed to be so. Operation specification, in this regard, is the masquerade and not the certificate.”
He therefore proposed that the AOC should have ”no expiry date unless suspended or revoked while the operation specification only should have a biannual expiry date to shed unnecessary expenses to the operators.”
“Today, we have an unhealthy situation where there is a blanket issuance procedure of AOC for big, small, or large operations. Under this system, the roles of other segments of operators that are also entitled by law to operate commercial operations unfettered, as guaranteed by ICAO, are not spelt out. By ICAO standard, small, large and medium operations, including; Air Taxi, Air Charter, Cargo Only, Nonscheduled and Scheduled operations, are recognised.”
Speaking also at the conference, the Vice Chairman, Airline Operators of Nigeria, (AON) Mr. Allen Onyema said policies and regulations also contributed to the failures of airlines, aside from poor management.
Onyema said there were several problems confronting the aviation industry, but the present government is addressing many of them.
“Government policies in recent time have been better, compared to what we had in the past. The present government has done well in the area of policy, such as customs duty waiver on aircraft spare parts and VAT and others that are favourable to the airlines,” he said.
But Nuhu has assured that the regulatory body will not compromise in the enforcement of safety standards and regulatory requirements in conformity with all regulatory requirements and Standards and Recommended Practices (SARPs) in the initial issuance and renewal of all Air Operators Certificate (AOC).
The assurance is coming on the heels of allegations by some airlines against the NCAA over failure to renew their AOCs.
Captain Nuhu, in a statement, emphasises that the NCAA will continue to operate within its mandate, as regards issuance of the AOC, irrespective of the personality or organisation involved for the safe, secure and efficiency of the industry as enshrined in the 2006 Civil Aviation ACT.
Explaining further, Captain Nuhu states that the 5 Phase AOC process, both initial and renewal is not peculiar to Nigeria as it is the International Civil Aviation Authority (ICAO) requirement Annex 6 Parts I and III and ICAO Document 8335, which is captured in Nigeria Civil Aviation Regulations, Nig.CARS 2015 Part 9 on AOC certification.
The NCAA helmsman calls on all stakeholders to join hands with the NCAA for the benefit of the nation and stresses that the NCAA is a partner in progress rather than the proverbial industry policeman.
He states that the authority is ready and willing to work with all parties to resolve any challenge or difficulty they may face as it has already done.
Low Profit Margin For Airlines
Airlines are a very complex business, with the added fact that they are a very low-margin operation. Before ancillary revenue, a typical airline’s bottom line was maybe less than 4 per cent of its gross revenue.
Following a dramatic increase in 2015, the Earnings Before Interest and Taxes (EBIT) margin of commercial airlines have been falling, with the combined margin for all global airlines projected to be 5.5 percent in 2020 before the Coronavirus pandemic.
The pandemic is estimated to have a negative impact on the EBIT margin of commercial airlines worldwide, decreasing to 28 percent globally.
Although Nigerian airlines are not immune to the sharp decrease in the profit margins, yet more airlines have continued to emerge.
The upsurge of airlines in the country, therefore, raises the question of the rationale for floating more airlines by operators.
Other questions begging for answers are: will the market accommodate all of them? Nigeria with a population of over 200 million and about 2 million passengers travelling annually, further brings up the question whether the local market is under-travelled or not.
Based on the fact that over 2 million passengers fly annually, another question is whether these airlines will be able to think outside the box to develop new markets and expand existing ones without trying to outdo themselves in a price fare war, bearing in mind that increasing market share of low cost carriers, places downward pressure on ticket prices.
The Attraction
There are three kinds of investors in the airline business. First is the state which sets up airlines (national carriers) as an infrastructure project. There are also institutional investors with stakes in the hospitality sector. In this case, even though the airlines provide thin margins, they still facilitate tourism. The third is individual investors
Although airline business is capital intensive with low profit margin, yet individual investors also go into airline business because they see a potential for profit and also because the business is prestigious to some extent.
Reports have, however, shown that the airline business on a global level continues to grow as household incomes increase in countries that have typically been very underserved by airlines, thus enabling millions of people to fly who have never done so before. In most markets, some airline entrepreneurs may see unexploited market niches based on things like cost structures or specific routes. For most operators venturing into airline business, it is likely that they also possess a significant passion for the business and the confidence that they can bring something new to the table.
Huge Market For Domestic Airlines
Even with the upsurge of domestic airlines, the Director-General of NCAA, Capt Musa Nuhu, believes that there is a huge opportunity there for the Nigerian market to grow.
Capt Nuhu confirmed that it is the same reason that Nigerians see that many airlines are coming up in the country.
Nuhu said, “We have Green Africa Airways, NG Eagle and so many other airlines coming up. I am sure that Green Africa Airways and NG Eagle are the next to fly. The market is there. It is economics.”
In a recent interview, the DG explained that unfortunately due to the condition of the roads, a lot of people prefer travelling by air. “The demand is growing and that is why you see many airlines growing. I can tell you that out of the 9 million that are said to be travelling within Nigeria, only probably one million people are flying regularly. So, maybe only one or two million people travel in Nigeria, in a population of 200 million”.
“It is still a virgin market. If we uphold our policies and strategies, we will make a friendly environment in the industry and it will grow. That is why in the ministry and with the aviation roadmap, they want to do things like aircraft leasing companies, MROs, which are some of the things that make maintenance cost. You know airlines go to Europe for maintenance, but when we have an MRO, it creates employment and you just roll in your aircraft and do your maintenance here in naira,” he stated.
Also in agreement with the director-general, former airline senior management staff hinted that there are set standards for getting AOCs.
According to the aviator, who spoke under the condition of anonymity, the standards set by the NCAA is such that investors can come and go as they please and that only the market force can sort it all out.
“Since when did the number of potential airlines seeking AOCs have to be ‘rationed’ in a country? The standard is simple. If you meet the criteria, you get the AOC. The market will sort things out. So what if 99 percent fails? Same standard applies everywhere,” he said.
In contrast, former Commandant, Murtala Muhammed International Airport (MMIA), Group Captain John Ojikutu, said that the emergence of new airlines is due to scarcity of funds locally.
Ojikutu therefore opines that whatever is available outside needs to be brought back to the country.
According to him, bringing the money formally through the bank or financial institution can easily be questionable, therefore the clever routes are to buy goods for sale or for investment.
He said, “We need to find the sources of the funds of those buying these aircraft. What are their business plans when the passenger traffic post-COVID-19 is dropping? The air fares that most of the airlines are selling to passengers destinations are far below expected profit earnings. To me, the life span of most of these airlines is short and their exit would not be painful for the investors provided their objectives on the capital flights are not significantly lost”.
In his own view, the Secretary-General of the Association of Nigerian Aviation Professionals (ANAP), Comrade Abdulrasaq Saidu, stated that the emergence of new airlines is good if they are established with good intentions.
Saidu stated that the airlines would do well if they are managed by professionals in the aviation industry, condemning a situation whereby politicians dabble into aviation without knowing what it takes to run an airline.
Speaking further, Comrade Saidu suggested the constitution of Boards of Aviation Parastatals to be made up of well-meaning Nigerians with cognate industry experience.
Another solution to the challenges associated with aviation in Nigeria as proffered by Saidu is the fact that NCAA needs to be completely autonomous so that the agency can carry out its oversight functions diligently.
To Saidu, given the huge amount of capital required to start an airline in Nigeria, it would look like financial suicide to venture into it without a feasibility report to determine the viability of the business. For instance, he condemned a situation where operators make do with just two aircraft, only to pack up when it is time to do C-checks or other maintenance routine.
New Start-Up Domestic Airlines
Ibom Air
After operating for two years, Ibom Air, a Nigerian airline owned by the Akwa Ibom State Government is no longer new in the airspace.
The airline commenced operations on June 7, 2019 when a Bombardier CRJ900 aircraft marked Ibom Air took off from Victor Attah International Airport, Uyo, with government officials on board, en route to Muritala Muhammed International Airport in Lagos.
In May 2021, the airline also signed Nigeria’s first domestic codeshare agreement with Dana Air.
Dana Air COO, Obi Mbanuzuo, described the agreement as “the first of its kind for domestic airlines in Nigeria”.
United Nigeria Airlines
United Nigeria Airlines is a private airline. The new start-up received its Air Operators Certificate (AOC), valid for two years, on February 1, 2021. The airline has its headquarters in Enugu, capital of Enugu State. With an office in Abuja and its operational base at the Enugu International Airport, United Nigeria Airlines started with four aircraft to operate scheduled flights between four Nigerian cities, including Abuja, Asaba, Enugu, and Lagos.
United Nigeria Airlines is a Nigerian carrier, affiliated with Obiorah Okonkwo, a Russian-trained political scientist, businessman and entrepreneur.
The airline took delivery of four 50-seater Embraer ERJ-145LR aircraft during the second half of calendar-year 2020. After rigorous examination by the Nigerian Civil Aviation Authority (NCAA), which included test flights, NCAA granted the airline an AOC, on 1 February 2021. The initial AOC is valid until 31 January 2023.
On February 12, 2021, United Nigeria Airlines” inaugural flight from Murtala Muhammed International Airport, Ikeja, Lagos State, Nigeria to Akanu Ibiam International Airport, Enugu, Enugu State, Nigeria, had a 100 percent passenger load factor.
Green Africa Airways
On August 12, 2021 Green Africa Airways commenced operations with the first flight touching down at the Nnamdi Azikiwe International Airport in Abuja.
The first commercial flight is coming, following the airline’s announcement of the receipt of AOC from the NCAA.
With the AOC, Green Africa officially started operations recently with an inaugural flight from Lagos to Abuja on one of the airline’s ATR 72-600s.
The airline was founded on 15 June 2015 by Babawande Afolabi, who serves as the chief executive officer. It is a new low-cost carrier targeting the Nigerian air travel market. Operations were originally planned to start in 2019, but have since been delayed.
NG Eagle
The state-owned Asset Management Corporation of Nigeria (AMCON) is seriously planning to retain Arik Air alongside its new start-up NG Eagle.
THEWILL investigation shows that AMCON had concluded plans to wet-lease three more aircraft for Arik Air, which has been in receivership with AMCON since 2017.
NG Eagle was incorporated on July 11, 2019, with a share capital of NGN1 billion (USD2.5 million), of which AMCON holds NGN499.9 million (USD1.2 million), with the rest held by private investors.
It was also gathered that NG Eagle is in the advanced stage of procuring its AOC certification drive and had applied to use at least three B737NGs to operate domestic routes. Nigerian regulations require a minimum of three aircraft for a start.
Cally Air
Cally Air is a Nigerian joint venture based at Calabar Airport. The airline is a joint venture between The Cross River State Government and DANA Group, under a public-private agreement. Cally Air commenced operations with daily services from Calabar Airport to Abuja and Lagos on 01-Aug-2021. It is expected that Cally Air will serve the new Obudu International Airport, which is expected to be completed by December 2021.
The airline received its first Boeing 737-300 (5N-BYR) in early Apr-2021 and its second Boeing 737 aircraft at Murtala Muhammed International Airport in Lagos on 28-Apr-2021 and they are configured with 142 and 144 seats.
Governor Ben Ayade of Cross River State said the state government acquired two aircraft for Cally Air on 16-Jul-2021, adding that the aircraft would be operated and maintained by Aero Contractors until Cally Air receives its air operator’s certificate.
Governor Ayade further stated that Aero Contractors would operate the aircrafts on behalf of Cally Air “for six months in the first instance” as Cally Air is yet to receive its air operator’s certificate (AOC).
Mr Ayade said, “It takes six months for the licence to come. We will continue with them (Aero Contractors) until Cally Air has its full management team and a full AOC.”
Cardinal Airlines
Another Nigerian start-up, Cardinal Airlines, is said to be going through the Air Operator’s Certificate (AOC) process with the NCAA, with plans to commence domestic operations from Abuja by the end of the third quarter of 2021.
THEWILL gathered that the aviation company has applied to use Embraer jets and Avions de Transport Régional turboprops due to their cost effectiveness on domestic and regional routes.
Chanchangi Airlines
Chanchangi is also trying to make a comeback having gone far in its AOC procurement with the NCAA.
Disclosing Chanchangi’s planned return to the skies, Capt Nuhu said, “ Chanchangi wants to come back and they want to use ATR. They are planning to come back. The demand is there”.
Also waiting in the wings is Binani Air, Obike Air, and many others.
About the Author
Anthony Awunor, is a business correspondent who holds a Bachelor of Arts Degree in Linguistics (UNILAG). He is also an alumnus of the Nigerian College of Aviation Technology (NCAT), Zaria Kaduna State. He lives in Lagos.
