Africa: Nigerian Airlines have World’s Lowest Aircraft Utilisation-Sanusi
Deputy Managing Director, Arik Air, Captain Ado Sanusi has pointed out key things the government should do to help Nigerian airlines sustain their operations. He spoke to Chinedu Eze. Excerpts:
What do you think government can do now to help the airlines?
The airlines are facing multiple challenges. These challenges include high cost of operation in the country, which is caused by high cost of aviation fuel, high cost of getting foreign exchange and multiple taxes from the parastatals. So if you are going to make the operating environment conducive for airlines, they must address these issues.
They must look at how they can bring the high cost of Jet A1 to something comparable within the region. We can take the Ghana model. Katoka Airport, Accra, Ghana has announced they want to reduce the price of Jet A1 by 25 percent. They will cut some taxes and make it 25 percent cheaper within the region.
Jet A1 is major component that increases the cost of operation so if you bring down the cost of the product, it will bring down the cost of operation. Then the cost of getting foreign exchange; now this is not the first time the federal government is looking at the industry and allocating foreign exchange according to industry needs.
Even during the military regimes they used to give consideration to those industries that are foreign exchange intensive and allocate them foreign exchange and this will stimulate the economy because it will allow the airlines to have access to foreign exchange. This will enable the airlines operate competitively at very good airfares. Then you have to look at multiple taxations by aviation paratatals and then even if you say temporarily, government should waive some charges so that the airlines can use this waiver to offset particular fees or services to reduce their cost of operation.
Why is it that the Nigeria Customs Service is always reluctant to implement the waiver given to the airlines by the federal government on imported aircraft and spares?
I won’t say they are reluctant, but I think we should make sure that whatever is waived is being implemented. If it is Customs duty that is waived to zero duty, we have to make sure it is implemented in all the Customs stands because this is what has been given by government to stimulate the growth of the industry.
Even if there are zero waivers there are still some taxes, which the federal government says we are going to pay. When they say that Customs duty is zero, how about the other taxes? By the Act establishing Customs they have to collect these taxes. Some of these taxes are remitted to ECOWAS countries for the development of the ports and others. If government wants to give zero duty and zero taxes, government ought to specify this in a document and make it clear. If government says that for aircraft and aircraft spares there is no Customs duty, it has to make it clear and state the items in the waiver and then make sure it is implemented.
The waiver should be a policy statement which everybody will know so it should be made available to everyone, so that Customs should have access to it, airlines should have access to it and everybody should have access to it because what you are doing is legal and aimed at helping the airlines as captured in the budget or in the waiver.
When you talk of making Jet A1 available, how do you consider dedicating one of the nation’s refineries to the refining of aviation fuel so that the product could meet the demands of the airlines?
Yes, I have read in the papers, where government is considering dedicating Warri refinery for the production of Jet A1. It is a very good idea for a stopgap measure.
But you have to understand that the logistics of bringing the product to the airport have to be put in place. What of if you refine it in Warri and we don’t have the logistics of bringing the product to Lagos, Abuja and other airports where the product is needed. Also we have to look at the entire economy of the nation. Refining only Jet A1 in Warri and dedicating the refinery to only Jet A1 may in the short term help the airline industry.
But if you look at Ghana, they are not refining, so what is their secret? So you don’t have to refine to sell the product cheaper; everything has to do with the rate of foreign exchange. We just need to stabilise the Naira; make sure the Naira is stable and it is available for the marketers; not the one they will be getting at N350 per dollar and then the marketer says he is going to peg his price at the parallel market price of N420 per dollar.
When you talk about continued importation of the product you notice that even at normal times the product is not even available?
That has to do with distribution of the product or bringing the product to the airports. So it is not that enough Jet A1 is not imported but there is a problem of infrastructure. If you are coming into Lagos you will see about 400 trucks with Jet A1, coming into the airport to drop 33, 000 litres. One aircraft of ours can take four or five of those trucks for a trip. So if we were going to continue to be bringing this Jet A1 in trickles; of course we would definitely have shortfall.
So as we are addressing the challenge of availability of the product, we should also address the problem of infrastructure, storage and transportation. We should address all those issues together and also the pricing.
And if you look at it, if you address the problem of distributing the product through the pipelines to the hydrants at the ramp, the price will come down because the more you truck this product the more you incur most cost.
In the planned concession by government, it seems it wants to concession both the terminal and the airside. Is this a possibility and if it is a possibility it then means that there would be airfield lighting, which means that you are operating only seven hours a day would be taken care of?
We support the concession plan. I have not seen any business government has run successfully. If you look at the airport being run by government and the one being run by individual you will see that the one being run by individual is better. I am very sure the federal government must have looked at that to make a decision that concession is the way to go. I believe they are going to do a thorough study of concession, including both the air and the landside of the airport. It is extremely important to do that.
Airports are gateways to the nation; they also constitute national security because you have to understand who and who comes into your country and the ones who leave your country. I believe all these must have been looked at by government before it decides on concession. Concession will bring efficiency; it will bring greater utilisation of the facilities because no operator would like to open his airport only between 6:00 am to 6:00 pm. No operator will do that. Concession will also attract more airlines to come to the airport, as observed all over the world. This is because that is the only way they will make money. It will also bring competition.
But it will also open a bigger can of worms that we have to look at. Government is now running airports, but it has not licensed these airports. Now government is giving out the airports to individuals or companies in concession. We must also look at giving these companies license to operate the airports so that they would be held accountable. This is because at the time government is sunning the airports we are not holding government accountable. Let’s us take the Calabar incident for example, where a mad man rammed his car at Arik Air aircraft on the tarmac of the airport. Arik held the Federal Airports Authority of Nigeria (FAAN) responsible, but then, the regulator must be there to also hold FAAN responsible.
So if you give that responsibility of managing the airport to a company when we have not licensed these airports to make sure the airport management is held responsible there will be no accountability. Recently our aircraft hit an antelope on the runway and nobody was held responsible for that kind of a thing. And now you want to give these airports to private investors and we don’t have the manpower to make sure that we police those people that are running the airport. The airside part of the airport is very sensitive and needs regulation. There must be perimeter fencing; there must be lighting, signage, there must be all these things that make the airport safe. There must be adequate fire cover.
All these we must make sure are in place before we now give it on concession. Immediately you give the airports in concession you must license them because the only way you can hold the concessionaire down is to remind him that he would lose his license and if he loses his license he cannot go back to the government and tell them he lost his license. He lost it because he was not operating within the rules, so he cannot get it back.
How is Arik Air managing to operate its flights with all these constraints?
Nigerian airlines have the lowest aircraft utilisation in the entire world. We have the lowest utilisation on the Boeing B737 engine. If you have untilisation of seven hours in a 24 hours period while my counterparts in other countries are having between 16 to 18 hours utilisation and the rest of the time is used for maintenance; then you can see how difficult it will be to meet our operating cost. This is because if I have 10 hours and my competitor has 16 hours; that is six hours above mine and this can be addressed easily.
For example, if you take Benin airport; I don’t see the reason why Benin airport cannot be operated in 24 hours. I see no reason why I cannot do late flights into Benin. I see no reason why I cannot do 5:00 am flight out of Benin. This is because the airport is located inside the city. So there are no security issues there. Once you land you just drive out of the airport. It is the same with Calabar airport, which is also built into the city.