Code Share will help Nigerian carriers
Organiser of Akwaba African Travel Market, Ikechi Uko
Travel expert and organiser of Akwaba African Travel Market, Ikechi Uko says the only way international airlines could agree to code-share with Nigerian carriers is for government to introduce the Fly Nigeria Act. Chinedu Eze presents the excerpts:
The multi designation of foreign carriers is hurting the local airlines’ business and so much money is taken out of the country by these foreign carriers. Knowing the importance of Nigerians traveling overseas and our lack of capacity, how can government use policies to take advantage of the large and growing market?
I think the biggest solution to all of that will be the introduction of Fly Nigeria Act. The Fly Nigeria Act should come with a code-share agreement. This will be similar to the bilateral agreement that involved Nigeria Airways in the past. So if I can fly the same frequency I pay royalty, so that way you collect money in lieu of providing service. It wasn’t an efficient thing, it was rent collection but at least there was a benefit. But in the absence of a national carrier, in the absence of a Fly Nigeria Act that forces people to do code-share, what is the alternative?
We don’t have an alternative in place because our laws are not against multi destination as the major challenge now is how to serve the passenger. You ask yourself who is the most important person in the whole scheme of thing? It is the passenger. Without the passenger there is no airline, there is no airport, there is no aviation. So, if government’s role is to provide for the passenger and care for the passenger, then government has to do things that benefit the passenger. Now, what benefits the passenger most is multiple destination because it provides transport service everywhere in the country. Secondary to airlifting the passenger you will think about the indigenous economy like the airlines and the aviation parastatals. Government now needed to have created a vehicle that will help these local airlines benefit.
If we go back to the old system where everybody has to fly to Lagos before leaving, it increases the cost and the pain for the traveller. A man who leaves in Maiduguri and wants to travel to Dubai will wait for the flight from Lagos first which comes three times in a week. From Lagos he travels to Dubai, Cameroon or Niger. So he flies to Lagos stays overnight then goes somewhere and comes back, it takes him a week to be able to do something he can do in 45 minutes and it cost him because he had to take into consideration the hotel bill. So the old system isn’t that good for the passenger, so I don’t think we should be thinking about going back to that old road.
But Ghana has just done a smart thing; they are the most liberal civil aviation regulation agency in Africa now. After them I think it is Rwanda, they give fifth freedom to anybody who apply. So Kenya Airways flies out of Ghana to Monrovia to Freetown and back. They give fifth freedom to Egypt Airline, Turkish Airline, Tap Portugal to go to Sao Tome and they give to Qatar. They give fifth freedom to anybody who applies and Rwand Air also has that. But they have done a smart thing because, I heard this argument in Ghana, the local airlines are saying that Antrak died because the government is giving fifth freedom to everyone that applies. But the question is can Antrak fly those routes?
Antrak has been there they never flew to Freetown, they never flew to Monrovia; they couldn’t serve the passengers. So if you needed to go to Monrovia you probably will have to fly to Nairobi first and now fly back. Or you fly to Britain and now came back with British Airways; meanwhile, it is 40 to 50 minutes away. The airlines couldn’t serve these routes so government has to look for how to solve the problem of the people who need to travel. Travelling opens the economy; the more people travel the more your GDP grows. There is a direct correlation between travel and GDP growth. So, if you now say your market and your people can only be served by local airline you are constraining the growth of your economy.
And the statistics available from the research done by IATA says that everywhere you have opened the market the economy has grown. And that the biggest access in Africa also turns out to be the biggest economy. The stations with the biggest air connections will always become the ones with the biggest economies. There is a direct connect. This is research by IATA on 12 countries in Africa. What the Ghanaian government has done is to say, South Africa Airways you can fly direct to Washington, we give you fifth freedom but it has to be a code-share with African World Airlines (AWA). So, AWA is a small Ghanaian carrier but in the next one year AWA is going to be a big carrier. AWA is going to be the biggest threat to our Nigerian carriers who do Lagos to Accra.
AWA now has access to South African Airways technology, online booking and passengers. And the code-share to Washington will help Ghana get category one safety status from the US Federal Aviation Administration (FAA). So if we now bring it to Nigeria, you can allow everybody to fly if they code-share with Aero, if they code-share with Arik, if they code-share with Medview because those are the only three airline with capacity for international flights as at now. So, you can give everybody a license but they must have a Nigerian partner. But if you say you won’t allow anybody you are actually constraining your people, so that is old school.
Where do you factor in the development of manpower; the training and employment and then the development of local carriers?
I have just given you an example that a small Ghana carrier, AWA in partnership with South African Airways is going to be a very big player in our market. It is going to be a feeder airline for South African Airways not just between Accra and Lagos but in the whole of West Africa. There is no direct flight between West Africa and Washington so South African Airways providing that out of Accra, AWA is now going to be the feeder airline, which was what Virgin Nigeria was doing in West Africa with Ethiopian Airline, with Virgin Atlantic and Delta. So we need that kind of arrangement that gives you a profitable partnership; maybe a Nigerian carrier like Aero could go into such an agreement with Qatar. Then Aero can feed Qatar out of Lagos from all West African destinations. So Aero will grow in capacity but I can tell you today Turkish Airline flies to more African destination than every other African airline except Ethiopian Airline. So, they actually wouldn’t need your partnership because on their own they can secure their target markets, but your government has to make it necessary. That may be why Emirates is not in any partnership because on their own they fly everywhere.
What kind of policies can Nigeria introduce to actualise these goals?
What we need to do is not in stopping others from growing, is to streamline their growth along with our own growth. And streamlining it you will say, look, code-share with a local airline, when you now want any route out of Lagos, do it as a code-share with a Nigerian carrier. So that Nigerian carriers can actually benefits because you need to raise their standard to your standard so you have to help them train cabin crew, engineers, their checking, their online because it is in the interest of these big airlines to help these airline getup to their level.
Exploitative fares, how can they be stopped?
Such fares in airline business are not seen as exploitation. Direct flights are always more expensive than indirect flight. If you check every destination except with Nigerian carriers, if you are checking the most expensive flight between Lagos and Dubai it should be Emirates. The most expensive flight between Lagos and Kenya should be Kenya Airways. On the major carriers, they can subsidies onward destinations and get their money from where they have advantage which is direct flight. Because the shortest point between London and Lagos is from a direct flight. So if you can go through the convenience of flying to France and changing plane then you pay cheaper. So that is with every airline, we shouldn’t interpret it as exploitation. They are just taking a natural advantage of the directness of the flight.
Now, if we had a national carrier that was embedded in the agreement between us and UK, if Virgin Atlantic flies five flights out of an expected 10. The remaining five if they are flying in them will pay royalty. And part of the money for the royalty is to pay for this empowerment, training and development. So, what happens to our Bilateral Air Service Agreement (BASA) money? That is money that is supposed to go into this empowerment, development and the rest of them. Now, which airline is Nigeria’s response to Virgin Atlantic? That is Arik. Arik doesn’t fly as much as Virgin neither does it fly as much as British Airways. So the extra money is royalty that goes to the federal government. It should also help in training and also defend some of Arik cause, because Arik is representing Nigeria. Arik is not going there because it is Arik it’s going there because it is a Nigerian carrier.
So some of the things that happened with the absence of a national carrier, these are the fallout. I am using Ghana as an example because it is nearer to us. Some of the benefits of code-share are these. South African Airways is building a new gate for the airport in Ghana to be able to accommodate their passengers going to Washington. United Airline and Air France/KLM helped Ghana government to build a new gate, gate three and four to be able to raise a standard to the standard of the airline. So if we say, okay this airline is flying into Enugu or Port Harcourt and this is the host airline for Port Harcourt, the code-partner of that feeder, the other one has to help elevate the standard of that airline.
Example is Ethiopian Airline and Asky. Ethiopian Airline has to help Asky elevate its level to the efficiency of Ethiopian Airline which it has done. It makes sure the airline flies on time. So those are the benefits of creating this kind of arrangement where your local carriers can benefit from your market. So it is not the problem of the local carriers, it is just that our policy has not streamlined these two things. We have the market and we have some carriers that we can help develop by streamlining policies to meet our set objectives.
Why is it easy for Air Cod’ Ivories to have a national carrier with institutionalised investors and technical partnership with Air France and why is difficult for us to do it in Nigeria?
I heard a joke from an international airline managing director that said there are 259 registered airlines in Africa and most of them won’t last twelve months so they will keep changing their name from Senegal Air to Air Senegal, Nigerian Airways to Air Nigeria, Air Cote d’Ivoire to Cote d’Ivoire airline, Air Cameroon to CameAir and others. They are just changing nomenclature but how long are they going to last? Not very long for most of them. So it is not in starting airlines. The success of some of these airlines is the fact that you go into a technical partnership and ownership with a strong proven carrier which provides its processes, its control, its leadership and its skill to these smaller airlines. Aviation is a global business so you can be a global aviator by operating out of Enugu only which is the limitation of most Nigerian carriers.
Our knowledge is limited and we think if we master our local environment we have mastered everything. But we are competing against global players who have advantages and knowledge beyond you. So, for us to operate very well we need some kind of partnership. I will give you a good example; everybody rates Arik as very, very good with safety, who maintains Arik’s aircraft? Lufthansa Technik. Are they Nigeria owned? No. So, because Arik wanted to keep a high standard in safety it engaged that company. You can accuse Arik of anything but everywhere in the world I know people rate Arik as a very safe airline. Somebody has already done it in form of safety why can’t we do it in other things?
Why can’t we look for people who have proven themselves in a particular environment and say okay let us work with you. Air Nigeria was a fantastic example, Air Nigeria’s problem was the foundation of the company. It was faulty but you could see just before it was sold that the Managing Director was a Nigerian with the financial controller. The operation director was Ethiopian, the commercial director was Kenyan , the person handling the other key position was Kenyan. So we took the best skills available in Africa and put it together. I am not saying there are no Nigerians that you can put together but this is a global business, so you can’t do a global business with local sense.
So for us to be able to do what some of these airlines are doing you have to rely on ability that is beyond you. As at today only one African airline is financially successful, that is Ethiopian airline. I am quoting IATA, that out of these 259 Africa carriers only one can be said to be doing well and that is Ethiopian airline. And if you add up all the wealth, aircraft and everything that the 259 carriers have it is less than 30 per cent of probably Emirates. Nigeria has the capacity to have at least one successful airline or two, ne global; one regional. But we can’t do it based on just our strength.
So what will you advise the present government to do in order to reposition Nigeria to benefit from its large aviation market?
First of all, we know that Nigeria has the capacity to run a successful international carrier and a successful regional carrier and a successful domestic operation. You create structures to make sure that an international airline emerges out of Nigeria. You create a structure to make sure that there is a regional player out of Nigeria. And you can open up our domestic market. The few airlines we have cannot serve our domestic market well. There are towns in Nigeria that cannot be connected by air, it shouldn’t be so. If you leave in Calabar, and you need to go to Benin, how do you go? If you leave in Port Harcourt and you need to go to Makurdi, how do you go? So, we need to link up our domestic airport and from the experience of South Africa and Ethiopia, it is the success of the big carriers that will now fund and subsidize this local domestic market because they also need feeders. If you fly from Accra-Banjul every day, British Airways takes off by 11 am in London, so they allow all the flights to arrive before the ones going to Lagos goes. So they bring people from all over Europe to London and they go to Lagos.
All the international airlines’ hub flights leave midday allowing people to come in from everywhere. If you run a hub for a regional carrier, people come from everywhere to feed you. I have seen that done by Kenya Airways, I have seen it done by Ethiopian Airlies and I know in Europe that’s practically what all of them do. KLM’s flight to Lagos leaves at 11, between 6:00 am and 11 am flights are coming from all over Europe, so from that time you now start feeding to every part of the world.
So the government need to be able to create policy that would allow us have one international carrier, a regional carrier and fewer domestic operators. It could be done through many ways. My first option would be a national carrier but that might not sell with some people. Then do everything in your power to help an Arik emerge as a global player. Arik has the equipment, they already have the IATA recognition, they already have IOSA (IATA Operational Safety Audit). They have the equipment, they have fantastic safety record, they have had some experiences. So how do we help Arik overcome its challenges? Why do they have these challenges? How can the government of Nigeria help them succeed? Because they have already proven that they have what it takes. The government is hostile to most of these airlines.
Yes, Nigerians complain about the services of these airlines, we have every reason to complain because we expect a lot more but the airlines are having serious challenges. Why would they cancel flights? Why would they not be on time? So how do we help them? Then suddenly you hear that fuel is scarce. You don’t hear such stories anywhere. Fuel is scarce in Lagos and airline has to fly to Abuja to buy fuel and come back to proceed to where it is going to. People say the airlines owe, why do they owe? For me Nigeria should see aviation as strategic. We have been subsidizing power, we sold the power plants to people, we have given them some billions of money last year. The Central Bank is raising another set of money for them this month because we see it as strategic. We have been subsidizing petrol to the detriment of our economy because we see it as strategic. We have to see aviation as a strategic part of our economy.
The growth of our economy is dependent on our ability to move. So I think government needs to support them. The public might oppose this; people with vested interest might oppose it. There is this thing I have seen in Nigeria, everybody that wishes that they have an airline will oppose anything you do that will help those already running the airline because they wish they want to do it. So they are hoping those airlines will die but they haven’t started their own. As at now my own opinion is that those that are already there should be strengthened, we already have between seven to eight functional airlines.
So the three that are playing on international, we should help one to become global, help the other one to be good regional or the other two to be good regional players. And if we align it well Aero and Medview can supply Arik all the passengers they need from West Africa to feed the Arik flight to London, Johannesburg. So Medview and Aero can be the supply chain, Arik can’t fly everywhere, but Medview can carry people from everywhere to feed Arik’s flight that leaves by midday to any part of the world. So if we integrate these three airlines, these other ones become regional and local players to support Arik’s international play. It will work in everybody’s interest.
Nigeria is the most connected country in Africa and by nature is the number economy in Africa. And you could see that these economies that well connected by air are also places where the economies are fast growing. Now look at Nigeria, all the connections from Nigeria are not Nigerian carriers. So if we say that we should keep out other carriers and rely only on Nigerian carriers, Nigerian carriers do not fly to more than 15 destinations globally. But yet our economy is growing not because of our local carriers but because of our inter-connectedness to the other countries in the world. So sometimes it is not in our interest to begin to protect our local market because we need the global market to be able to grow our economy.
So this simple example of the growth our Nigerian economy which is tied to inter-connectedness to the global village is not done by Nigerians. Arik flies outside Nigeria to maybe Johannesburg, then New York, London, Accra, Banjul and Dakar and Monrovia. But Nigerians fly to more destinations than that. Aero flies only to Accra, Medview flies only to Accra, so if we are going to rely on only Nigerian airlines then we won’t be able to go anywhere. The ability of the Nigerian economy to grow at the rate with which it is growing is because we are connected to a global economy. So it does not make sense for us to begin to limit tour connectedness to the world.
We need to expand it; we need our airlines to benefit from the expansion. The other thing we found out is that out of all the monies Nigerians spent last year travelling to abroad, less than 5 per cent was spent on Nigerian carriers and less than 20 per cent of the money was spent on African carriers. 80. % of that money, the so called the $2.2 billion dollars on the IATA platform, BSP (Billings Settlement Platform) platform was spent on international carriers. So how do we get part of this back? If we say let every carrier who flies these rout have a Nigerian partner. So if we do code-share and open up our environment we will benefit more, Nigerians will travel, there is nothing we can do to limit this so let us take advantage of it.