Africa: Ground handling firms sheathe sword over price
The huge price war that has existed between two of Nigeria’s biggest aviation ground firms, Nigerian Aviation Handling Company (NAHCO) Plc and the Skyway Aviation Handling Company (SAHCO) Plc, may soon come to an end as both companies have resolved to close ranks in what will save them billions of naira in revenue.
Their intense rivalry has caused them to reduce their normal charges astronomically in order to woo clients, which are normally airlines, not minding several millions of dollars in investment.
While other African countries like Ghana, Cote d’Ivoire, Senegal and others charge the going rate for services, Nigeria charges the lowest for ground handling services rendered to airlines, especially international carriers.
These two companies render services to all foreign and domestic airlines that operate in the country, but they have not grown to become major handling companies, and inside sources reveal that financially the organisations are struggling to survive.
New Telegraph also learnt that because of the fear of losing their customers to other company, the duo allows airlines to owe them and sometimes some of the debts become stale and would not be paid and with a little threat they move over to the other handling company.
The Group Managing Director of NAHCO, Mrs. Olatokunbo Fagbemi, told our correspondent that they had been speaking with the Nigerian Civil Aviation Authority (NCAA) for protection against price war.
Her words: “It is something that we believe that we will resolve. It is something that we believe that will be resolved. We have discussed with most of the airlines to let them know that we can’t continue to do that. We will let you know how it works out. Between us and SAHCOL, I think we have a better relationship and better understanding of issues.
Hopefully, you won’t see that cut throat competition as we go on. We will compete on service rather than in price other than service.
“In terms of pricing, I think it is not just the ground handling sub-sector, but the entire environment and we have been speaking with NCAA. We need the protection of the regulatory agency in whatever we are doing.
“Before the change in foreign exchange, some of the airlines were paying in dollars and when the foreign exchange went haywire, it was not factored in it. However, it is something we believe we can resolve.”
This is coming as Fagbemi disclosed that the company had invested about N2 billion on new equipment and planned to scale up to more than N3 billion by the end of 2019, as the new investments in equipment would help reduce operations cost.
According to her, infrastructure failure at the airport, and ageing equipment led to increased maintenance cost.
She said with the injection of new ground support equipment and ongoing improvement of airport facilities, operating cost would reduce substantially, enabling the company to pass its steady revenue growth to shareholders.
“Within the warehouse, we have the forklift. The phase two has started. Part of it has come in. We are expecting the rest to come in within couple of weeks. Basically, most of our equipment is to support aircraft handling and our warehouse operations. Those are the equipment we bought”.
She further disclosed that revenue of the handling company over the next five years was projected to rise steadily from N9.8 billion in 2018 to N13.269 billion in 2019, N16.91 billion in 2020, N21.56 billion in 2021 and N27.495 billion, N35.054 billion in 2022 and 2023 respectively.
She said the growth would be driven by the company’s five years transformation plan. The plans are expected to drive growth, service improvement, improve profitability and also ensure that NAHCO maintains its leadership position, despite increasing competition in the ground handling business.
Fagbemi said, “The new management of NAHCO is confident of achieving our targets in 2019 and beyond. We believe we can achieve our forecasts. We had thought deeply about the figures and put everything in place to ensure we achieve the forecasts. We stand by the forecasts that we have and we believe we will achieve them.”
By Wole Shadare