Africa: Nigeria’s Policy On Aviation Killing Airlines – Dana COO
Mr. Obi Mbanuzuo, the Chief Operating Officer (COO) of Dana Air is one of the knowledgeable Chief Executive Officer (CEOs) in the Nigerian aviation industry, having spent all his life as aviation practitioner. In this interview with OLUSEGUN KOIKI, he talks about the controversial wet-lease agreement with Asky Air, Nigeria aviation policies and the charges imposed on the airlines by the agencies, among others. Excerpts:
What are the plans of Dana Air for 2019?
2019 is an election year, the elections have just happened. As you are aware, Dana Air celebrated 10 years of operations in 2018. We entered 2019 with the intention of solidifying our operations; increase our routes and add some aircraft to our current fleet.
This first quarter is already gone. All our aircraft should be back in quarter two of 2019. So, our operations would return to the same level our customers were used to especially with the arrival of new airplanes. At the moment, a couple of them are undergoing pre-delivery checks. Dana is going to reinforce our market phase, add new equipment and enhance our service.
Being an election year, it started very weak, but with the elections over, we are expecting good things to come especially in the second term of this administration.
We are expecting more friendly policies from the government, which will help the industry to grow in general.
As you are aware, the last couple of years, the Federal Government did a lot in terms of reduction in tariffs on spare parts and aircraft acquisitions. They started something on Value Added Tax (VAT), but they are yet to implement it till date. Don’t forget that aviation is the only transport mode that is taxed in that mode.
We will urge them to complete that job because as it is, we still pay the VAT. As it is, it is a job half done. A job half done is not a good job. This is where we are right now.
What steps have the airline operators taken to ensure that the VAT is fully implemented by the government?
It is unfortunate that up till date, the pronouncement is yet to be implemented. What government did then was to make a pronouncement that VAT would be removed; VAT is administered by the Federal Ministry of Finance through the Federal Inland Revenue Service (FIRS). For that to be removed, government needs to issue an Executive Order, which was what we thought was going to happen last year to push it.
Till date, we are still waiting for government to see how they would proceed. Some statements were made, which were never gazetted. The respective agencies still collect their VAT as it was. As an industry, we will continue to talk about it.
It is a tax that will help the airlines and also help the passengers. First of all, the passengers will know that there is no more additional 5 per cent that they have to pay. Many years ago, transportation generally was removed from paying such tax, but for some reasons, aviation has been unfairly burdened with this. Getting more people to fly drives the economy. It’s as simple as that.
Sometime last year, Dana unveiled its relationships with Asky Airlines from Togo, how far have you gone with this arrangements?
Earlier, I spoke about how we took our aircraft for maintenance. We were aware that these aircraft were going to go for this scheduled maintenance every 15 months.
So, it wasn’t like we didn’t plan for that. Part of the discussions and agreements we had with Asky, was to provide capacity to cover for the period when our airplanes would not be around.
The first aircraft arrived and operated domestic flight from Lagos because the agreement was to operate domestic; irrespective of where the airplane comes from. We have wet leased aircraft from Europe in the past, including Egypt.
Unfortunately, certain members of aviation community especially some of our colleagues did not understand the idea of that wet-lease.
So, there were lots of brouhaha. Rather than fight our brothers, we decided to suspend that agreement. That is where we are now. It was actually a multiple wet-lease aircraft operations with a sister company who has adequate capacity to provide.
Probably, because of the proximity; may be because Asky Air is from Togo here in West Africa, a next door neighbour. If it was from somewhere far, may be it would have made some senses for them. For now, it is suspended and we are looking at other options. That is why it hampered our operations.
The capacity was supposed to have come in. We sent three aircraft out now, probably we would have had three airplanes; Boeing 737-800, B737-700, which would have been operated on our behalf, but we suspended that operations.
When are you reinvigorating the partnership since it was not terminated?
The initial part of that agreement was the aircraft part. Then, we would have had training for our pilots on B737. We are planning to acquire B737 this year.
So, imagine we are operating on a wet-lease with Asky, we have the opportunity of training our people on that airplanes type because we are adding that aircraft type to our fleet.
Asky has maintenance agreement with different airlines. Dana Air has future plans to build a Maintenance, Repair and Overhaul (MRO) facility in the future. Rather than spending millions of dollars maintaining our aircraft abroad, we would do our maintenance in Nigeria.
The agreement was full blooded; starting from bottom to the top, up to a time where they will help us set up this MRO for example, but now, the initial plan was truncated at the commencement of the agreement. Other things will come to play; the people who misunderstood the operations, now understand it better.
In what ways can the challenges of the airline sub-sector in Nigeria be solved?
We have to tackle the challenges one after the other. The first thing the government has to understand is that aviation drives the economy; it is not for the rich. Nigeria is a large country; we don’t have enough good roads or rail. So, transportation from one point to the other depends a lot on aviation.
It is necessary for people to understand the importance of aviation in economic development. Once you let people understand, possibly, the policymakers will also realise its importance.
Dana Air like every other airline we have in the country today is a privately-owned airline and government-owned airline is no longer in vogue.
British Airways was formerly government-owned before it was privatised, we too had Nigeria Airways, but for one reason or the other, it was liquidated. So, as we say, it is not the job of government to interfere in running of business. Government has to give us an enabling framework.
In the previous airlines I have worked, I remember going to Congo and price of aviation fuel paid by domestic carriers was heavily subsidised by the government for domestic operators.
I just gave you an example of things that could be done, rather than trying to suck from the airlines at every opportunity. Look at United States, the aviation navigation infrastructure in the US is actually free of charge.
The Global Positioning System (GPS), which is built by the US Air Force, no airline pays a cent for using that facility. The Federal Aviation Administration (FAA) of US employs all the Air Traffic Controllers (ATC). By that way, the airline can thrive and face their business, but in this country, we charge the airlines for everything.
Yes, the Nigerian Airspace Management Agency (NAMA) needs money from somewhere to run its infrastructure, but some of these infrastructures can be paid for by the government.
NAMA is an example of an agency that should get subvention to run its business fully. Also, the Accident Investigation Bureau (AIB) has to be paid for by the government. Policy-wise, there are some areas that the government has to look into to help the industry.
Look at some countries; they look at something called public service routes. For instance, Kebbi has very poor road network for you to go there.
The government can subsidise services for the airlines for them to go in there. This will help the airlines not to lose much money flying there. This happens around the world; Australia, US and others do it. This is to help the population of the country to fly in there. Policy-wise, we still have a long way to go.
What is your say on the space constraints at our airsides especially at the Murtala Muhammed Airport (MMA), Lagos, which is the country’s major hub?
There are 22 airports owned by the Federal Airports Authority of Nigeria (FAAN); if we use the space in the entire 22 airports, then, I will say we don’t have adequate space to park our aircraft, but no because our airports are not fully operational 24/7. For instance, Dana Air would have to park its aircraft at Owerri Airport instead of parking them at Lagos, but I will have to be at Owerri Airport before 6pm. If it is there at that time, it is useless to me. I will like to operate my aircraft until 10pm. For utilisation, it reduces my costs, but I can’t do that because of lack of landing aids for night flight, then, that airplane becomes inefficient. When people say airlines have come and gone, there are several things that are responsible for this.
Why do everybody keeps their airplanes in either Lagos or Abuja? It is because these are the only places that have night navigational aids, not necessarily because they are their home base. Most park their aircraft here because of inefficiencies in the system.
I can park an aircraft anywhere outside Lagos so that the man in Enugu for instance, can wake up in the morning and travel to Abuja Airport if he wants to, but if I park the aircraft in Lagos, he has to wait for me to come in the morning before he can depart for Abuja or others.
Also, MMA was built in the 1970s and that airport has master plan for new terminals, new runways and other facilities from when it was commissioned, but nothing has been done on that master plan till date. When it was commissioned, it probably had projection for yearly aircraft and passenger movements, but we lack foresight in this country.
Right now, everyone is complaining of lack of space to park aircraft. Other countries that built terminals at the same period as ours, now have two or three new terminals going. The lack of space to park aircraft is definitely our fault.
How far have you gone with your plans to build an MRO facility for your airline for the industry?
Currently, FAAN is the agency in charge of allocating lands to operators.
So, we have to liaise with FAAN to give us available space wherever we can get it. On how far we have gone, we have applied to FAAN to get land for us. in terms of usage of the equipment inside, we have the adequate manpower to do heavy check on any aircraft that we operate. We have engineers to do heavy checks on our aircraft.
The Nigerian Civil Aviation Authority (NCAA) has seen that. All we are looking for now, is the land from the airport operator, which is FAAN. We also looking at setting other hangars already owned by other people for lease or cooperate with them.
Why are many African airlines going into MRO business, rather than the business of carrying passengers, which is their core area?
Well, if you say the airlines are diversifying, then, you are looking at MRO as a form of profit centre, some other airlines are looking at MRO as a form of operating It for themselves. If you look at most advanced countries, most airlines have MROs that do heavy checks.
There is no way for instance for Delta Air Lines can take its aircraft to Philippines to do heavy check because the cost of doing heavy check is a big burden. Anytime you take an aircraft outside for heavy check, it’s a big burden on the airlines.
Dana Air has been here for 10 years and we hope to continue to remain in the business. That is why we want to make sure that the millions of dollars spent outside, we don’t spend them there any longer. We will also give lots of professionals in the industry employments. If we get land anywhere in the country today to build our hangar, we will commence work immediately. We are already doing A-Check on aircraft ourselves, but these ones last for a day or two. However, a C-check lasts for a month or so. If you don’t have a hangar, you can’t do that. Initially, we intend to just do our own work, not that we will want to make money from it from other people for a start.
Do you think the global aviation industry generally is fair to African airlines?
The fact is that I don’t see any pilot that flies in Nigeria or Africa as inferior to any other pilot in Europe or America, Asia and others.
As you are aware, a lot of Nigerians fly for some big carriers in Europe, America, Middle East and Asia. A friend of mine flies for Delta Air Lines in the US for; I have another one who flies for Emirates and many others like that. Technically, there is no difference, but there is this wrong impression that our airspace is unsafe on the continent.
If their pilots is given same weather, infrastructure and others as we have in Nigeria or Africa, I can bet you they will have crashes everyday in Europe. European pilot is trained to take off and at 200ft, he puts his autopilot on. At every airport he wants to land, he has the navigational aids, Category 3 Instrument Landing System and others to guide him; everything works, but the kind of weather we have here, is unprecedented. The weather forecast is not always normal.
What is your say on the crashed Boeing 737 MAX 8?
I want to say it here that Boeing basically quickly rushed the B737 MAX 8 aircraft into the market. They were trying to catch up with Airbus.
There was a crash in Indonesia and they came up with a system, which they said they have fixed, unfortunately, Ethiopian Airlines had a crash with that same aircraft brand.
If that crash had happened in the West, they would have placed a total ban on that aircraft brand, but the initial thought was that those were third world countries; ‘we know how to fly airplanes, they don’t know how to fly airplanes. So, let us continue.’
There is bias against the airlines in Africa. For those of us in Africa, we know we are as good as anyone else in the world.
What is your say on the charges imposed on airlines by aviation agencies?
As we consistently say, our charges are extremely high in this part of the world.
As we speak right now, FAAN is actually campaigning to increase its charges and you wonder with the sub-standard service, why do you want to increase your charges? Someone in FAAN once told me that in the Murtala Muhammed Airport Two (MMA2), we pay higher charges. And that is true, but the services provided by MMA2 are better than services offered us in a typical FAAN airport, at least for now. So, the airport user charges are too high. They say it is for the passenger to pay. Yes, everything goes into the cost of passengers because they are built into the tickets.
I will want aviation agencies here to look at a country like Brazil. How did the passenger traffic triple in 10 years? If I can charge N5,000 for instance to Port Harcourt to breakeven, I will charge that sum, but out of that N5,000, FAAN wants to increase the Passenger Service Charge (PSC) to N2,500 from its present N1,000. It is either I add the charge to the N5,000, which is very easy for me, but the passenger would look at it and prefer to go with road transport. I really want to compete with the buses. But, I can’t with those charges.
It is a shame that a country with 180 million people has only 10 million passengers flying annually. It is a shame. The United Kingdom with only 70 or 80 million people has about 70 million travellers into its airports annually. We want to get more people flying especially with the current road networks, which are in very poor state. Charges are one of the things that will bring cost down for the airlines. We need to stay afloat in our operations.
Are you thinking of increasing our fleet in 2019?
We will definitely add more aircraft to our operating fleet in 2019.
We are looking at bringing three B737 aircraft. Currently, we have five aircraft and hopefully, before the end of the year, we should have additional three aircraft. Of the five aircraft that we have, one is a private jet and we have four commercial airplanes. But, then, I need more people to feel those seats. I need to fly those aircraft till mid-night if I can. I have pilots and engineers who are ready to work 24/7.
Currently, we are a full domestic carrier. We want to consolidate on our market before we spread our tentacles outside the country.
But, as it is, once it is 6pm, we can only fly into Lagos, Abuja, Port Harcourt and Kano Airports. I want to be able to go to other airports across the country.
Why are foreign airlines not willing to partner with Nigerian carriers as they do with other airlines on the continent?
The problem I think is with the airlines; Dana has had a lot of discussions with foreign airlines and they have been very receptive.
There are two things to this point that you raised; one, is multiple designation, which is a policy issue from the government. Very few countries give multiple designations to foreign carriers, but the reverse is the case in Nigeria. If I want to go to Germany for an example, I can only go to Frankfurt, why am I giving Lufthansa Airlines for multiple designations into my countries. Most times, when these Bilateral Air Services Agreement (BASA) arrangements are signed, the airlines are not involved.
We are basically against multiple designations for foreign airlines because we Nigerian carriers don’t get multiple designations in those countries. The foreign carriers know Lagos is a big market, Abuja, Enugu, Port Harcourt are also big ones, but what do Nigerian carriers get in return? Nothing.
Nigerian airlines are losing out because the passengers they would have ferried are carried by foreign carriers.
If the government must give multiple designations, they must impress it on the foreign carriers to partner with Nigerian airlines. They can choose any of the airlines they want to partner with. If they want to fly to Enugu, I can codeshare with them and I make some revenues in the process as a Nigerian carrier.
Besides, some big airlines from Asia, one or two of them have met us to discuss business. They only come to Lagos and they are looking at how we can bring business to them to Lagos. We are in discussion in that area, but some airlines are reluctant to do this because they feel if they could go there and bring passengers down, there is no need to codeshare with any Nigerian carrier. It’s a policy thing, which has to change.
Sir, Why is it so difficult for local carriers to partner with one another despite efforts by some people in the industry to make this happen?
The problem is ego, nothing else, but I can say it here that Dana Air and Med-View Airline, we have a very strong partnership ongoing between us.
I can show you my data to show you how many passengers we have carried for Med-View in the last one month and vice-versa. When a scheduled aircraft could not go on any of the two airlines, we have a partnership to airlift our passengers. This agreement has been on for about two years and we are thinking of growing it.
The major problem we have in this country is ego. Some people don’t want to work with somebody, but we are open to anybody. Locally, we call it a re-protection agreement. And it has been working fine ever since.
By Olusegun Koiki