Why Nigerian aviation ’ll keep struggling – Onyema

…advocates liberalised funding model

…discloses FG’s leasing company plan

…‘airlines, govt must partner to unlock sector’s potential’

Dickson Omobola & Joy Aliyu

Chief Executive Officer of Nigeria’s largest flag carrier, Air Peace, Allen Onyema, was a guest at the 29th Annual Conference of the League of Airport and Aviation Correspondents themed: ‘Financing Aviation in Nigeria: Risks, Opportunities and Prospects,’ recently held in Lagos.

He was one of the five panelists, including Chief Executive Officer of Belujane Konzult, Mr Chris Aligbe; Chief Operating Officer of Bi-Courtney Aviation Services Limited, operators of Murtala Muhammed Airport Terminal Two, Mr Remi Jibodu; Managing Director of the Federal Airports Authority of Nigeria, FAAN, Mrs Olubunmi Kuku, represented by Director of Finance and Account, Mr Ayodele Olatiregun; and Managing Director of CITA Energies Limited, Dr Thomas Ogungbangbe, who analysed funding challenges in the country’s air transport sector and the solutions.

Having run Air Peace successfully for more than a decade, Onyema, who is also the Vice Chairman of the Airline Operators of Nigeria, AON, AON, gave his insights. Hear him speak:

Albatross and comparisons

“Whether you are involved in the administration of the airport or involved in airline operations, it is a capital intensive industry. Unfortunately, in this part of the world, funding has become our albatross. That is why we do not need to start comparing Nigerian airlines and the airlines of the first world. I feel that Nigerian airlines should be given their place of respect because what they are doing is a selfless act. In aviation, you can run down your other businesses to ensure that your airline survives without help from anywhere. Out there in America and Europe, they borrow money at about two to five per cent; at most, five per cent. Over here, it is 35 per cent. Even while borrowing at that level, an airline can be told to dig its grandmother’s grave as collateral or sell its whole village as collateral. There are a lot of nuances, and these things have not really helped aviation. So, you see Nigerian airlines struggling. You have to amass a lot of wealth to go into operating an airline. The conditions given to airline operators by financial institutions are far from being helpful. However, we can not continue to talk about the problems. Let us talk about solutions.

Lack of integrity and solutions

“The problem in this part of the world is lack of integrity. If not, why would banks ask us to bring our great grandmother, all our landed properties before they can lend us money? It is because in the past, some people took money from the banks, leading to the banks’ collapse because they failed to pay back. We come from the part of the world where people do not regard money from banks. They think it is nobody’s money, thereby squandering it. When you take money and direct it into other things than what you borrowed the money for, there are bound to be problems.

Self-introspection

“We have to do what I call introspection. We have to look at ourselves and tell ourselves the truth and start showing some level of financial integrity to be able to get it right. In our (Air Peace) own case, we may not have been where we are today if we did not show that financial integrity and discipline. I am not saying it has been very easy. However, overtime, you need to show it for your bank to trust you. We have done that. I can work into any of the banks we use today, and I will not be told to bring everything I have worked for in life. The Nigerian banks are starting to be a little bit liberal, but it needs to be earned. We can talk from now till tomorrow, moaning but if we do not do that self-introspection, there will be problems. What we have done is to show financial discipline and integrity. Today, if I want to invest in anything, I can pick up my phone and call the bank. They will say how high do you want us to jump. So, I want everybody also to imbibe that financial discipline and integrity.

Government’s role

Government can help by creating a window for the airline industry. Yes, the cost of acquiring aircraft parts and all are very high, but the good thing this government has done for us is ensuring that forex is stable. You can even see it to buy. Now, we can plan. However, they can create a window for airlines to acquire dollars at a little bit cheaper rate. Nigerian airlines are not given their place of respect. That is one of the things working against us. There is a need for government to create financing and a window for the airlines to thrive. However, I must say it the way it is: Federal Government has done something very good for this country and the aviation sector. You see the dry lease they have been able to provide for the airlines is going to be a game changer for all the airlines in this country. I must use this opportunity to applaud President Bola Tinubu for giving us a minister who acknowledged that while we talk about the capacity of the airlines, we cannot continue to complain about it when government has done nothing to improve it; instead, it has been looking for ways to bring them down. That era is gone. We have a businessman President who has put a round peg in a round hole. If you make it easier for the airlines to access financing, then things will improve.

Unofficially blacklisted

“This country has been unofficially blacklisted. For the first time in 12 years, this country, in the next two weeks (he spoke last week Thursday), will witness its first dry-leased aircraft. Remember, all the big airlines do not really own those aircraft. That is why you see one airline having about 800 to 1,000 aircraft. You cannot do operations solely on wet lease, it is extremely expensive, but my country was stigmatised. My country was unofficially blacklisted for accessing that because of sins of the past.

Airlines’ role

“Two things: on our own, we must show some financial discipline, government can step in through the Central Bank of Nigeria, government can help Nigerian airlines access opportunities, so that airlines that want to go international can do so and those who want to increase their capacity within the local space can do that.

Liberalising funding

“When you say the banking industry consolidated, it was like raising their capital. The only way airlines can do that is to get funding, they have to liberalise the kind of funding they do to the airlines in Nigeria. A situation where you borrow money at 35 per cent is like you are dead on arrival. So, we need funding like it is done everywhere in the world where aviation is treated a little bit separately from others because it is a very critical sector and capital intensive. The return  on investment is very low, not only in Nigeria but worldwide.  Aviation should not be treated the way other sectors are being treated. We deserve and demand to have very liberal and affordable rates for funding. It is given that if the airlines in Nigeria, considering what we are doing at this moment, are given succour to borrow money at single digit interest rates, no airline will fail in this country.

Guarantying loans

Airlines will be willing to have the federal government support them by ways of guarantying our loans, locally  or internationally.  That would be good, but at the same time, the airlines must do self-introspection. It is not that after government guarantees, then there is a disappointment in repayment.  There is a need for self-introspection. Have you examined the kind of business you want to do? Do you have data to tell yourself, this is what I am going to do? Am I going to be a premium  service-driven airline or budget-driven airline or that kind of thing? You have to answer all these questions and look at your climate. When you borrow more than you deserve or more than you need, that is a problem too.  So I support government coming in.

Leasing company

Federal government is about setting up a leasing company,  whereby they will get these planes and lease them to Nigerian airlines at single digit. I can not thank President Bola Tinubu enough for looking the way of the airlines and  allowing Festus Keyamo  to do the things he is doing. Financing is not only when you go out there to borrow money.

Albatross and comparisons

“Whether you are involved in the administration of the airport or involved in airline operations, it is a capital-intensive industry. Unfortunately, in this part of the world, funding has become our albatross. That is why we do not need to start comparing Nigerian airlines with the airlines of the first world. I feel that Nigerian airlines should be given their place of respect because what they are doing is a selfless act. In aviation, you can run down your other businesses to ensure that your airline survives without help from anywhere. Out there in America and Europe, they borrow money at about two to five per cent; at most, five per cent. Over here, it is 35 per cent. Even while borrowing at that level, an airline can be told to dig its grandmother’s grave as collateral or sell its whole village as collateral. There are a lot of nuances, and these things have not really helped aviation. So, you see Nigerian airlines struggling. You have to amass a lot of wealth to go into operating an airline. The conditions given to airline operators by financial institutions are far from being helpful. However, we cannot continue to talk about the problems. Let us talk about solutions.

Lack of integrity and solutions

“The problem in this part of the world is lack of integrity. If not, why would banks ask us to bring our great grandmother and all our landed properties before they can lend us money? It is because, in the past, some people took money from the banks, leading to the banks’ collapse because they failed to pay back. We come from the part of the world where people do not regard money from banks. They think it is nobody’s money, thereby squandering it. When you take money and direct it into other things than what you borrowed the money for, there are bound to be problems.

Self-introspection

“We have to do what I call introspection. We have to look at ourselves and tell ourselves the truth and start showing some level of financial integrity to be able to get it right. In our (Air Peace) own case, we may not have been where we are today if we did not show that financial integrity and discipline. I am not saying it has been very easy. However, over time, you need to show it for your bank to trust you. We have done that. I can walk into any of the banks we use today, and I will not be told to bring everything I have worked for in life. The Nigerian banks are starting to be a little bit liberal, but it needs to be earned.

We can talk from now till tomorrow, moaning, but if we do not do that self-introspection, there will be problems.

What we have done is to show financial discipline and integrity.

Today, if I want to invest in anything, I can pick up my phone and call the bank. They will say, how high do you want us to jump? So, I want everybody also to imbibe that financial discipline and integrity.

Government’s role

“Government can help by creating a window for the airline industry. Yes, the cost of acquiring aircraft parts and all are very high, but the good thing this government has done for us is ensuring that forex is stable. You can even see it to buy. Now, we can plan. However, they can create a window for airlines to acquire dollars at a little bit cheaper rate. Nigerian airlines are not given their place of respect. That is one of the things working against us. There is a need for government to create financing and a window for the airlines to thrive. However, I must say it the way it is: the Federal Government has done something very good for this country and the aviation sector. You see, the dry lease they have been able to provide for the airlines is going to be a game changer for all the airlines in this country. I must use this opportunity to applaud President Bola Tinubu for giving us a minister who acknowledged that while we talk about the capacity of the airlines, we cannot continue to complain about it when government has done nothing to improve it; instead, it has been looking for ways to bring them down. That era is gone. We have a businessman President who has put a round peg in a round hole. If you make it easier for the airlines to access financing, then things will improve.

Unofficially blacklisted

“This country has been unofficially blacklisted. For the first time in 12 years, this country, in the next two weeks (he spoke last week Thursday), will witness its first dry-leased aircraft. Remember, all the big airlines do not really own those aircraft. That is why you see one airline having about 800 to 1,000 aircraft. You cannot do operations solely on wet lease; it is extremely expensive, but my country was stigmatised. My country was unofficially blacklisted for accessing that because of sins of the past.

Airlines’ role

“Two things: on our own, we must show some financial discipline; government can step in through the Central Bank of Nigeria. Government can help Nigerian airlines access opportunities so that airlines that want to go international can do so and those who want to increase their capacity within the local space can do that.

Liberalising funding

“When you say the banking industry consolidated, it was like raising their capital. The only way airlines can do that is to get funding; they have to liberalise the kind of funding they do to the airlines in Nigeria. A situation where you borrow money at 35 per cent is like you are dead on arrival. So, we need funding like it is done everywhere in the world, where aviation is treated a little bit separately from others because it is a very critical sector and capital-intensive. The return on investment is very low, not only in Nigeria but worldwide. Aviation should not be treated the way other sectors are being treated. We deserve and demand to have very liberal and affordable rates for funding. It is given that if the airlines in Nigeria, considering what we are doing at this moment, are given succour to borrow money at single-digit interest rates, no airline will fail in this country.

Guarantying loans

“Airlines will be willing to have the federal government support them by way of guaranteeing our loans, locally or internationally. That would be good, but at the same time, the airlines must do self-introspection.

It is not that after government guarantees, there is disappointment in repayment. There is a need for self-introspection. Have you examined the kind of business you want to do? Do you have data to tell yourself, this is what I am going to do? Am I going to be a premium service-driven airline or budget-driven airline or that kind of thing? You have to answer all these questions and look at your climate. When you borrow more than you deserve or more than you need, that is a problem too. So, I support government coming in.

Leasing company

“Federal government is about setting up a leasing company, whereby they will get these planes and lease them to Nigerian airlines at single digit.

I cannot thank President Tinubu enough for looking the way of the airlines and allowing Festus Keyamo to do the things he is doing. Financing is not only when you go out there to borrow money.”

The post Why Nigerian aviation ’ll keep struggling – Onyema appeared first on Vanguard News.