Chairman of Nigeria’s largest airline, Arik Air, Joseph Arumemi-Ikhide, reasons that the national airline that can work for Nigeria is a flag carrier, which would be driven by the private sector with the full support of government. He argued that the world is doing away with the national carrier model because it has proven to be a failure in most countries, including Nigeria. Chinedu Eze presents the excerpts:
Since the federal government declared its intention to have a national airline, there has been intense debate about which model of airline that can succeed, as the ghost of Nigeria Airways Limited continues to haunt the country. What is your position in this debate?
As far as I am concerned I think Nigeria needs flag carrier; not national carrier. First is that all nations are doing away with national carrier. Air Lingus of Ireland was sold about two weeks ago. The Irish people were very happy, although they were emotional about it but they said their government would no more pump money into the airline.
But you find that Ryanair and other privately owned airlines are doing very well. Government has so many things to do with its lean resources and these include healthcare, education, provision of infrastructure; so Irish government looked at the airline and preserved its technical side like the Maintenance, Repair and Overhaul (MRO) facility and its leasing concern. The airline has one of the biggest aircraft leasing companies in the world.
A country should look at what it actually wants to be known for and concentrate on it. You find that Alitalia has been sold, the same with the Portuguese national carrier, Tap and many other government owned airline are being sold. The national carriers are going. America of course had done its own long time ago.
Let’s turn to Africa now. Kenya Airways is having problems. They lost about $250 million recently and they announced it and they explained that they made the loss because of strong competition, two, because of terrorism which affected tourism and then management issues. The airline is now selling its wide-body aircraft. The aircraft they are selling is less than one and half years old, including Boeing 777-200.
KLM has some stakes in Kenya Airways, the public has stakes and government has some stakes. On that of South Africa Airways what saved the airline was the World Cup. As the World Cup was coming government has to put in money into the airline. After the World Cup there was African cup of nations, but the airline still has problems. The same thing with Egypt Air; It has parked most of its large-body aircraft because of low patronage caused by insurgency that drove away tourists. They are now managing their small body aircraft while they are looking for buyers for the large body aircraft. Egypt Air has approached us to buy their planes and we said we don’t want. I remember the way they treated Air Nigeria; when the abandoned the passengers of Air Nigeria at Gatwick airport, London.
Egypt Air has approached us to come and buy their aircraft, we say we don’t want. Kenya Airways wanted us to come and buy we said we don’t want. Because we know that definitely with the Boeing 777 X coming out and by 2020 the Boing 777-200 ER will be out and out own is coming out 2017, and with that the value of what they want to sell to us will nosedive. How can we go and get an asset that is of less value, once the new one comes out the former’s value will nosedive.
So we are sticking to our Boeing 787-900 that we want to acquire. We have seven units because we accessed some funds from the US Exim Bank, so we can say, okay rather than buy the Boeing 777-200 ER, let’s replace them with Boeing 787-900, this aircraft is still at its infancy so it has very good value. And that is what we want, so all those that accuse Arik that we don’t know what we are doing are the ones who don’t know what they are talking about. We have looked at our plans and Boeing admitted that our move is in our best interest; that it is economical and well thought out.
Our new aircraft will start arriving from 2017, so we take out our Airbus A330-200 out and operate all Boeing with commonality of parts and the new Boeing aircraft saves 20 per cent of fuel, more efficient and better for us. We expect Boeing 787-900 and we are starting with Boeing 737-900 ER (Extended Range), which is going to have a flatbed; then we are going to have 12 Boeing 737 MAX. That is the new MAX coming from Boeing. Between 20 17 and 2021, Arik will have 26 aircraft coming in.
When you are talking about national carrier, we believe that; maybe, national carrier is good for Nigeria for government to train pilots, engineers, use it as a means of putting in infrastructure in the industry, but the way we look at it is that government can still achieve that through other means. We have trained a lot of pilots in Arik and some of them have been poached by government. Four of them are in the Presidential fleet. But we believe that government should train its pilots than to take from us. It is wrong for government to allow us to train our pilots with our money and they take them from us. We also believe that the Nigerian Civil Aviation Authority (NCAA) should have a clause in its regulations to have a check on poaching of pilots from one airline to another. Some of those we trained are the ones flying private jets all over the place. Some of them want to come back and we said, no. Some of them have gone to fly in the Middle East.
What I find out is that a lot of people who are making comments may not have sufficient information. For example, people talk about having MRO in the country. I agree that we need it in Nigeria if we are to develop our aviation sector. We have funds to establish a maintenance repair centre. We got about half a billion dollars about three, four years ago. We had an agreement with Lufthansa Technic that they should man that maintenance centre because if you build maintenance centre and you don’t have the qualified people to run it, nobody will come there. And the number of aircraft we have is not sufficient to justify the investment. But if you have it under Lufthansa Technic, Lufthansa will be sending clients here, just as they have similar facilities in Malta and other places.
When they get contract they decide where they will take their clients to. Sometimes they say, Arik, you go to Malta to maintain your aircraft, sometime they say you go to Sophia, and sometimes they will tell us go to Singapore. So once we have partnership with them they will be the one that will attract clients and once Lufthansa is here they will come. This will bring revenue to Nigeria; it will help train manpower in aviation and create employment for Nigerian engineers. It will be a very big opportunity for Nigeria.
What are the things forestalling the Project?
This is what Nigeria should be looking at than all these attacks on Arik. The real thing NCAA should be striving for should be to enhance the possibility for Nigeria to have MRO facility. So NCAA should help to facilitate Arik and Lufthansa to build the facility. Lufthansa has told Arik they are prepared to support us. We have gone to look for the funds; we have approval for the funds. We have surveyed the place but unfortunately a Minister came and divided the land into two and gave one to oil and gas company. So the land available is no more sufficient for the planned facility. This is because wide body aircraft requires a very big maintenance hangar.
The people who will fund the project insist they want the facility in Lagos. We have tried to convince them to let us build it in Abuja where there is land but they insisted they want it in Lagos. We have gone back last year to renew the funding and they said the money is still available. So really we sympathise with people who are nostalgic about Nigeria Airways. They are very passionate about the airline and it is understandable, but things have really changed. We really appreciate their emotions, but we have to move on. They should face the reality.
When we took over the old headquarters of Nigeria Airways after buying it through court liquidation process, we met the whole place in shambles. So we decided that for us to have a new start we should start with modern technology. That is why we decided to go for new planes. At that time Boeing had changed to the Next Generation (NG) planes, Bombardier too had changed, so we decided to have a clean break; that we didn’t want to fly the classic or the old planes.
Nigerians are apprehensive about one person owning an airline and getting all the government support as a flag carrier, so what plan do you have towards divesting your shareholding?
God in his infinite mercy use people to achieve His purpose in a life time. Everybody is sent on a mission. If you want you can listen to God’s voice; if you don’t, you won’t listen. From President Obasanjo, Yar’adua to Jonathan and now President Muhammadu Buhari, everything that is happening is a blessing for us because we are learning from it. Although what Buhari is doing now may not favour some people’s interests but they like what he is doing because he is bringing sanity and discipline into the system. I never at any day sat down and said I wanted to start an airline. Circumstances brought me into it.
The former President, Olusegun Obasanjo wanted to establish a major Nigerian carrier with partnership of a foreign airline. He spoke to South Africa Airways and he didn’t like the way they responded. Even recently he still recalled that incident to me. He also spoke to KLM and received similar response so he invited Richard Branson and his Virgin Atlantic. Then he challenged Nigerian businessmen and said, why can’t you people do something and government would give us the support. Some people said no Nigerian can do it. Here we are today.
We have explained why we decided to go for new aircraft; not because we had money, but we looked at it and said this whole place was old technology. We came in during that era of technology change in aircraft manufacturing. So we had to take a decision. So some of the people we consulted said let us start with old planes so that when we made the money we buy new planes. I refused. So many of us had different opinions about how we would start. Some even said there was no need to buy this property of Nigeria Airways; that we should just get a container. That was their own vision. It was not that we did not consult people; we did. But they had a different opinion from our vision.
It was the same experience when I started my farm in Edo state. Some people believed that there was no need to provide cooling houses for chickens. I have a big farm in Benin City where we have well built houses for the chickens with cooling system that set the temperature for the laying of the eggs, but some people at the beginning said we didn’t need that. So when you start a business everybody believes in his vision and what he wants to do.
People also wondered how I would get the funds to drive my vision of the type of airline I wanted to establish. I raised funds from the US. I used to work in the US so because of my background the people I worked with supported me because I had a good record and they were the ones who met with US Exim Bank and said this man is a good person and I got the loan. The same thing happened at Export Development of Canada I was able to get the loan.
With that we had access to funds and we bought the modern planes. We got two classics but we quickly phased them out and of course we got Lufthansa Technic as partner. We have got the airline to the level that we are now thinking about public offer, but this will not be done overnight; it takes time. As we speak today, we have Vetiva, a Nigerian company working with Deloitte, Goldman Sacks, AfroExim and will also work with Zenith Capital. We are inviting Zenith Capital to join now to work towards the public offer. Within the next 12 to 15 months more investors will come in. We have got the airline to a point of no return, where somebody cannot reverse from where we are going.
We have got funds to buy 26 more aircraft from 2017 to 2021. They will be coming in: the Boeing B787-900, the Boeing 737-900 ER, we are also going to get Boeing 737 MAX. At this point everything has been signed. We already have deposit with Boeing. We have our roadmap. The road map is very clear. Once we get this we pay off Asset Management Corporation of Nigeria (AMCON) for the two London planes (Airbus A340-500). Everybody said we are heavily indebted but it was these two London planes that Union Bank gave us a guarantee that is causing all this. We shall pay AMCON off and settle our issues with the organisation.
Dangote I am happy is alive. I am very proud of him. In fact, he is a great patriot. He managed his company for a long time before he went public. The same thing with Jim Ovia who is a great supporter of Arik; he nurtured Zenith for over 20 years before it was open to public offer. Boeing we are talking about, the family that owned it nurtured it for over 29 years before they went public. Most successful companies had to be nurtured by their founders who had the vision and know where they are leading it to.
A lot of personal resources have gone into the Arik project. There are so many misconceptions about it. Arik has been a Nigerian project since the time we started. If you look at the management structure, we make sure that every geographical part of Nigeria is represented in the company. The employment is open. We make sure we get the best but we are conscious we must bring all Nigerians together. Even our route network, we were the first to go everywhere: whether is Gombe, Uyo, Ibadan, Ilorin etc. We were the one who started going to Ilorin. We went to Sokoto. We developed routes from Abuja, our capital; we went to Yola and to Maiduguri before the insurgency started.
We were conscious that our company should be a uniting factor, so that all our brothers and sisters should move together and visit each other. During Sallah we give priority to flights going to the north; during Christmas we do the same thing. We even extend that to Africa. We have pilots from Sierra Leone, we have pilots from Senegal, Mali, and we have Ghanaian pilots who even operate our wide-body aircraft. We also have pilots from Uganda, Kenya and Ethiopia. In Arik we don’t talk much; rather, we act. The respected Theophilus Danjuma said we should do more action than talking. I believe in that.
Everybody has a say in Arik and when we are going to go public we are going to make sure that every section of Nigeria owns part of Arik. Currently we employ about 3,000 Nigerians. Some Nigerians like to brag they fly British Airways, but all the foreign airlines put together do not employ up to 500 Nigerians. Do you know how many people Dangote employed in this country? He employed more than some two, three state governments put together. And what we are going through Dangote had gone through that. He is an inspiration.
We do appreciate comments we get from people. That does not mean we did not make some mistakes. Unfortunately the airline industry is growing but the support services are not growing. For example, Arik needs about 800,000 litres of aviation fuel a day but how many fuel marketers can supply it? You will find that today we talk about bowsers (fuel dispenser vehicles) breaking down, the bad roads, we are still trucking fuel from Apapa and the marketers do not have enough. The facilities and services cannot meet the expansion and growth we are experiencing.
We have applied to various agencies to give us land so that we build our tank farm and they said no. When these 26 planes come, where are we going to park them? The truth is that those who are shouting about national carrier should urge government to step up the development of infrastructure. The training school, the Nigerian College of Aviation Technology, Zaria should be expanded and well-funded.
Many say that the Nigerian carrier that would be established should have a technical partner which will help it to interline and fly to higher destinations. What is your take on this?
Contrary to what people believe that you need an international carrier before you operate successfully, I do not agree with that. I think that is an attitude of somebody that does not have confidence in himself. Nigerians are some of the best educated people in the world. The best heart surgeon in London, in Cromwell is a Nigerian, from the South East. Most of the top doctors in the US are Nigerians. In NASA (the National Aeronautical and Space Administration), we have Nigerians there. If you go to General Electric there are Nigerians. In every sphere of life there are competent Nigerians there.
It is a pity that we don’t appreciate ourselves. In Arik here I doff my hat for the executive team. Most of these people are very, very competent. Anywhere you go to in the world they will stand their ground and one thing you have to understand is that most of them are technical people. They attended the best schools for training and recertification.
I will like to talk about our Operations Control Centre (OCC) dispatchers. They have been to the US for training and they hold FAA (Federal Aviation Administration) licences. And during their training FAA said they are very competent. I was amazed at their performance. And these are Nigerians. Our staff that went for training in Singapore came out tops in the whole world.
We have IOSA (the International Air Transport Association (IATA) Operational Safety Audit). We have done it three times. We have E-IOSA, which is enhanced IOSA and it was done by SH&E based in the US. That is the topmost people in the world. It was this same SH&E that wrote the manuals for Nigeria to get the US, FAA Category Safety Status. They are very strict and the last one they did there was zero findings. At the IATA register we are already there for the clearing house. There are issues that can make an airline not to enter clearing house. For any airline to be with you they want you to be in the clearing house. We are in partial clearing house with some airlines like Emirates. We have with Hahn Air; we have with some other people. So our tickets are sold all over the world.
There are a lot of things Arik has done. We have moved a long way. We have highly advanced IT system in Arik and we have real time weather. Few days ago in Port Harcourt they told our captain to start the engine of the aircraft but the captain said he was not going because the weather he was seeing from his cockpit was not good. Our aircraft are described by Boeing as richly specs. We have high specs on our aircraft and we do not joke with weather and instrument. We spend extra money to equip our aircraft with enhanced safety features. So the captain in Port Harcourt said he was not going to fly, but another airline took off and within five minutes came back and said the weather was too rough.
When our captain saw the weather situation in his cockpit he called our OCC and they confirmed and said they have weather report from the Nigerian Meteorological Agency (NIMET) and our sources from Europe too. Any time Nigeria is being inspected by FAA it is Arik they use.
When Nigeria held the World Economic Forum for Africa we dedicated our aircraft because they said they were told they should fly only Arik; that once you are in West Africa you should fly only Arik. I do not know the technical partner they are talking about but Lufthansa is doing our maintenance. Operational wise Nigerians are very competent. Coming to interline, we are more than ripe and we have a lot of people coming but we don’t want to rush into it. There is no need to rush into interline when we don’t have a frequent flyer programme. We are doing a test run. Once we get it right we start. If you interline now without it, it will only benefit your partner without benefitting you.
I learnt your airline’s on-time performance has improved. How can you sustain it and what are those factors that hinder your on-time performance?
This year for all airlines has not been very good in terms of on-time performance. The Harmattan in January extended to a longer period and you know, most of our airports do not have the necessary instrument, although our aircraft can land under zero visibility but there should be corresponding instrument on ground to enhance it. The election disrupted our operations with the VIP movement and all that. After that we now went into fuel scarcity which lingered for a long period. As I told you earlier, we need at least 800, 000 litres of fuel a day. Sometimes we got as little as 300,000 litres which could not take us anywhere.
The truth really is that nobody wants to delay flights. You have to understand one thing, the more flights we make the more money we get, so it is not economical for us to delay flights or cancel flights. The passengers abuse us but they do not know what we are facing to get fuel. If the fuel supply is delayed there is nothing you can do.
What can Nigeria do to enhance fuel supply to the airports?
Nigeria is the only country in the world where crude oil price is going down but there is no corresponding downward review of prices of aviation fuel. Barrel of oil has gone down now to $48 from $100 but aviation fuel is still sold at N135 per litre; the reduction is barely 12 per cent. In the US aviation fuel is cheap. When we were going to Dubai we were buying our fuel in Dubai because it is cheaper in Dubai than in Nigeria. The government of Dubai deliberately lowers the prices of the product for Emirates. This is because the government of Dubai sees Emirates as an instrument to make Dubai what it is.
We want our refineries to work. We want to see our government try to improve the supply of the product. I gathered from the Director General of NCAA that the pipeline that connects the depot at Ejigbo to the airport in Lagos could be revived; that they need to clean it up. He said that he appreciates that the hiccups in fuel supply is a limiting factor; that the Permanent Secretary (Ministry of Aviation) is looking at the issue now. You will see six airplanes waiting for two bowsers to serve them. That causes delay, so it is not going to work.
To me, what the government needs to do, maybe it can still do national carrier, is to concentrate on infrastructure. Improve the terminals, get transit section and get the conveyor belt. Let us buy heavy duty conveyor belt for God’s sake; not conveyor belt meant for small operation and the thing is damaging people’s bags. With this and good fuel supply the airlines can operate efficiently.
If government wants aviation to be strong all these foreign airlines will need to negotiate with local airlines. When we went to Angola to get some frequencies they told us look, go and meet with the local airlines, negotiate with them. Once you people have signed something, bring it, the Minister said he would endorse it and that was what he did. We went to Brazil they did not cooperate with us but when Brazil came here our government gave them everything they wanted.
I like to correct one wrong impression. There have been reports that airlines were given N300 billion intervention fund. I will like to say that that was absolutely not correct. That sum of money was meant for power, textile and aviation industries. To the best of my knowledge, aviation did not get more than N130 billion. To us in Arik no cash was given to us. It was to reduce our interest rate in the funds we owe banks from 21 per cent to seven per cent. We were not given any cash so when people say we were given certain amount of money and we diverted it people are just being accused wrongly.
No such thing occurred. It was the replacement of existing loan. We got a total of N15 billion and it was not given in cash but to reduce the loan in two banks: one bank N10 billion; the other bank N5 billion. The last time we checked what we owe the banks for these facility is about N7 billion, so we have paid half of it. I was disappointed with somebody who wrote in one of the papers that Aero and Arik can be merged together because they are owned by AMCON. The person was not informed. Those who are passionate about this country should base their views on facts when they make their comments.
