The Chief Operating Officer of Dana Air, Obi Mbanuzuo, in this interview says while globally airlines need government support, in Nigeria, the need will be more acute; otherwise thousands of workers in the sector may lose their jobs.
It is getting to four weeks since you stopped working and so are other airlines, what do you think will happen?
Like you said it is almost four weeks that Dana stopped flying and most airlines stopped about the same time. It has actually been tough because we know normally January comes up with the peak of December, but January was looking okay and in February we had the issue with ILS (Instrument Landing System) situation in Lagos, so apart from that incident, things were looking okay. This coronavirus situation forced the federal government to first shut all the airports apart from Lagos and Abuja for international flight operations. So when that initially happened, it reduced the traffic a bit, we all know a lot of traffic in Nigeria is based on international travel, even domestically. Number one factor that drives traffic is business. Very few people travel in Nigeria for leisure. So the fact is that two long haul international airports were closed initially and then Lagos and Abuja were fully closed and then it really affected traffic. Because a lot of the domestic travel is business travel, people go for seminars, conferences or government assignments so that affected us. So we shutdown initially because the traffic was so reduced that we were carrying 20 per cent load factor which didn’t make sense. So in essence, the month of March and a bit of February were loss making already even before the shutdown. I don’t think any of the domestic airlines will want to operate because we may go bankrupt and I hope people are taking the strategies we put in place in Dana Airways.
Suppliers have been very accommodating because this is a worldwide event. So, there are certain cost that we are currently not bearing which if were in a normal situation we would be bearing. So people have their aircraft on lease, luckily we are negotiating with some of our lessors, and even with system suppliers for the computing systems that we use. So I think the main pain is actually going to be borne by the employees themselves because very few airlines can afford to pay any salaries during this period. So the airlines themselves will require some government help whenever the economy restarts. The airlines will need some cash flow even if it is just to put fuel in the airplanes from day one. Because whatever fund we had, we all kind of paid March salaries but right now it all about the CBN factor, the employees themselves. The good thing in the domestic market is that the airlines are not talking about downsizing. I haven’t heard of any airline; nobody has let go of staff yet.
When you consider the Minister of Aviation’s comments on local airlines, do you think government can really see a need to support existing airlines to stand on their own when all these things end?
One of the things we have always heard from the Minister of Aviation, Senator Hadi Sirika is that he is one of us and he is a pilot. So the airlines are actually sticking to that. We do need the assistance of the Minister and the Ministry of Aviation, so the airlines are sticking more to the Central Bank of Nigeria, which, which will have a lot to do in terms of foreign exchange rate, foreign exchange availability, almost everything the airlines use is sourced from abroad, unfortunately.
So, the CBN will have a lot to do in terms of making available either through the bank of industry or wherever, making available funds to restart the business at low single digit loans or grants. So the minister of aviation is one of us, he will always do what is best for the industry. I think we are facing more of the financial side of it, which is the central bank and things like that.
If the situation continues till the end of April, what do you think will happen with the local airlines’ workforce?
Just like I said, unfortunately if the economy shuts down there is no alternative for the aviation workforce. Really, what we are looking at just like every other Nigerian is for government to provide palliatives for the entire population of the country because what affects the country affects us. Everybody is sitting at home hungry now; you don’t know who works for airlines or for ports. Everybody is hungry.
As it is right now the airline cannot afford to pay anything apart from what they have paid already. We paid March salaries and that was what we could do. Unless the government makes something available now, we all see what is happening presently in the US, UK, where they are trying to give support to airlines and other businesses. Nigeria might not have that financial clout right now but it is possible that there might be some indigenous ways that we can try and help the public at large.
Of course, when the public is helped our own workforce is also helped. They are one and the same; there is no difference, you cannot separate them. But it will be a difficult thing for everybody. I am talking to you right now and I am the COO of an airline and it is difficult for me actually, I am sitting at home thinking of how things are going to be. I have my fingers crossed and I am hoping that the Nigerian Centre for Disease Control (NCDC) and the people who are looking at this situation from the health perspective are doing things right, and we still encourage everybody to just follow the directive so that this doesn’t extend too much past this month of April.
There is a general believe in the industry now that by the time the COVID lockdown ends, some Nigerian airlines would go bankrupt?
My question is, what is this assumption based on? Because I am only seeing this from personal experience; in Dana Air we have reduced our cost to the barest minimum. What is going to drive me bankrupt now that I am not flying? We are hardly paying out anything in terms of cost of operation. Yes, some airlines might find it difficult, even before the shutdown, which is why I said we would need some kind of assistance to restart. When we restart, those that are shaky and cannot find their feet might then finally go bankrupt at that point like you said. But right now, at Dana Airways, we have six aircraft parked; even though they are parked, our engineers are still working on them. Some of the aircraft are preserved so once in a while they come in to start the engines, look at the systems, rotate the tyres and wheels and all that. But apart from the minimum cost that we are paying out, the other cost to the agency for now are not ongoing. They are not demanding right now they are all kind of shutdown.
Of course the quicker this process, the COVID shutdown, the sooner it opens up the better for everybody. Because the society right now is tense, even though we paid March salary like I said, we won’t be able to pay in April. I think when airlines resume operation after the lockdown; there will still be some tentative issues. Passengers will not come back straight away. You will have some people who will be scared of travelling, every country will not open up at the same time and a lot of our traffic comes from abroad. If, for example, Nigeria domestically opens up, you come back to the situation around the end of March when we Dana Air shutdown, we were still flying, there was still Nigerian traffic but nobody was travelling, there was no much business going on. So if Nigeria opens up domestically, the domestic airlines will still not see much rebound in traffic for a while. I am not looking to see anything near what we have before till around maybe October or November. Even if the country opens up for May.
Let’s look at it globally, what do you think will happen to the aviation industry?
Aviation globally is going to change definitely. Airlines are going to cut down their operations. It will be like 9/11 situation, but this is even worse than that. I remember in 9/11 people that used to fly first class changed to business class, people in business class changed to economy. Remember most airlines don’t have first class on board now. Only very few have first class; it is all called business class. What we are going to have now is that there will be greater use of the Internet in business. Under this lockdown I am doing a lot of my meeting through online conferences, so after the COVID-19 ends, why should I go back to a plane to fly somewhere for a conference when I can do it with four or five people in different locations in the world? Recently I had a conference meeting. I was in Lagos, three people were in the US, two in Italy and we were all talking as if we are sitting next to each other. So people have to realise that there will be reduction in the way we travel.
You remember that there was already some noise from people that were against emissions, carbon dioxide, and now you add this issue to that with the fact that people have now found alternative ways of doing business without actually getting on a plane. So it will also have an effect on the market. The second effect you will find is that ticket prices will go up even domestically in Nigeria, I suspect that ticket prices will have to go up. This is because that is something that we will see. After 9/11, airlines actually cut fares to try and bring people back but that was a specific travel, the north Atlantic travel between Europe and the US, Asia was not really affected by 9/11. But this is now a worldwide issue, and like I said, traffic will come down, so why then are you going to discount to get people on flight when the traffic has come down? I suspect the fare will go up a bit; few people flying can at least pay for the cost of the flight that we have before maybe traffic start coming back.
But I don’t expect traffic to come back even in the international routes. It may not come back until towards the end of the year. I personally have booked travel with my family, we have already bought our tickets on a foreign airline, we are not going to use that ticket again next year. We are not going to travel again.
Do you think leasing will remain the same where lessors will be unwilling to lease to Nigerian airlines?
They won’t be forced to lease this time because they will have the airplanes but nobody will be interested in leasing. Think of it, airlines now are parking aircraft, so those parked aircraft will never be resuscitated. I will give you an example; British Airways just parked six A380s. As you know the A380s is on its way out. I don’t even think BA will bring the A380s back into service. So, there will be a lot of aircraft in the market, some leasing rates will have to come down, when the leasing rates come down and you still can find anybody to lease the aircraft, you give to those who didn’t want to lease before. I give you an example, the leasing companies will go and lease an aircraft to United in US for say $70,000 a month, when they bring that same aircraft to Nigeria, it is a $150,000 a month. Why because they just felt you have no option. I am not in the leasing side but I hope that it will affect the market in terms of the rates coming down.
