Penninck: Airport Business Should be Profitable

The airport as a whole is managed by FAAN; we are just an operator within the Lagos international airport. So our duties are one: is to abide to the rules imposed by FAAN and the Nigerian Civil Aviation Authority (NCAA) which also themselves are based on ICAO regulations. So what we try to do that has been successful is to abide to all of them. Now, what have we done in the recent months? The latest thing that we have done is that we have purchased two brand new X-ray machines. The technology has moved from single view to dual view and all our X-rays are dual view which is now compliant to ICAO and NCAA regulations.

 

Two, it was said by the immediate past Aviation Minister that FAAN has manpower shortage, to alleviate this, we embarked on a massive training of 150 Aviation Security (AVSEC) personnel. BASL sent them to the East African School of Aviation which is an ICAO recognized school. The instructor was here for over two months and he has trained over 159 of our AVSEC staff, so all our AVSEC people are ICAO compliant in the area of security regulations. We are in the process of upgrading our Close Circuit Television (CCTV), we have finished fine tuning the proposal and we have various other projects that will definitely improve the security system at the terminal.

 

But there is an improvement on a minimum requirement, we have passed the minimum requirement, we want to be above the minimum. In that way we have to say that we are working with FAAN and not against each other; of course, on the commercial side we are competing but not on safety and security because safety is a common interest.

 

There are few things I have to say about this, and I think these things were repeated by our Chairman (Dr Wale Babalakin). Aviation is not Nigerian; aviation is not even Africa; aviation is global. So what we have to do is to look at the global standards. When international airlines fly to Lagos they will expect the same level of safety, security, operational quality service delivery when they fly to New York, Amsterdam, Brussels or Singapore. Let us use Singapore as an example; the Singapore way is the way Nigeria should go. Don’t forget Nigeria has the largest population in Africa; that is a fact. There are very few things I think personally that Nigerians cannot do compared to the rest of the world.

 

You have everything in Nigeria, so let’s take out the element that says Nigeria is a different standard; I think we should say that Nigeria should look at global standards and the quality that is giving at other airports. So if we now agree that Nigeria should look at global standards, let’s look at what is the best practice. And to me, the best practice is privatisation. You can have privatisation with the participation of the government .I am not saying you should privatise hundred percent, but if you want to do that no problem. When you said that there must be a certain level of service delivery, you can put that in the concession. In Europe it is there. Let me give you an example, all telecoms in Europe or almost all are private or at least semi private owned.

 

Even water delivery in certain countries is privately owned and managed, electricity delivery is privately owned but they have service level agreement. It is such that you must make sure that you give constant power, constant water and the price cannot go from zero to a hundred within a year. You have to get approval from the government or from the ministry to increase the rate but those things are already in ICAO. Whenever aeronautical charges are changing and usually they are changing upwards, ICAO regulates to say that you must first have a meeting with the stakeholders, give the minutes to the civil aviation and then take the decision with the stakeholders.

 

And that doesn’t apply to public airports only; it applies to all airports. This means that even if an airport is totally privatised the rates and the charges cannot be explosive; it cannot go from $50 dollars today to $100 tomorrow. There is an ICAO regulation and you have to abide by the regulation. It is well defined on what an airport can and cannot do. Now, look at our example, we are the only major private terminal in Nigeria and public terminal, meaning that we have scheduled flights, there are some other small terminals but they don’t handle schedule flights. It is not me saying it, but I still think we are the best terminal in Nigeria.

We are the only private terminal in Nigeria. Now, what do we do better than FAAN for example? I will not say what FAAN could do better but I will say what we are doing better, we have a very strong maintenance culture. We have also a small team but we treat our staff well. I am not saying FAAN doesn’t treat their staff well but there is a very big problem in the aviation industry in Nigeria at the moment, a lot of companies don’t pay on time. I can proudly say we pay on time and we pay above what the industry pays. So we have a culture within the company that at least satisfies the staff and in return to that the staff satisfies the customers that pass through the terminal.

 

We have massively invested in trying to keep up with the international standards. We don’t have the bureaucracy of a public company. There are many airports in Africa that are still state owned but they run like companies. The philosophy in the airport is that you have a private company but the government is a shareholder, either majority shareholder or minority shareholder; they definitely have something to say in it. If you move out of Africa, Heathrow airport in London is privately owned, Brussels is privately owned, the government has a stake in it, about 10 per cent, 15 per cent or 20 per cent, just to make sure that the interest of the state is still well represented.

This is because sometimes the ownership of these terminals might not be a national of the countries.

 

For example, I am from Belgium, Brussels airport I think is majorly owned by the Canadian pension fund but the rules are clearly stated in the contract with the owners.  You cannot do this, you should do this just make sure of that. Since Brussels airport was privatised, they went up and up in the ranking in terms of service delivery, in terms of security, in terms of safety and also in terms of comfort. Don’t forget that if the country remains or the state remains the shareholder and the company is now profitable the returns will be higher and they can invest that money into public transport, into infrastructure improvement like roads, into recreation, into health care.

An airport is supposed to be profitable by the way; in general, airports are profitable. If you run an airport at loss it means you are doing something wrong and especially for a country like Nigeria where the population is just there, I mean, if you go to international airport there are plenty airlines. This place is a gold mine, so they should have enough money to reinvest in infrastructure improvement. So I will say that we are a terminal that could be an example or at least a motivation to say, yes that is the way to go.

We should privatise, make government remain a shareholder and put goals to improve the airports and make them profitable and then reinvest this money in areas where the country is supposed in social amenities and number one is education. Once you have an educated workforce, the workforce will be more productive and the economy will just develop. So air transport is a catalyst to the economy. It should not be the milking cow. Airlines the same thing, airports the same thing, they are catalyst to the economy we should create opportunities to the development of various regions in Nigeria.

If the north had more transport capabilities with the south, the north will be more developed. There will be more business, there is agriculture, there are fields, the manpower in the north is underutilised because there is no transport to take the goods to where the consumers are in quick time.  Now what does that create? It creates a very expensive commodity, fruits and vegetables are expensive here compared to the north. You don’t have basically a market that can afford such expensive fruits and vegetables. If the fruits and vegetable would be cheaper production will be higher, employment will be higher in the north. It will be a win, win scenario but the infrastructure is not there, that is why we should push transport and air transport for now, but the dividends of air transport can be invested in railway.

So I think privatisation of airports or privatisation of the major airports is important because the other ones’ financial burdens can be shared by the states. Create a company that manages Lagos, Abuja, Port Harcourt and maybe Enugu or Owerri airports, these are profitable airports. Now this company or these companies should be having target on returns, these returns the country can invest in the airports like Bauchi, Katsina, Ibadan, Yola and others. These are smaller airports basically where profitability might not be as essential as service delivery.

In France there are 27 airports but only about seven or 10 are profitable, the other ones are there because the region wants an airport there. Why? It is because the industries in that region require air transport. And they said that if there is no decent or reliable air transport close to the factories of close to the offices they will have to relocate somewhere else. Going back again, air transport is a catalyst to the economy, so these airports are run at a loss. It runs at a loss when you look at only the airport. But if you look at the region and the economic effect of that airport it is profitable. So what the state or the region does there is that since it derives so much revenue from economies around the airport, they say let me just re-inject it in the airport itself and they still have leftover to do other things.

That is why I think state governments should do the same. If you want an airport, be aware that your airport is not profitable and if you really want it, you have to pay for it; because I think it is unfair to the federal government that states are saying they want an airport and they don’t pay for it.

 

What we have done is this, unfortunately there is competition here between the two terminals and you know our stand in this is that GAT is supposed to be managed by us but it is not. So we have to leave with the situation but it is not ideal, it is not right but that is the way it is. Now what we have done is that we want to be better, we want to be the best. So what we did is to ask, what do customers want? And how can we derive revenue and profit out of their needs? And the best way to go about it is to attract shops to the airport. unfortunately we have limited land but within the land that we have we have been quite innovative and thinking outside the box to know where we are going to accommodate maximum amount of shops to make this almost a shopping destination for this side of Ikeja all the way to Oshodi and Ajao.

 

So, within months there will be a supermarket opening at MMA2, Sparks is coming. After negotiations with the company management, we decided that they should have 2000 square meters to open a supermarket here. We know that this is going to attract one, revenue from rent, two traffic to the terminal and also to certain people they might say well I am going to fly an airline that operates out of MMA2 because when I  arrive I can shop there and I can go home whiles in the other terminal I cannot do it.

 

So we are trying to attract all the possible things that can make money for this terminal and to the advantage of the users of this terminal. Don’t forget that it is not only the passengers we also have the tenants and the staff that work here, they all appreciate what we are doing here. So this is the kind of things other airports could and should do to become profitable. Kano for example is not far from town, it has a huge land, one suggestion that I will have is that they should just go and seek for mall developer, to develop one on the premises.

 

First of all, we are repairing the top floor of the car park. The top one is the biggest of all so we have more capacity there.  And then also we are probably going to open the car park in front of the terminal, where we have only the VIPs. Everything requires money, we can have very big ideas but we have small pockets. So what we are trying to do is to step by step build this place to meet one: the customers’ expectations, two: to meet best international standards and three: prepare for the future. The hotel hopefully in two years’ time it will be finished by then we will definitely have more parking spaces available for both the hotel and the airport. Don’t forget that this car park is bigger than what most hotels have as car park. If you take Protea in GRA how many cars can you put there?

Now that this concession could be deemed as successful, what do you want the government to do to enhance and encourage more concessions?

 

When we talk about these things I have plenty ideas and usually they say my ideas are too big or too crazy. But in a country that managed to build the Third Mainland Bridge, I can tell you that in international standard around the world, you don’t have many bridges that can match the Third Mainland Bridge. So why can’t we move certain things that are now at the domestic airport to somewhere else and free up the space for commercial use. 20, 30 years ago it was acceptable to have airlines that have offices on the airside but now we have an airline that is almost limiting the commercial expansion of this place. The Nigeria Air Force,  that is a small thing, I think that with a new government and a government which wants to bring change, there could be also a change in the way airport are operating and change in the focus of an airport.

 

I am not saying that Air Force has no space here. Air Force has a space at the airport but there are more strategic places for the Air Force. If you look in between the two runways, the international and domestic runways, there is ample land, free land, on the other side of the international runway ample land; there is no limit in terms of space. We could accommodate Air Force and many other things a little bit outside current concentrated zone.

 

A bit further down we have people who are farming next to the runway, this could be transformed into a commercial hydra terminal and expansion of the terminal. There are so many ways we could expand the airport but we should again refocus and think, what is this airport for? It is for the economic development of the country, so let people who are active and operating in this environment and successful, let us get an opportunity of expanding and show that the things that are happening elsewhere can happen here also. I have plenty ideas on how to improve the things that are here. Unfortunately, not everybody is on the same wave length and unfortunately there are lots of interests involved.

 

 

Again the purpose of an airport all over the world is changing, it is not only to take one person from point A to point B, but they are now economic development centres. For Ikeja area of Lagos it is a mixed opportunity I think to restrain everybody in this confines spaces rather than to look at ways of expanding the terminals and the shops. Look at Johannesburg, it has wonderful airport. How many shops? I was there when it moved from being a small terminal to what it is now. I was there when they were transforming it; it was difficult to operate but now they have tripled the shops inside it. It is a whole new experience; people enjoy travelling through Johannesburg airport because you have things to do. You don’t necessarily waste your time sitting down, you can spend your time either shopping, enjoying a massage, ice cream. So the non-aeronautical in the new airport is almost more important than the aeronautical revenue. The aeronautical revenue should be for investment in security, in safety and the maintenance of all the equipment to make sure that an aircraft can land in any weather condition.

 

I will definitely increase the access road, change the drop off area, it is a constant hassle to depart in the evening from international airport. Number two, I don’t know why but there is a kind of shortage of maintenance facility staff.  Three, you know this terminal was designed in the 70s, and it was commissioned in 1979, things have changed since then. There was an attempt to remodel it a few years ago, but I think there are issues with the contractor. And it was obvious that things were going too fast and maybe not organised as they should have been. Most of the equipment in international does not work; I mean the passenger’s service equipment, the escalators, the air-conditioning, nothing works, not even one avio-bridge is working. Out of 14 avio-bridges not even one was working. We have six and they are all working and the revenue is different.

So there is definitely a shortage of maintenance. So one is the road, two is the maintenance, three that particular airport is the gateway to Nigeria, this is the first point of contact with the majority of the people that come to visit Nigeria or come and do business in Nigeria. I could almost ask you is this the image you want to portray of Nigeria when you enter international airport? Nigerians are proud and rightfully so; they have many things to be proud of but not international airport. And you know you don’t have a second chance of a first impression. My wife, when she arrived here she was crying when she saw the state of the airport, but now she has changed her mind. You know the first impression was bad and many people are saying the same thing.

 

So modernise, change the green ceilings, you need a complete overhaul of what you have, then start building more. Make sure what you have is well and fully functional, if you have sufficient avio-bridges that are all working, if your air-conditioning is working, if not you tell the airlines; because this is another issue that they have there. So number three thing I will change is to tell all these airlines that at night I am full, the airport is empty in the morning, between 9 am and 12 mid-day it is completely empty. Tell these airlines I am operating in the evening, if you want to operate in the evening you pay a surcharge say 20, 30 or 40 per cent. You motivate them to operate at times when there are not that many flights. Try to spread the flights; I think a slot system would be a nice thing to do. I don’t know what is happening at the middle of the car park there, the hotel or car park area has to be changed.

 

The last thing is train. The staff there should also be good to their customers. The customer is not at their mercy. There are very, very good people there that are working at international airport but too often, they are telling you “What do you have for me? almost everybody is opening their hand to get money. It is not right; this is not what Nigeria should be.

 

 

The rule is that everybody must be searched, the only inconvenience that you have there is the processing time. It is inconvenient but it is not an infringement of the rule. As long as everybody passes the normal security checks or processes and you have been frisked and your bags have been checked, you are okay. But again when you are doing it, how long does it take to do it? And in what kind of conditions do you have to do it? There are airports in the US that are far worse than here in terms of security. But when you are endlessly in line, it is not good. But I don’t think that it is an infringement of the ICAO rules.

 

Number one I will say that we have to find a way to transfer from domestic to international and vice versa.  To have a link between the terminal here and international, is it a mono rail, is it a rail shuttle, we should have a shuttle between both terminals to create the hub system in Nigeria. What we have now is that first of all you go through the hassle at international, you are endlessly in traffic and by the time you end here you might have even missed your flight. So we must change that. It is a big project but it is something that has to be done at government level. It is an investment the same way that Lagos State has invested or is investing now in this mono rail, the same thing should be done here at international airport.

Make it a seamless connection between international airport and domestic. Number two, the airport landing equipment for our flights on this side, that is the runway, should be equipped as the other runway so that domestic airlines which are really not comfortable at the moment don’t spend endless fuel waiting  for clearance and also at night they are pushed to land at international runway, we need to change that.

 

This airport must be well equipped enough to handle domestic and international flights on both runway and in all weather conditions. And the same thing should be done in Abuja. Abuja really should have second runway and then Port Harcourt should also have a descent terminal and better landing equipment. What the previous Minister has done is good, that starting the modernising of equipment at all the airports. It is a good step but on this particular airport, it is better connection between domestic and international, and better landing equipment.