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Nigeria: Repositioning Airline Business in Nigeria

With the first delivery of its 13 Embraer E195-E2 on firm order, Air Peace has shown that it is prepared to reposition airline business in Nigeria, writes

When Nigeria’s largest carrier, Air Peace set a continental record with an order for 30 brand new Embraer 195-E2 aircraft in April 2019, not a few were curious about an emerging Nigerian carrier’s bold step and this aroused new curiosity about Nigeria and its lucrative international routes.

That deal was unveiled during Embraer Business Meeting with the Aviation World in Port Louis, Mauritius. With the signing of the deal, Air Peace became the official launch customer of the brand of the aircraft in Africa.

Fast forward to January 28, 2021, when Air Peace became the first African carrier to take delivery of this brand new aircraft type with 30 requests, which included 13 firm orders and 17 purchase right orders.

As the Chairman and CEO of Air Peace, Allen Onyema disclosed, there would be subsequent deliveries of the aircraft until the 30 on firm order are completely delivered.

It was also heartwarming that Air Peace number of orders came second to Lufthansa globally, which ordered 35 of the same aircraft type.

With this order and on-going deliveries, Air Peace has written its name in the firmament of world air transport industry and would henceforth become a point of reference for air transport in Africa.

Aviation industry pundits have observed at different fora that Nigeria is well known in the aviation world, not so much for its successful airlines, but the fact that it remains the most lucrative route for international carriers, where foreign airlines fix outrageous fares for people who are obsessed with travelling and a country where they make the highest profits per ticket.

Air Peace Bold Step

Speaking at the arrival of the new aircraft at the Nnamdi Azikiwe International Airport, Air Peace Chairman/CEO said having a brand new airplane is to enhance the airline’s savings.

“It is not as if the second hand planes or old planes are not good, they are good. But the brand new planes give you that grace to have some savings at the end of the day because less maintenance is required. So, we decided to make an order for 30 aircraft.

“We made the order in Mauritius; we now made a firm order for 13. We have 17 orders on purchase rights. Meaning that whenever we are ready to buy the remaining 17, we are going to get them at the same price we are buying the 13 now. Today is a great day for this country, because Nigeria, through the instrumentality of Air Peace is the launch customer of this type in the whole of Africa.”

In addition to saving maintenance costs, and being more profitable for the airline, industry analysts said that ordering new airplanes puts an airline into the index of global aviation industry and boosts the airline’s goodwill. That was what the defunct Nigerian Airways Limited (NAL) enjoyed as nation’s national carrier and that was what Arik Air enjoyed when it acquired new aircraft and that is what Air Peace will be enjoying now, being the key barometer to reference Nigeria’s aviation industry.

The former CEO Aero Contractors and Managing Director designate of NG Eagle, Captain Ado Sanusi told THISDAY that the bold step taken by Air Peace was commendable and noted that if Nigeria has strong carriers, there won’t be any need for national carrier, adding that Nigeria may tailor its aviation sector like that of the United States, where flag carriers dominate the airspace.

“Air Peace joining the league of airlines that ordered new aircraft is a welcome development. E195-E2 is a very efficient aircraft, cost effective and will ensure the survivability of the airline.

“This level of investment is the right for Nigeria’s aviation industry because it will make the airlines stronger and more profitable. When we have strong airlines in Nigeria, Nigeria will become like the United States that are dominated by flag carriers. So we might take flag carriers instead of national carrier. This is new technology that it is bringing into Nigeria airline industry, which is very good. Developed nations look at flag carriers; not national carriers,” Sanusi said.

Former President of Airport Council International (ACI) World, Angela Gittens and the Director General and CEO of the International Air Transport Association (IATA), Alexander de Juniac, noted that national carriers may not be the best way to go, especially in Africa, where they are known to be very inefficient because of the government subsidy and so it is more subject to governmental types of economics; so government tends to curb competition in order to allow the national airline to thrive.

De Juniac therefore canvassed for government support of privately owned commercial airlines to make them competitive with downward review of airport charges to make them successful.

The Way to Go

The Ministry of Aviation, Senator Hadi Sirika said during the ceremony to mark the arrival of the new aircraft that Air Peace had tapped into federal government’s road map for the industry and noted that to remain competitive and profitable, Nigerian airlines should go for new airplanes.

“I think this is a step in the right direction and keying it into a well-established sector road map. The sector road map of civil aviation in Nigeria operated and being driven under President Muhammadu Buhari, speaks only about this. And I take it as reorganising the content and the importance of that road map that Air Peace is now keying into it,” Sirika said.

The Minister said part of his duties was to support the growth and development of airlines and other businesses in the industry; to help, develop, nurture and support “the businesses so that they can contribute to our GDP, employ our people and provide the needed service. Now you can’t do all of these if you don’t do it right”.

THISDAY learnt that when Air Peace started operation six years ago it stuck to a management and growth plan, which it never deviated from. According to the plan, the airline knew that in the first four years of operation, it would not make profits, but should aim for new aircraft in order to drive on its growth trajectory. That was the time that the airline first made firm order for 10 Boeing 737 MAX in September 2018 and the following year ordered for the E195-E2.

The Chief Executive Officer of Mainstream Cargo Limited, Seyi Adewale described Air Peace as a pride of Nigerian skies and commended the airline for achieving so much in such short period of its existence.

“Indeed Air Peace Limited is a pride of the Nigerian skies. It is instructive to note that a wholly Nigerian owned company can achieve great feats within six years. Air Peace has evidently proven a strategic thinking board of directors and management, passion for excellence and deft maintenance and aircraft replacement or acquisition methods.

“The growth and effective development of Air Peace Ltd reveals that airline business in Nigeria can be successfully and profitably managed. So, this is confidence-building platform (or indeed template) that bankers, investors, intending promoters can latch on to build a more robust sector. There are always risks in business and aviation is not exempted. However, the successes of Air Peace Ltd assures intending airline investors that Nigeria with 36 States, over 200 million (youthful) population, clearer government policy and best stock exchange in Africa assures interested parties that Nigeria is worth taking a second look regarding investing or promoting the sector.

“However, we can develop a long term sustainable part that fits both private airliners and government working together to achieve this competitive feat. It’s very difficult for private airlines to do this by themselves without the active support, promotion and intervention of government. All successful airline operators globally have government involvement and backing. Ours would not be different if indeed we want to compete globally,” Adewale said.

Boosting Nigeria’s Image

Industry analysts have also posited that the acquisition of new aircraft by Air Peace will reposition Nigeria’s image in the aviation circles and rebuild trust between aircraft lessors and Nigerian operators. It would also stir aircraft insurers to review their premium and country risk.

The Managing Director, Flight and Logistics Solutions Limited, Amos Akpan told THISDAY that the delivery of E195-E2 aircraft to Air Peace was the best thing to happen to Nigeria because it was not small recognition to have in the industry an airline that can deliver new aircraft.

“For a long time Nigeria has not entered into that classification because of the amount of money involved and the value given to the equipment. You know that when you put aircraft in some registers you devalue that aircraft due to country risk and other factors. Now, they trust Nigeria to get new aircraft. It means that we have come of age in terms of management of our systems and retention of values and machines.