Post COVID-19: How Airlines Can Make Over N50billion Annually – Ojikutu

Post COVID-19: How Airlines Can Make Over N50billion Annually – Ojikutu
Ojikutu
By Kenneth Jukpor and Ayoola Olaitan

Group Captain John Ojikutu (Rtd) is a former Commandant of the Murtala Muhammed Airport, Lagos. He also is the Secretary General of the Aviation Safety Round Table Initiative and Chief Executive Officer, Centurion Securities. In this interview with MMS Plus newspaper he speaks on a myriad of aviation sector issues and unveil opportunities for the industry when the air travel restrictions are lifted. Excerpts:

 

COVID-19 pandemic has been confronting the globe, how would you rate the effects on the nation’s air travel industry?

COVID-19 has affected Nigeria the same way it has in other parts of the world and that is because we didn’t take action on time. Do you remember the first time we had the first index case just before then I admonished them to close the airports as it was done in South Korea. If the airports were to remain in operations then only Lagos and Abuja for international flights, even the first index case when they were in search of him they were looking for the passengers that where inside the flight with him. I wondered why this was an issue when there are comprehensive details collected by airlines when booking for air tickets. The immigration also had the address of these people and if not accurate, get such information from the airline. Nobody gets a flight ticket without giving relevant information. The COVID-19 figures which has kept rising daily in Nigeria originated from the open airports. At the point the airports were shut, almost a thousand people had come into the country from affected countries. If you look back at the early March you will get the real picture of how it spread. We are lucky that the effects of the pandemic are not the same in Africa as it is in other continents.

Look at the Lagos social distancing; it is obvious that people are not keeping the distance. The effect of the pandemic on aviation is more because 80% of our earnings in the industry is from foreign airlines. So, if the foreign airlines are not coming in we are not making money irrespective of the noise domestic airlines are making.

Looking into the aviation industry in the Post COVID-19 era, what are the emerging opportunities or avenues to explore for sustainability?

Don’t expect passenger traffic to be as it was before the pandemic until the next two years. If it does change sooner, that will be a great thing because the money is not there for the passengers and the fright about the pandemic is still there. Aircrafts need to be serviced to be in a good state and the airlines need money to do that. Pilot recurrence need to be reapproved and they also need money for the recurrence training. As aircrafts need to be in good conditions, so do pilots also need to be trained before passengers can be put onboard to be sure they are safe.

Another thing is the additional cost of operation. I have always criticized giving food to passengers for one hour flight. It is not cost effective on the airlines. Looking at rate of fuel and picking and landing charges, when tickets are still sold at N30,000. Well, some of the airlines are already saying they will stop giving food. The cost of sanitizing the aircraft at every landing will also be an additional cost and the era of quick turnaround would be history.

Every airline must begin to look at opportunities in cargo transportation because the passengers won’t be there when the ban is lifted. About 100million metric tonnes pass through the seaports and this means it passes through the road network. Today from FAAN’s record the cargo traffic is about 40,000 metric tonnes compared to the sea ports. Why can’t the airlines tap into that sector? They don’t need to look for one percent because only 0.005% is about 500,000 metric tonnes. This will change cargo business at the airports.

If airlines look into the road transportation cargoes and tap into it by 0.005%, they would multiply their earnings in air cargo freight by over 10 times. They will make a minimum 50 billion every year which automatically translates into about 25% of what they were making before the pandemic. This venture would reduce the effect of the COVID-19 on their businesses.

A British carrier came into Nigeria recently amid the air travel ban and was fined N1million. This sum is less than the fare of two passengers and it has raised concerns about this aspect of regulation. What’s your take on this?

The money should have been charged based on the dollar rate. In 1988 or so I saw somewhere that the government said the flight ticket fares should be based on exchange rate with the dollar at the time. So, if the fine for the offense is 500,000 then it should be in dollars that was the mistake made concerning the law. The amount of fine should be charged based on the dollar rate now. If the specified fine was N1million ten years ago, was the value of a dollar at that time. So, the equivalent of that sum should have been translated to get the correct fine.

The issue of fares for air tickets should also be managed similarly. I mentioned that even tickets to Abuja that are charged for N30,000 are wrong for an hour flight. When airlines collect N25,000 to N30,000 for such trips, I always tell them they must be making money somewhere we don’t know because the charges do not seem profitable at that rate. The problem with most airlines is that they are benefiting from something. Why are questions not raised as to why the government avails multiple frequencies to the foreign airlines? Why are the domestic airlines not fighting the government for giving such frequency to foreign airlines on multiple landings? Foreign airlines go to about six airports in this country. How many of the domestic airlines can operate international flights from these airports?

Most of the domestic airlines don’t pay landing and parking costs or they owe it in huge sums. This also explains why without the foreign airlines the nation’s aviation industry is nowhere. The same thing with navigational charges, some of the domestic airlines will even say they cannot pay and nobody goes after them. Flight operations have only been grounded for few months now and they are lamenting on losses.

Aviation agencies have been directed to relocate their headquarters to Abuja. This has raised some concerns in the industry. What’s your view on this?

The complaints about the relocation are rising because these agencies are close to Murtala Mohammed International Airport (MMIA) in Lagos. Most people are worried about the relocation, but the worry is negative because MMIA is the cash cow of the nation’s aviation industry. The government has valid reasons for moving the headquarters to Abuja.

However, my view about the relocation is that having the headquarters of these agencies there will not allow the man in charge of the airport to operate independently. He won’t be able to use his initiative to take simple decisions. If someone is put in charge of a place giving back such money the way and his bosses are around him, his situation will be like a local government chairman in the country today. The challenge is that a local government chairman cannot operate optimally because of the governor who is looking at his every move especially where it has to do with finance and major projects. This same challenge is seen in other aspects of governance, the government needs to allow the Judiciary and other arms of government to operate on their own.

Today, when you go to MMA that is generating N5billion, ask how much does each agency has in its account and you will be surprised that an agency might not be able to boast of N10million. Now, moving them from Lagos does not mean they are relocating to be at the Abuja Airport, they will be moved closer to the Ministry. This issue of relocation has been on for a while. In my book that I wrote in 2006, though I also mentioned this in one of the letters that I wrote to the Presidential committee during the Obasanjo administration, that the agencies should be moved closer to the Ministry instead of the running the industry between Lagos and Abuja. This quest started long ago, we have to move them close to the Ministry. The job of the Ministry is to make policies and the job of the agencies is to translate this into operations. We have even gotten to the point where the Ministry wants to do the job of operations like wanting to repair runways, so moving the headquarters of the agencies is a step in the right direction for the industry.

Again, the government says it wants to concession the airport. After the concession, will the agencies remain at the Lagos airport? So, definitely they will move. The point is that people are complaining because they don’t want to leave a place they have become where they have become to comfortable. Government says it doesn’t want them to be closer to the airport again, probably in preparation for the concession.

One of the reasons given for the relocation was to cut the cost of having the management and directors move to Abuja frequently. How would you rate this? 

Let us agree it the reason. Now, looking at the cost, we have to figure out how many people are moving? How many directorates are in each of the agencies? They don’t have more than six directorates. How many people are under each of the directorates in terms of key members of staff (directors, personnel managers and deputies), this will amount to about 10 people multiplying them by the number of directorates that will be about 60 or let’s give it total as 100 people. Apart from the directors who possibly will be in duplex what about others that will not have access to be in a duplex. Now looking at the cost of all this, how much is budgeted to each of these agencies every year as housing allowance. Given that N250million was spent on the 100 people that are supposed to be moving we are talking of those who are in the headquarters not those who are in operations at the airports. Looking into the tour allowance you will be shocked that they spend about N1billion to N2billion. So, when this relocation is done the government will need to cut it off to save cost. I have put all these calculations together since 2006 during the Obasanjo administration.

The government is not helping the industry with the current structure. If they have a director that put all his energy at MMIA and doesn’t stay there rather is always moving from Lagos to Abuja two to three times a week, the cost of the movement is not free including accommodation and air tickets. This relocation is even moving too late. About four or five years ago, the Nigerian Civil Aviation Authority (NCAA) moved partially to Abuja.

I have observed that some agencies have been around the airports when they are not needed there. If you’re too close to the man you put in charge of operations, he will be helpless and for every little thing he will keep coming back to you instead of making key decisions. For instance, we have a situation where an Airport manager can’t take key decisions regarding development of the airport. There is need to seat down and look at how to grow this sector, so for me, I’m in total support of the relocation of the agencies headquarters to Abuja.

The Airport managers are not even known because when there is an issue at the airport people go to the agency’s PRO or the Director of Airport Operations. The slightest of challenges at the airport is reported to the headquarters to solve it, when there is an Airport manager.

The main question to ask most people against the relocation needs is – if the government finally concession the airport what will the headquarters be doing there?

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