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‘How to ensure airlines’profitability’



Indigenous  airlines can brace the inclement environment by forming healthy partnerships, African Business Aircraft Association (AFBAA) Chairman Nick Fadugba has said.

Fadugba, in an interview last week in Lagos, said though Nigeria was recovering from recession, airlines could latch onto the huge size of the air travel market through partnerships to compete favourably  with others.

He said: “Nigeria is blessed with the biggest domestic aviation market on the African Continent, bigger than South Africa, Kenya, Ethiopia and many other countries. And yet we have not been able to harness this market for our own benefit. The beneficiaries are foreign airlines. Our airlines need to work together. If you have five aircraft, 10 aircraft, it is nothing in the world of aviation.

“We need a critical mass. If you look at Ethiopia, they have 100 aircraft that is one airline, and yet we have 10 airlines here with maybe  five aircraft each. We need to work together, otherwise, the economies of the business are not in favour of the operators.

“They need to come together to scale up to get a critical mass. They can work together in training, maintenance, in spare pooling and aircraft acquisitions. There are many areas African airlines and Nigerian airlines, in particular, can work together. So, we need more cooperation in Nigeria among our airlines.”

Specifically, he advised operators  to leverage their operations through the pooling of fleet, training of personnel and co-running a maintenance repair and overhaul facility, among other options, until the government introduces a more thorough approach to funding aviation.

The AFBAA chief said running maintenance, repairs and overhaul facility required a sound business plan, pooling of resources, competent management, scheduling aircraft, training and retraining of experts, among other critical needs.

He said in Africa, aircraft maintenance, repair and overhaul (MRO) market was worth over $2.4 billion but Nigerian carriers were unable to tap into the market.

Describing the situation as unfortunate, he said this goldmine had remained untapped over the years in most parts of Africa.

Nigeria, on its own part, he said, has joined the league of MRO providers following the establishment of one such facility by the oldest domestic carrier, Aero Contractors.

The airline has carried out the first C-Check on Boeing BB737 Classic after almost two decades.

Fadugba said to have an efficient MRO facility would require support from the government and financial institutions for low-interest loans and development of infrastructure, especially for airports to attract traffic.

According to him, the government can support such initiatives through the allocation of land around airports at affordable cost.

He urged FAAN to adopt a policy of giving land at little or no cost to attract investments in tooling hangar and manpower training.

Noting that Africa’s MRO business should be exploited, Fadugba lamented the absence of MROs in West Africa, taking cognisance of aircraft type available for line maintenance, and the possibility of business for potential investors.

To him, airlines that have aircraft MRO providers include Air Algerie Technics, EgyptAir Maintenance & Engineering, Ethiopian Airlines MRO, Kenya Airways, Royal Air Maroc, Morocco, South African Airways Technical, and Tunis Air Technics.

Fadugba said one of the benefits of MROs was that it would spark competition from foreign providers, leading to better pricing for African operators.

He said such situation would also enhance timimg, create jobs and training for the local population while making substantial contribution to the economy.

He listed other challenges to airlines setting up MROs to include access to bureaucratic interference, sourcing, attracting, training and retaining a skilled workforce, reputation for performance and tolerance for risk.

Analysing MRO trends globally, Fadugba said: “Most airlines are looking for cost-effective solutions to address their MRO requirements/outsourcing arrangements, potentially with subsidiaries and through joint ventures. The larger MROs are providing a wider range of products to cater for higher levels of outsourcing by airlines,’’ he added.

Noting that older aircraft are being retired as new ones enter airline fleets, he said there was high aircraft utilisation by low-cost carriers, who outsource their maintenance requirement.

The implications of this, Fadugba observed,  is that new aircraft will generate fewer maintenance. While new aircraft are more reliable and require more advanced and expensive MRO capabilities, he added that new skills, knowledge and capabilities are equally required.

“Original Equipment Manufacturers (OEMs) are providing options at point of new aircraft sales:  Engines and components becoming more complex and reliable. Independent MROs impacted as OEMs grow market share.

‘’Outsourcing of engine and components overhaul is now a standard practice for most airlines. Airlines are opting for pooling contracts with reliable component suppliers”, Fadugba said, adding that Africa is becoming more attractive to investors.

Fadugba said the key to MRO’s success is the understanding of market dynamics in the sector.

MROs may need to partner so as to increase expertise, improve systems, develop worldwide marketing coverage and generate reciprocal business with suppliers.

“MRO Business is Capital Intensive and High Technology. The best way forward for Africa is co-operation, collaboration and win-win partnerships,”  he added.

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