3 new airlines, 60 planes coming to crash Nigeria fares

By Samson Echenim

• Green Africa Airways to become largest with 50‭ ‬Airbus planes

Nigeria’s domestic air travel market is on the cusp of experiencing the biggest explosion in recent history of any aviation market in the world, business a.m. has learnt from very reliable sources within the industry.

The explosion is being envisaged on the back of the nearly-ready entrance of three new airlines that they say should happen this year, starting as early as June; and one of the new airlines is expected to begin operation with 50 Airbus A220 aircraft, or at least hitting that high figure in its first year of operation.

The other two airlines are bringing in five aircraft each on the average. This number will add to the existing 40 planes currently operating in Nigeria’s domestic market.

With about 100 aircraft in the country’s travel market, where less than five percent of citizens are able to afford air travel, analysts are already pointing to this development as a potential factor that could drive down air fares.

The new airlines, which sources close to the development told business a.m. have secured their Air Operator Certificates (AOC), are Green Africa Airways, United Nigeria Airlines and Value Jet.

Emeka Nwobu, a tour service company owner told business a.m. that if the planned introduction of 60 aircraft into the local air travel market materialises, there was bound to be a shakedown in fares, which would benefit travellers and lead to more people having to afford air travel.

“It is something big, so big that the market will have a burst,” Nwobu said enthusiastically, adding, “With 60 aircraft coming into the Nigerian travel market, that is 150 percent the size of existing market capacity. Fare rates could as well go down by same percentage, or at least 100 percent,” said Nwobu, who is CEO of Ethos Travel Services.

Industry sources who spoke with business a.m. revealed that Aerokeys had undertaken the training of United Nigeria Airline’s crew and that the airline will start operations with Embrear 145 50-seater regional jet.

United Nigeria Airlines is said to be owned by Obiorah Okonkwo, the chief executive officer of Abuja based The Dome Entertainment Limited, and there are indications that it will start operations in April with five aircraft.

Two weeks ago, Green Africa Airways ordered 50 A220s jets from Airbus, the European plane maker, worth over $4 billion, in a deal that now stands as the largest aircraft purchase by any African airline. The airline will become not only Nigeria’s, but Africa’s biggest by fleet. With Air Peace, Nigeria’s biggest carrier operating a fleet of 23 planes, Green Africa Airway’s capacity by fleet will be more than double that of Air Peace.

The new airline also agreed to lease three Airbus A220s from Irish-based lessor GTLK Europe.

It will introduce the three Pratt & Whitney PW1500G-powered twinjets by August this year. The carrier said they will “bridge the gap” until deliveries of its own A220s begin in 2021.

Green Africa chief Babawande Afolabi said the company has secured funding “backed by some of the best players in the industry”, stating that it is “anchored” by a group of individuals including former American Airlines chief Tom Horton and Kuramo Capital head, Wale Adeosun.

The airline will be commencing operations “on a high” as a result of the lease, said GTLK Europe chief Roman Lyadov.

“It is a good development for the country, even though it could create cold shivers for existing airlines. In every free market, competition is a key element and that is what brings fairness into the market. I talk of fairness in terms of willingness to improve service on the part of airlines and the opportunity of choice for the consumer, the travellers. It should not cause any airline to pack up, except such airline does not mean business in the first place,” said Ikechukwu Udeze, an aviation industry analyst.

“Airlines already in the market are even at advantage. If new airlines are willing to take the risk, to join the competition, the old airlines have no cause for worry. I do not think there is already a tense competition in the Nigerian travel market. Air fares are still very high, higher than most countries of the world, but we know why this is so: there are fewer airlines and fewer people who are able to fly. Now, I can say we are going to be having more airlines, more planes, more seats and that could potentially mean more supply. The trend could lead to a slash in fares,” said Udeze.

No seat glut concerns

On whether there would be seat glut, both analysts said the country’s middle class population would fill up the gap. About 23 percent of the Nigerian population is middle class with spending power. This represents about 45 million people of the country’s 200 million citizens.

Nwobu said nearly all of these 45 million Nigerians could turn to air transportation if current ticket rates are halved.

“There is going to be a big change if this happens. Any time change beckons, there are fears. The market actors are engulfed in fears. But when the trends start playing out, operators will begin to fine-tune their marketing and operational strategies.

“One thing is sure: price will go down nearly, if not by half and this will make millions of Nigerians, especially the middleclass businessmen and well-employed people to begin to use air travel. If the fare rates go down as much as half what we currently have, even students can afford to fly. What I see happening is not a seat glut, because if 45 million Nigerians begin to fly, even a hundred planes will not be enough to lift them. Right now, less than five million Nigerians can afford to fly because the cost of flying is too high,” said Nwobu.

Nweze also said there would not be a likely over supply of seats.

“Everyone needs safety and comfort. Our roads are no longer safe, and even if they are safe, they are not good. Currently, local fare rates are around N35,000 and N45,000 one-way on the average, depending on if you book well ahead, or you do over the counter. If we now have the kind of competition the new airlines are bringing, operators would be forced to halve their rates and this will make millions of Nigerians begin to use the airlines,” Nweze said.

However, there are still fears that the size of Nigeria’s travels market could be too small for what is about to happen. Mohammed Tukur, a former assistant secretary-general of Airline Operators of Nigeria (AON), said even though there are still start-ups, Nigeria has had a number of start-ups and failures. But he said Green Africa, United Nigeria Airways and few others seemed to have bold vision.

“It remains to be seen how these new airlines cope in a tough airline environment considering the low number of flying public. Not a few had suggested and raised concern that with Nigeria’s relatively low numbers for the flying public, it may quickly descend into a dog fight with no winners,” Tukur said.

Airlines jittery

Investigations by business a.m. showed that airlines are already jittery and many refused to comment on the development. Will airlines be slashing their fares?

“We will let you know if there will be any such thing,” said Stanley Olisa, a spokesman for Air Peace.

Another airline spokesman who pleaded anonymity said, “We have our fare regime and very ready for competition. We have been here for 11 years despite the challenges and we believe it’s about service. Whoever has the best service or is able to satisfy the customers wins. No issues at all.”

The airline spokesman, however, said there may not be available hangar space for the new aircraft, considering the huge number.

“Where will they park them? MMA2? No space for such and is the industry now profitable for such order which is likely to come at once or with little spacing? They might have their strategy no doubt, we are watching,” the source said.

The airline insisted the federal government must remove VAT from the airlines to ensure a more conducive operating environment.

“But with poor policies killing airlines we asked for removal of VAT and they are increasing it. How nice,” the airline said, adding, “The competition will be stiff. It now remains to be seen how you outwit the other with your service, route planning, schedule and fares. It all depends on creativity,” said the spokesman.