Nigerian airline business buffeted by multiple taxes, foreign exchange scarcity

Nigeria’s beleaguered aviation industry continues to teeter along, stumbling, falling and getting up, but still stumbling. From airport facilities to airlines management, everywhere you turn in the aviation industry there is an issue to deal with. FOLARIN ADESENOWO, the chief executive officer of Maple Group, a one-stop shop for all issues pertaining to the travel business, knows a few things about the industry, for apart from running a travel agency, he is also involved in packaging of tours and in the luxury end of private jet travel. In this exclusive interview with business a.m.’s BUKOLA ODUFADE, he lets us into his take on the travel and tourism industry in Nigeria, including the challenges of operating in an economy like Nigeria; the disruption caused by social media aggressive agencies, attractiveness of tourist spots to young people, while also providing insights on the state of the Nigerian aviation industry.

As a major player in the Nigerian aviation industry, how is the atmosphere like for your business?

At the moment as we all know, the economy is not in a buoyant state. We just came out of recession, according to the National Bureau of Statistics, so what is happening in the industry is that it is just picking up. Most of the people that travel need foreign exchange, so we are in a state whereby we have gone through the downturn in the business, and we are just picking up and hopefully by the year 2019, we hope to see a better time in the travel industry.

Your company seems to be into everything travel related, from travel and tourism to trainings on travel and tourism, can you talk us through what your business is about?

We are really like a one stop shop for all travel related issues. When I say a one stop shop, I mean we take care of your flight, of your hotel bookings and also we provide visa assistance. We do various destinations packages, destination weddings, you want to get married in Dubai or Turkey, and we do that as well. Also, we have another arm of the business, which is called Maple Aviation. What it does is it takes care of the luxury part, the private jet and helicopter charter. As you know, it is not everyone that wants to fly the regular economy, business or first class. Some people, because of the demand for time and wanting to fly in comfort need the service of private jets. So the model we run on that is that we are a private broker for private jets, which means we manage our clients’ planes, and get passengers to fly in them.

For the luxury part of your business, how lucrative is it despite the fact that most Nigerians are average earners?

It is a big business but like I said, because of the recession, it affected a lot of our clients. Many of the planes we manage have been taken back because most clients can’t afford to pay the hanger fee, and so many other fees associated with keeping a private jet. Also, some of the business men that used to fly in them, because of one thing or the other, have stopped and have gone back to flying the regular first class or local ticket as it may be. However, because of the routes, the connectivity of some of the airports, there is still need for private jet. For example, if you need to fly from Abuja to Warri, there is no commercial flight that flies that, and when you think about it, Warri is where most of the oil companies are, so there would be need for the oil personnel to move from Abuja to Warri; but no commercial airline flies that, so there is still need for the private jet business.

Going into the travel and tourism industry, Nigeria seems to be picking up in this regard, especially amongst young people, they seem to be really into travel and tourism, how do you tailor your service to meet their needs?

Yes, the young people are keying into it, but they still need to do better. With the emergence of internet and the use of social media among the young people, they are able to see that there are other things on the other side of the world; they are able to see what is happening on the other side.

In those days, there was no Google to tell you what was happening in Paris or Maldives or Dubai. But because people can now see in pictures or video clips, it can drum up the interest in them to travel. So, I would say that we have a few packages for the young people to places like Seychelles, Maldives, Istanbul, places that are basically not for business men but for touring and young people and we tailor it to what they want. They don’t have to really stay at a five star hotel; we have two star hotels that can serve their needs.

Given the fact that the social media, like you mentioned, has opened everyone’s eyes, and now there are social media aggressive travel and tourism agencies, and I’m sure that has disrupted the traditional travel agency market to a certain extent, can you speak to that?

Yes, it has. But what I believe is that the market is big enough for everybody, and there are over 180 million people in Nigeria. Some people are still not tech savvy and not comfortable with the internet and even those that are comfortable might be too busy with their day to day jobs, than sitting online and trying to plan their trip. So the role of the travel agency would still be there, they would still need someone to speak to. Also, apart from that, most of the conventional travel agencies, like us, have an online presence; so with most of these online ones you hear about, there is a conventional one at the backend. A serious minded travel agency would still have an online presence. So, we still have an online portal that when you buy from, you would not know that we are the ones you are buying from. We have managed to structure our business that way to meet the challenge.

In your view, what is the market size of the travel and tourism industry in Nigeria?

I would not want to be quoted but in terms of the human resources, the personnel being employed by the travel and tourism industry, I think we are looking at 30 to 40 percent.

Do you mean of the entire workforce of Nigeria?

Yes, because when talking about travel and tourism industry of Nigeria, we are including places like the hotels, because it is part of the tourism industry, the hotels, the airlines, the vendors that cater for the airlines, going to the airport and seeing the number of people there.

That seems like a lot of people?

And they might not be doing legitimate businesses but one way or the other they are making an earning from whatever they are doing, from push trolleys to car parks. Even at various embassies, you would see quite a lot of people there, so putting that together, we are talking about a good chunk of the labour workforce in Nigeria.

The aviation space in Nigeria has improved quite a bit in the last few years in terms of safety as we have not recorded any major crashes. In your view how much has changed and how much work still needs to be put into it to make sure it is up to global standards?

We still need to put quite a lot into the safety and the entire aviation industry, but I must commend the present administration, the administration of President Buhari, led by current minister Hadi Sirika. They have done quite a lot of improvement in the aviation sector, for example the Abuja airport runway, they have resurfaced it and it has been there for 23 years, so they have done quite a lot regarding that. Port Harcourt doesn’t have an airport, all the planes are flying to the NAF base but the Port Harcourt airport would soon be opened [Note: This interview was conducted before President Buhari opened the airport last week] and looking at all these in terms of the time they have been there, I think this administration seems to be serious about aviation and know what they are doing.

Talking about the safety of the airline is another thing, you have noticed that there has been no plane crashes, which means the Nigerian Civil Aviation Authority (NCAA) are doing a very good job in terms of auditing these airlines and there is a specific log book they have to keep and if we have not noticed any issues in the industry that means the regulators have been doing their job, and the regulators are doing their job because the government is enforcing it, so it is a ripple effect.

On the state of the airports, despite this present administration’s doing so much, the infrastructure in the airports are still abysmal, really poor, what has Nigeria not really improved on the state of infrastructure in airports?

I think presently Nigeria is suffering from something called infrastructure deficit. The entire infrastructure, not just the airports, the roads, rail are all in a state of deficit. So, that is why you would see the airport in such conditions. Things like the conveyor belts, which have been there since the airport was built decades ago, those kinds of things need to be changed but, unfortunately, people managing the airport have not thought it fit to improve on the state of the airport. But I believe that, if at the pace we are going, and if we have serious minded people, we would get there. For example, if you have travelled recently internationally, out of the Muritala Mohammed Airport, we used to have the customs, the standard organisation, like four law enforcement agencies checking your bag, it used to be very annoying and very tedious, but what we have now is just a scanner at the main door, and once you go through the scanner no one checks your bag, which I think is an improvement in the process. It is still a work in progress, a lot still needs to be done to get to where we should be as an international airport; so fingers crossed, and we would get there.

The Nigerian government recently unveiled the country’s supposed national carrier, Nigerian Air, but immediately suspended it due to funding. Do you think the country would be getting a national carrier anytime soon and were there other reasons that could have caused the suspension apart from funding?

It is a shame where we found ourselves, which is a big embarrassment to the aviation industry and the country as a whole, because what happened is just a typical Nigerian attitude, a typical thing we do. We go on air to announce something and we are not ready for it; we have done it in the past, we won’t do our thorough feasibility study and we just go on air and start making noise.

It is almost as if they didn’t even source for funding before the announcement?

If anything, I think they were trying to score a cheap political goal and it backfired. We all know the elections are coming up next year and the present administration is trying to put up something like we have done something that has not been done before, so that was why the minister went to announce it and at the end of the day, they had to call it back after 3 months.

Back to the issue of national carrier, it is a very viable thing; but because of the level of corruption in the country, I don’t know if anyone would take us serious. Because we have tried all kinds of models we can think of; we have done it fully owned by the government, it has crashed, we have done it through PPP, it has crashed, so we have done it through various models and they have all crashed. So, it is very difficult for me to say if anybody would take us seriously to help us float our national carrier. Even airlines that have tried to, like Arik, step into that shoe and forge ahead and represent us –  I mean, Arik used to have a Lagos-Dubai route, Lagos-London route, all the international routes have been cancelled so really I would not know if we would have a national carrier in our lifetime.

The number of Nigerian airlines has dropped drastically from 32 to less than 10 in the past years. In your view, what do you think is their biggest problem, what is causing them to fail?

The aviation industry or airline business is not the most profitable one in any country because otherwise, you won’t find airline like Iberia which belonged to the Spanish government struggling. British Airways had to rescue Iberia, BA bought over Iberia. So, it is not the most profitable business; however with the support of any serious minded government, these companies are able to thrive. What is responsible for many companies going under is the same thing happening in the manufacturing industry. It is the harsh conditions of doing business in Nigeria.

So the government is not encouraging them, no incentives in place to help these airlines, no favourable environment to operate?

I won’t say the government is not supporting; yes they are but it is not enough. Also, some of the owners of these airlines are too extravagant, if you understand what I mean. There was a bailout fund that was given a few years ago to a particular airline, but the owner of the airline rather than pumping the funds into the business went to invest it in another country. So, really in that case, how is it the fault of the government, the government gave them funds at a reduced rate and instead of pumping it into the airline, it was siphoned somewhere else.

So, one thing is the government, another one is the owners of the airlines as well.

Those are just the two things responsible. If owners are really serious minded people and know what they are doing, then we should not have a problem. The government is trying but they need to do more.

They need to give access to cheaper forex, and the issue of multiple taxes; sometimes when the ticket comes, you see a lot of taxes being added to the fare, and these are some of the things killing the industry.

Also, on the executive order on the ease of doing business that was passed last year, has it had any effect on your business?

For me, what I experienced from last year May to now, nothing has changed, you know when those policies are made, it can’t just happen like that, it takes time for the ripple effect to trickle down. So maybe before the end of the year or next year we would see the effects.

Most cities in Nigeria are not connected by air and most cities still don’t have airports, do you think we should have more airports in the country?

Airports are not like bus stops, it takes a lot to run and to maintain. I don’t think we would ever get to a stage where every state has an airport. In America, yes, virtually all states have airports, some even have two, one for domestic and another for international.

But the issue is that even the ones that are available are they being maintained? That is the question to be answered. Presently, the Warri airport is shut, so you can’t fly to Warri. Also, the question is do we really need to have so many airports? What we need to do is if we have five, we should look after them and make sure the facilities are up to standard and can be at par with any airport in Europe.

What are your broad thoughts on the Nigerian economy in general?

Yes, the other thing we need to do now is to look inward and see how we can promote our local tourism, because a country like Dubai thrives basically on tourism. So, I think we need to look inward and see how we can promote our local tourism, how we can make earnings from it. Beyond oil, the whole country can also survive on tourism, we have a lot of places, we have the Obudu Cattle ranch, Olumo rock, Ikogosi warm springs. These are some of the many places where investors can come in to develop so that people don’t have to travel every year for summer. Another thing is the government t needs to interface with the international airlines because the fares are too expensive when you are flying out of the country. I would give you an example. If you want to fly from London to Lagos, you would be surprised that you can do that for less than N200,000 but if you want to fly the same airline from Lagos to London, it would be double that amount.

Why should it be so? Is it not the same distance, same fuel, same airline, same personnel, why should I pay double? And even in comparison with other African countries, it is more expensive to fly from Nigeria. If you fly from Ghana, for example to London, you are not going to pay the same fare if you fly from Lagos to London. So, there must be something wrong in our pricing, it is not normal, I think it is a rip-off. I know what the problem is. The government needs to make it a priority, either through the senate or House of Representatives.

What then is the problem because I know that flying to other African countries is also really expensive?

It is a lot of problems, but part of the problems is something I mentioned during the course of this interview which is multiple taxes.  The other one is the foreign exchange. Now, we have the same exchange rates for the airline operators and all other sectors but in those days, we used to have a separate foreign exchange rate for airline, we used to have the IATA rate. For example, if you go and buy BTA for travelling abroad, there is a rate they sell to you, if you want to go on pilgrimage, there is a rate they sell to you, so I think the government needs to look into it and see how they can bring down the rate of exchange because most of these airlines pay their bills in foreign currency, so they need to bring down the rate of exchange. I know they are scared of people hijacking it, for example, if they release $1 million to a particular airline, how do you know that they won’t sell half on the black market. I think they need to find a way around it and bring down the exchange rate, because it is affecting the travelers, if they are paying so much on ticket, there are other bills to pay for, and that means most people would not be able to go on holiday and you need to go on holiday to have your body, soul and mind refreshed. We need to go out of the country to do business and meet people on the other side.