CEO INTERVIEW ‘Why young pilots find it difficult to get jobs’
and the amount of money involved cannot pay for that capital budget in one or even two years because when we are making budgets, we don’t go beyond the ceiling we are given. If you put 100 percent of our capital appropriation together for a year, it can’t pay for the simulator. That is why it was spread for two years. Unfortunately because of the recession we found ourselves in, there were no capital releases, and the college couldn’t meet the payment terms. That is why it is taking so long. We hope that by the end of this year, we would have paid sufficiently for the manufacturer to come and install the simulator.
The simulator has been built and is waiting for us in Canada. Once we made the necessary payments, it will be shipped and installed in Zaria. But we are yet to get the releases for 2017 capital budget and the year is almost gone. These are some of the challenges we face.
Talking about recession, the contribution of aviation to GDP is very low. When the national carrier is finally set up, how would that affect the impact of aviation on GDP?
There will be employment opportunities and for us at NCAT, there will be training opportunities because we will train more people. It will also drive tourism. Also, more people will fly and more businesses will connect each other. There will also be jobs for the service providers like caterers, aviation fuel dealers etc. and everybody gets to benefit. If the national carrier is succeeding, more confidence will be restored to Nigeria as a country and more foreign investors will be inclined to investing in Nigeria. Aviation drives the economy and there are huge benefits of a national carrier.
In addition to the national carrier, we will have Maintenance and Repair Organization (MRO) and the leasing company, which also formed the core of our recommendations. Since Nigerian airlines are not able to lease from foreign companies, we will have a local company which can lease aircraft to local airlines, but not only Nigerian airlines but other African countries’ airlines. The advantages include: it will be easier to lease, you don’t have to pay in dollars, and this makes it easier to pay and it keeps the dollars in Nigeria.
Did you also recommend the collapse of the private airlines into one national carrier?
We considered that, considering that AMCON owned a large chunk of Aero and Arik. So the proposal was to merge Arik and Aero to become the national carrier. But we felt these two airlines have too much baggage. Therefore we opted for a new airline without liabilities and encumbrances that will hit the ground running. Regardless of whatever name you use, once the American and European creditors know its Arik, they will ground the aircraft if it enters their territory.
There was this aviation intervention fund which became mired in controversies. Its surprising the airlines failed in spite of the huge interventions. What went wrong?
If you ask those airlines, they will tell you they never really got the money. It was more like interventions for the banks. The banking sector was suffering because of the huge debts the airlines owed them. When the bailout came, AMCON came and bought off the debts form the commercial banks. So the airlines where now owing AMCON instead of the banks. They negotiated lower interest rates with the banks. But it didn’t help. A lot of the airlines were underfunded when they were set up. The airlines were using their own funds basically; they didn’t have access to cheap credit from commercial banks. A lot of the foreign airlines are funded by the banks at single digit interest rates while our airlines paid more for credit. With a profit margin of about 4 percent and you are paying interests of 20 percent, how do you survive? Because an airline business is capital intensive, a prospective investor needs to do his or her home work very well and have a very good business plan. They also need people who are knowledgeable in the industry to run the airlines.
Airlines shouldn’t be run like family businesses. There are some basic things you do when you run an airline. You plan and save towards major checks and maintenances. A lot of the private airlines that went down in Nigeria failed because they couldn’t afford to do major checks on their aircraft. They fly the aircraft for about two years and when the aircraft is due for a major check that will cost in excess $1 million, they couldn’t afford it, so they grounded them. That’s how the airlines died.
Do your graduates get jobs with the slow growth of the aviation industry?
The pilots find it difficult getting jobs but the other processionals we train get jobs. For instance, the air traffic controllers work for NAMA. NAMA employs all of them because there are huge demands for them. The same thing goes with the aero telecommunications engineers. They also work for NAMA and FAAN. The pilots and engineers look for jobs. For the pilots, quite a number of them are still looking for jobs. But we do tell them upon graduation not to go looking for jobs in the big airlines as soon as they graduate. They should go into the general aviation (charter operations, private jobs, aerial works like surveying, mapping, cargo etc). Here they will fly smaller aircraft that they will use to build up flying hours and experience.
The main issue is that they lack experience it’s not that they are not qualified. For insurance purposes, most airlines require a pilot has at least 1,500 flying hours before he is employed. Experience of a pilot is calculated in the number of hours flown. Every hour we fly, we log it from day one. There are certain courses that before you qualify to go, you must have certain number of flying hours. In most cases, the insurance policy for the aircraft will state the minimum experience for the captain, the minimum for the co-pilot. If you violate that, in the event of an accident, they won’t pay. The Nigerian insurance industry doesn’t have capacity to cover 100 percent of aviation risks. They only cover about 15 percent and the rest is sent to London. These are the requirements in London and they have to meet them. But if we open up the general aviation industry, which government has begun to, there will be a lot of opportunities for young pilots. There are a lot of private jets now flying in Nigeria. Though most of them are foreign registered and flown by foreigners but with NCAA regulations, a lot of them are being registered in Nigeria and employing Nigerian pilots. If one Nigerian pilot will be employed in all the private jets, a lot of our pilots will be employed.
Can you bring us up to speed on the re-fleeting programme at NCAT?
Recall we took delivery of one Diamond 42 aircraft earlier this year. For this budget year, we plan to bring in two additional Diamond 40s. Unfortunately, the manufacturers told us they are relocating the assembly plant from Austria to Canada. So we will face a delay of about 9 months before the Canadian plant is up and they can produce the DA 40s which are the single engines. Because of that, we opted for another twin Engine Diamond which they will supply before the end of the year subject to release of funds. But our plan from inception was to order them in batches of five. The total number ordered was 20. If we were to order five annually, that means it will take us four years to complete the order. But all that is subject to release of funds.
However, when we finish paying for the simulator, some funds will be freed up so we can allocate more funds for the re-fleeting.
Do you think we have willing investors in the national carrier in Nigeria at the moment?
I believe so because when we had our sitting, a lot of prospective investors came and signified their interest in the national carrier. Some of the prospective investors that came told us categorically that they didn’t need a penny from government. They had the money to invest.
How much percentage in equity will the government retain?
I don’t know how much percentage the government will take but we recommended only 5 percent equity for government so government cannot influence decisions. But government will provide the enabling environment and guarantees. Government will also hold shares in trust for the Nigerian investors since they can’t sell shares immediately to the public until after three years. So after three years, government will divest those shares.