Humphries: Business Jet Market is Necessary for Growth of Nigerian Economy
Director, Aviation Finance for Africa at Investec, Melanie Humphries, spoke with Emma Okonji on the business opportunities in the aviation industry that Nigeria could take advantage of. Excerpts:
What are some of the trends you are noticing in the Nigerian business jet market currently?
Nigerian is one of the biggest private jet markets in Africa. In fact, Nigeria has Africa’s second largest registered fleet of business aircraft. The biggest trend that is driving the Nigerian business jet market is economic growth and wealth creation. Flexibility and convenience also plays a role on a continent, where scheduled airline flights are not frequent, and business jet users can better plan and execute their business meetings and travel. As such, we have seen a steady growth of high net worth Nigerians and corporates acquiring private aircraft to help meet their heavy schedules.
Who is the typical person that makes use of this form of travel?
They are high net worth individuals and corporates.
What would you say is the main contributor to aviation growth in Nigeria?
The increase in economic growth is leading to increase air traffic demand - both business and personal travel. The aviation industry connects Africa with Africa and Africa with the rest of the world. The industry provides jobs to many individuals in Nigeria. As the industry grows, so do the job opportunities which also have a positive effect on the Nigerian economy.
There has been tremendous economic growth in Nigeria and with the increase in wealth and the expansion of trade and business opportunities, the demand for business travel has also expanded.
The primary reason is that business aircraft are a necessary tool for many high net worth individuals and corporates that do business in and around Africa. Poor regional connectivity and limited infrastructure means that air travel is still the preferred mode of transport for passengers and cargo – presenting an opportunity for the aviation industry in Nigeria and Africa as a whole. In fact, business jets in Africa, and the access, predictability and passenger safety they provide, are playing a critical role in realising the continent’s growth potential. However continued growth and development of business aviation will require more focus on infrastructure, further regulatory development, the collaboration of service providers and of course, ensuring the necessary support is available to support the growing size of the African fleet.
What do you think makes the Nigerian business jet market unique, when compared to international counterparts?
We see similar trends in the Nigerian Business Jet market as in other African markets. There is a high penetration rate of corporate aircraft in Africa that us measured as the number of business aircraft per a 1000 HNW individuals, implying that it is a well established and accepted business tool.
Is financing for business jets in Nigeria a challenge? If so, why?
No, not more so than in any other market. Much depends on the financial strength of the sponsor and the quality of the information provided in order for the financier to consider the deal. Financiers also look at the aircraft asset being acquired and the security package that is structured. In turn, business jet owners require flexible, commercial terms of finance that make the acquisition commercially viable. Investec has 25 dedicated professionals globally with a wide range of experience in aeronautical engineering, law, accounting, airline management and leasing – to ensure that solutions driven deal can be built around the client’s needs and expectations while at the same time ensuring that the transactional risk is mitigated. As a bank of African origin, Investec is recognised as a leading aviation financier both on the continent and globally. In addition, we were appointed as one of only two Qualified Advisors to the Export Import Bank of the United States to support the funding of US-manufactured exported aircraft. As such, with our extensive experience in financing both new and pre-owned aircraft, we are well positioned to capitalise on growth in this industry in Nigeria.
How is the business jet market able to contribute to the growth of the Nigerian economy?
The Nigerian commercial aviation industry has contributed about $0.7 billion (N137.9 billion) to the Nigerian Gross Domestic Product (GDP), and projected investment of $12 billion in the short and medium term should lead to passengers’ growth to between 12 and 25 million by 2018. What’s more, industry data revealed that Nigeria’s passenger traffic for inbound and outbound destinations soared to 21 million in 2014, surpassing the 2013 record by over 20 per cent.
Demand for business aircraft is highly correlated to wealth creation, which of course is dependent on economic growth. The African fleet has more than doubled since 2000 and now comprises around 2.4 per cent of the world corporate jet population and as business jets are increasingly being seen as an productive business tool, the long-term prospects for business aviation remain strong.
Some may view the business jet market as wasting money and a tool to feed egos. Would you agree with this assertion and why?
I can see why that could be the perception but the truth is, generally most businessmen that travel use corporate aircraft as a very efficient tool to get their business done. The primary reason is that business aircraft are a necessary tool for many high net worth individuals and corporates that do business in and around Africa. Poor regional connectivity and limited infrastructure means that air travel is still the preferred mode of transport for passengers and cargo – presenting an opportunity for the aviation industry in Nigeria and Africa as a whole. In fact, business jets in Africa, and the access, predictability and passenger safety they provide, are playing a critical role in realising the continent’s growth potential.
What is your view about aviation regulations in Nigeria, and how can this be improved?
Aviation is one of the most regulated industries in the world and it’s not hard to see why. African Civil Aviation Authorities (CAA’s) has done a lot over the past decade to improve safety and oversight in the industry. But more can, of course be done, specifically to create congruence amongst the regulatory requirements of the various CAA’s, to further adopt international standards and ensure strong oversight is continuously enhanced in terms of compliance and accountability.
How can the Nigerian aviation industry generate more money for the industry?
The growth of the aviation industry should lead to further job creation. The growth and development of business aviation will require more focus on infrastructure, further regulatory development, the collaboration of service providers and of course, ensuring the necessary support is available to support the growing size of the African fleet. We see the emergence of a number of new Fixed based operators and maintenance facilities in Africa.
There is needed to increase traffic in the Nigerian aviation space. How can this be achieved?
The aviation industry is supported by the instruction of new capacity such as aircraft, routes and schedules by domestic and international carriers. Often the opening of a new commercial route network will drive further economic growth which in turn will lead to increased traffic and economic growth.
Air crashes have reduced in the global aviation industry for some time now. How has technology helped in addressing this?
African aviation is going through a major fleet renewal exercise. Commercial carriers such as Arik Air, Ethiopian Airlines, Kenya Airways and South African Airways, are all buying new aircraft from the Original Equipment Manufacturer (OEM) such as Airbus, Boeing, Embraer and Bombardier. The days where Africa was used as the ‘dumping’ ground for older technology equipment is long gone. Having said this, safety in the industry is not driven by technology or the age of the African fleet that much. More relevant to this debate is the training, safety, maintenance and regulatory oversight environments of our CAA’s and airlines.
Facilities in Nigerian airports are substandard, compared to other international airports of the world. What in your view do you think the Nigerian government must do to change the situation?
One of the main challenges, but also opportunities linked to the growth in the aviation industry is the consequent growth in airport infrastructure that is required to support the industry. Our understanding is that, as many African sovereigns, the Nigeria government should be working towards ensuring that it provide modern facilities that will expand airport infrastructure – and certainly with the growth in the aviation industry as a whole – we are sure we are likely to see this continue.