Market News

By Olusegun Koiki 

Capt. Ado Sanusi, the Chief Executive Officer (CEO) of Aero Contractors in this interview with OLUSEGUN KOIKI, spoke on the challenges of the airline, which hitherto was a leading carrier in Nigeria, plan of the management to grow its fleet and return to the top, among others. Excerpts:

The yuletide is around the corner, what is the plan of Aero Contractors’ management for the season?

We presently have a fleet size of three aircraft, but two are currently flying. Hopefully, the third would rejoin the fleet soon. We do not intend to increase our destinations during the Christmas season; we intend to make sure that we are reliable and we have pocket-friendly prices.

We understand that we are not operating in isolation and we do understand that there are lots of airlines that have brought in capacity, which is good for the market. We intend not to do that; we intend to maintain our fleet size of about three aircraft and we intend not to increase our routes, rather service the routes that we have.

Talking about investment, what is your projection for Aero Contractors’ fleet?

As for the investment, what I project for Aero Contractors is a 10 aircraft fleet operation company. So, for an investor, it depends whether he’s going to lease those aircraft or buy them outrightly and the brands of aircraft he’s going to buy. But, we can only advise and the advice is that this company will go back to its rightful position with our 10 aircraft flying.

Earlier, you said that Aero Contractors earned 14 per cent profit and reduced liabilities by 33 per cent in the financial year period, can you put figures to these percentages?

The fact is that because of tax issues, I may not be able to give you the figures, but what I know is that we made 14 per cent profit, but believe me, we are very excited about this trend of profit. Our figure as at 2022, was negative at 69 per cent.

Also, we have reduced our liabilities by 33 per cent. This is due to accrued payments and other things that we are doing. And we are saying, we will still continue to do that till we get to the level that we want.

We intend to reduce our liabilities to the best that we can, but to reduce it to zero, we need some investors to come onboard.

On the issue of reducing fares to pocket-friendly, we have looked at the market, we have seen the surplus capacity and like I said, we are not operating in isolation. I believe you are aware that about 10 aircraft have entered into the market. We have also studied the economic situation of the country and we are not insensitive to the economic hardship that is going on.

In the spirit of Christmas, which is the period of giving, we have decided to reduce our prices and we are still going to be profitable. We are not reducing our prices to a stage we will not be profitable, but everywhere in the world, you will see Christmas and Sallah sales and the reason is to give back to your loyal customers. I believe we should start doing that. We don’t intend to increase capacity at the moment, but we intend to continue to be modestly reliable to our destinations, which is more important to us.

The management of Aero Contractors planned to expand the capacity of its Maintenance, Repair and Overhaul (MRO) capacity, how far have you gone with this?

We have continued to grow the MRO; we now have Moroccan, Mongolian, Congolese, Senegalese and Ghanaian approvals for the MRO. You can see that we are expanding the MRO to accommodate the Boeing 737NG and also the Airbus 319 family. We are also increasing our capacity; we are looking at CRJs, Embraer 145, 175 and the rest. We intend to be a one-stop shop for all the airlines that are operating in the country; that is our plan. We have already started work on the Auxiliary Power Unit (APU). We have already started work to overhaul that unit. We want to domesticate the APUs and the landing gears and others. We are in talks with the manufacturers and some other people to assist us to set up the shop. The shop should be set up before the end of the third quarter of 2025.

We already have capability for top case tear for engines. We also intend to form a partnership to start overhauling of all CFR56 enginesin the near future. But as of now, we will do modular changes and do top case repair, which I don’t think anybody is doing now. We will continue to upgrade our maintenance facilities because we believe sustainability of the aviation industry requires a formidable maintenance centre in a country.

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With the recent rate of naira against the dollar, can you say you have more local airlines patronising your MRO facility?

The closing of different tiers of exchange rates by the current administration has helped a lot to make sure that airlines don’t enjoy different rates to others. Everybody goes to one source to another for the US dollars. Yes, we have seen an influx of customers into our MRO. Most of the airlines come for one maintenance or the other. Either it’s wheel and brake, pad, weaving, skin repairs, Full Operational Capability (FOC) check and others. The maintenance that the airlines could have taken out of the country, they now come to us. The unifying of the dollar exchange rate has helped to build our MRO users.

What is your view about aircraft wet leasing by domestic airlines?

Wet leasing is usually profitable for a short time, but you have to understand that you are selling your tickets in naira and you are paying per hour in dollars. So, if the dollar is fairly stable and you are meeting your projection, then, it might be profitable, but if the dollar decides to start going on a roller coaster ride, then, your pricing of your ticket will equally go on a roller coaster, too.

What Mr. Festus Keyamo, the Minister of Aviation and Aerospace Development has achieved with the Cape town Convention is quite commendable, but it is just a part of the ingredients that is needed for aviation to grow.

Why do I say that? We have the Cape Town Convention; that means that airlines can borrow money and buy airplanes or airlines can borrow money and lease airplanes or airlines can borrow money and lease finance aircraft, but there is a key factor to it, which is the interest rates.

The cost of funding in this country is very high, recently, they just increased the Monetary Policy Rate (MPR) to 27 per cent. That is stifling growth in aviation and with all the gains of the Cape Town Convention, I can’t see an airline going to borrow money at 33 to 35 per cent interest rates and then make profit.

So, it must be addressed. I am not an economist, but I don’t think in this economy, you can increase the interest rates to tame inflation. Rather, you will be killing businesses. Ninety per cent of our vendors that provide us spare parts, fueling and others, they borrow money and they borrow at exorbitant rates. So, it is actually affecting the growth of the aviation industry.

As a country, we don’t need to copy all what other countries are doing by increasing interest rates to reduce inflation, but we have to look at the peculiarity of our economy; the small-scale industry, the vendors that are supplying the airlines, what kind of funding do we have? Thirty-three to 35 per cent is not sustainable. There is no airline that can go and borrow money to refinance or to finance an airplane at 35 per cent interest rates and the dollar is N1,750 and then expect to make profit. That is a tall order for us.

Can you say the recent upgrade in infrastructure by the government has helped the airlines to carry out their operations safely, securely and comfortably in the country?

A lot has been done in recent times to assist the airlines and I think a lot more still needs to be done. You don’t just have a beautiful terminal building…The insurance is important, the Cape town Convention Practices is important, but the cost of running an airline in this country is high. We should address the multiple taxations. As a country, I think we should make a deliberate effort to see that airlines survive. We should understand why the airlines are struggling. This is very simple – multiple taxations. The airlines are trying to pay for the service the parastatals are rendering and I don’t think the airlines can fund the parastatals. It’s not possible.

So, there must be another source of funding for the parastatals because the airlines are struggling and the parastatals are struggling too to provide these services. Again, the 50 per cent outsourcing deductions in the aviation industry, I think it’s affecting us much and I believe that it should be looked at.

The Federal Government should look at aviation not as a source of revenue, but as an enabler to business and economic growth. If the Federal Government is looking at the aviation industry as a revenue provider, then, it will kill the aviation industry.

I can give you an example of Rwanda, the government understands that aviation is not bringing revenue to the country, but understands that aviation would enable it to bring tourists, Foreign Direct Investments (FDIs) and others and that is why the government has invested a lot in Rwandair. That is why it is a success story.

Quote: “As a country, we don’t need to copy all what other countries are doing by increasing interest rates to reduce inflation, but we have to look at the peculiarity of our economy…”