Market News

BY  Okafor Endurance

With the bold message on its website, “Welcome to the future – you are one flight closer to your dreams and destinations”, Green Africa Airways, a new entrant to the Nigerian aviation sector, is disrupting the airline business with low airfares that start from N16,500, the lowest in the country.

The Lagos-based airline was founded by Babawande Afolabi, an American returnee that holds the record as the youngest airline owner in Africa’s largest economy. The Osun State-born entrepreneur is in his 30s.

The company which is offering the cheapest airfare in Nigeria is coming into the market at a time when the prices of flight tickets have jumped to one of their highest levels. Airlines in Nigeria have continued to increase the price of tickets because of the scarcity of dollar, depleting fleet and the surge in demand for flights amid heightened insecurity in Nigeria’s inter-state roads.

With plans to start its flights from 24 June 2021, Green Africa is offering a 70 percent slash in airfares compared to its peers in the industry. The Lagos-based airline is commencing its operations six years after the day was first established. Founded on 15 June 2015 by Afolabi, who serves as the chief executive officer, Green Africa describes itself as a low-cost carrier as it targets the low-income segment of the Nigerian economy that cannot afford the luxurious but expensive seats on the flights of other carriers.

Originally planned to start its operations in 2019, Green Africa Airways has received the necessary operating licences from the Nigerian Civil Aviation Authority and is said to have placed an order for fifty A220-300s from Airbus while it also committed to leasing an additional three A220-300s aircraft from leasing company, GTLK Europe. The leased aircraft will allow Green Africa to meet its planned launch of commercial operations this June.

Green Africa’s Board of directors consists of industry veterans including Afolabi’s former boss, Tom Horton, former chairman and CEO of American Airlines (Afolabi was a summer associate at American Airlines in 2013); William Shaw, current CEO of Interjet; Virasb Vahidi, former CCO of American Airlines; Wale Adeosun, founder and CEO of Kuramo Capital; and Gbenga Oyebode, founder and chairman of Aluko & Oyebode.

Before founding Green Africa Airways, Afolabi worked in the finance and airline industries. His experience includes investment banking for financial institutions and emerging market clients at Morgan Stanley, as well as corporate strategy at American Airlines.

The Political Science and Economics graduate of the Illinois Wesleyan University (2010), where he served as student body president, is also the founder of Teatime Capital, a venture capital initiative focused on making micro-equity investments to ultra-small Nigerian businesses in often overlooked regions of the country. “Giving people microloans means giving them a shot at life,” Afolabi said. “Small businesses give people the means to send children to school, hopefully raising the literacy rates and lowering crime. It provides a new foundation for society.”

Born in Ile-Ife, Afolabi who holds an MBA from Stanford Graduate School of Business (2014) plans to expand the low-fare service offered by Green Africa across the African continent after it kicks off in the most populous country in the region. Having interned with Morgan Stanley on Wall Street, an article published in Illinois Wesleyan University Magazine, 2002-2017 said Afolabi was focused on bringing microloans to Nigeria. Afolabi, according to the magazine, applied for an internship with Sponsors for Educational Opportunity (SEO), which places minority students with some of the nation’s top companies.

“Of the more than 5,000 students who applied for internships through SEO, Afolabi is one of only 438 students to receive an internship, working this summer for Morgan Stanley on Wall Street,” the article said. The oldest of five children, Afolabi was raised to believe the world can be changed. “My mother is an elementary school teacher, and my father is a financial analyst on a very small scale,” said Afolabi. “They both instilled in me the knowledge that education can make things better. I must learn all I can and build my credentials so the financial institutions in Nigeria will truly understand how this can help. Before people change the world, they have to change themselves.”

Afolabi, whose internship was in investment banking, was one of only 48 sophomores granted an SEO internship in the summer of 2008. The SEO Career Program most often works with college juniors, placing them in seven categories of internships ranging from accounting and corporate law to global corporate finance leadership.

“All of this will help when I return to Nigeria and speak to financial institutions there about creating a microloan program,” Afolabi, whose own father had a business idea that died away because he could not secure a loan for as little as $200, said in 2008. According to Afolabi, his father’s business idea could not flourish because he had no money, no collateral and no connections to make it happen.

“There are so many people like him. I hope microloans can help. I hope they can be a lifeline for my people,” he said.

Afolabi’s plans from his university days to help the most vulnerable segment of the Nigerian economy is coming to life today as he has been able to set up Teatime Capital, a venture capital that is helping to invest in ultra-small businesses in Nigeria. The reason for Afolabi’s decision to establish a low-fare airline is not far-fetched from his plan to provide products that can serve the low-income segment of the economy. With the business model of Green Africa, Afolabi is trying to attempt the ‘Southwest effect’ on air travel in Nigeria. Its first flight is days away, yet the Lagos-based startup budget airline is edging closer to disrupting the Nigerian airspace forever. It has announced its entrance with cheaper airfares for seven routes including Lagos to Abuja, a strategy that looks well suited to a large country where average incomes are low and rising insecurity is increasingly discouraging road travel.

Green Africa’s strategy is not new, at least not on the global scene. It has a similar playbook to the world’s largest low-cost carrier, Southwest Airlines. Southwest, despite being a low-cost carrier, has been able to stay profitable through many decades. It even has an economic term named after it popularly called “the Southwest effect”. Southwest started out with an idea to make air travel accessible for all. While most carriers in the US focused on wealthy travellers, it set out to disrupt the market by giving more people the opportunity to travel by air at a low cost.

Southwest Airlines focused on four main things: a low-cost structure that stayed low due to fast growth, happy employees who liked their jobs and translated that to customers, being future-minded, and differentiated. Green Africa, just like Southwest, is coming into the Nigerian aviation sector with a low-cost structure with fares between N16,500 and N23,000, which is about a 50 to 70 percent slash in average fares charged by other airlines. Although, there have been questions as to whether the prices will remain low.

“I would not say the price they have started with will be permanent, it is an introductory offer but you can be sure that if you pick the first three airlines in the country with the lowest fare in two or three months, Green Africa would be one of them,” Olumide Ohunayo, a member of the Aviation Safety Roundtable Initiative (ASRTI), said. “They have started with a very low-cost aircraft, they are taking a smaller market that fits the Nigerian market and if they build on that and get good maintenance organizations, continue with the same fleet, get better deals with the manufacturer of such aircraft, the maintenance and cost of operation would go lower, their fares will not increase,” Ohunayo said.

Despite the similarity in low fares, differences such as fleet and routes make Green Africa different from Southwest. Green Africa will use ATR72-600S jetliners, a turboprop, while Southwest operates Boeing 737 jet planes. Turboprops are generally more fuel-efficient than jets whose fuel usage is higher.