New Telegraph

February 24, 2024

Ilogbodu: FG should tackle forex hiccups to help airlines survive

Chief Executive Officer, Arik Air, Capt. Roy Ilogbodu, rarely grants interview. Whenever he does, he sheds light on burning issues as they affect the country’s aviation industry. In this interview with WOLE SHADARE, he speaks on access to foreign exchange, precarious situation of airlines and the fate of Arik amid concerns of making it a national carrier, among other issues

 

Recently, the Federal Government bailed out Nigeria airlines to the tune of N4 billion. Is that enough to stabilise the ailing industry?

 

What I would say is that what we got was definitely not enough, we certainly could have done with a lot more.

 

The impact of COVID-19 has been quite significant. As you follow news from all around the world, you see that it is the same situation everywhere. Government has come massively in support of airlines. We did expect a bit more from government.

 

However, that said, we also understand that government itself faces significant challenges from all other sectors of the economy. Therefore, we do not think of ourselves as unique. We appreciate the little we got. Something little is better than nothing; so, I think that helped in its own little way in aiding us to surmount some of the challenges we face.

 

What other challenges do you have as operators?

 

We still face significant challenges. We are still grappling with many challenges; challenges of foreign exchange. That is a big issue. The exchange rates have virtually gone up significantly, by approximately 40 per cent since COVID-19 started. You realise that our industry itself is quite tied to foreign exchange to buy spare parts.

 

So, significant sum of foreign exchange is spent on maintenance of airplanes on a daily basis. You can’t compromise maintenance on aircraft. The tyres on an airplane, some people don’t realise how much it costs and how regularly we change those tyres.

 

You can’t use an aircraft tyres, for example, the way you use your car tyres. If you don’t maintain or change them, they get burst. You have to change them regularly whether they look old or not. So, you see that happening on daily basis because of some of the rotables. It is quite significant for us to face all these coupled with the exchange rate.

 

We need more help from government. As much as government can give, we will appreciate, especially if the issue of access to foreign exchange can be resolved. That is the major problem of airlines that can be resolved.

 

Ordinarily, airlines meet so many costly foreign exchange components on a daily basis that account for 70 per cent to 80 per cent of their direct operational    cost such as jet fuel, spare parts, insurance and simulator training, among several others. The local airlines will survive only if the Federal Government provides foreign exchange for them.

 

We cannot continue to source foreign exchange from autonomous markets at N470 to a dollar even if you go there, you might find it difficult to find the dollar.

 

What is the level of traffic since the outbreak of COVID-19? Is it improving?

 

Passengers are not really travelling as much as before. Capacity has also dwindled. What I mean by that is that, the airlines have suffered so much that the fleet sizes have gone down. It is obvious that passenger numbers have dwindled, but as airlines start to recover, it will become apparent that people are no longer travelling as much as they used to do pre-COVID.

 

But the good news is that the vaccine is here and so it gives everyone hope. I do expect that in the next couple of months there will be a lot more movement and things will start to come back to normal.

 

Many airlines may take the painful decision to restructure their underlying businesses. In the short term, dealing with the immediate cash flow crisis has become the priority. What the Nigerian aviation sector will look like once lockdown measures are fully lifted is very much dependent on the form of exit strategies they take, how they are implemented and how economies are re-activated.

 

What is the connection between Arik and Nigeria Eagle Airline? Is the airline going to transmute to Nigeria Eagle? Could you explain what is going on to us for clear understanding of the situation?

Well, in reality, there is no connection between the two. That said, you are aware that NG Eagle is solely owned y AMCON and, of course, you know that Arik Air itself is in receivership and the receivership was instituted by AMCON, which is based on the fact that Arik owes significant sums of money to AMCON. So, if you can infer from there, that’s the relationship.

 

Two aircraft were painted in the livery of Nigeria Eagle, what does that tell us?

 

I can boldly say that those airplanes are what we call in aviation, recovery. So, they have been recovered. If a company is owing and it cannot pay. Those airplanes were actually mortgaged to AMCON and it is very clear that at some point, they take their assets and that is what was done.

 

The fact that they carried the name and logo of Arik doesn’t mean they belong to Arik. The owners have taken their property. Of course, the opportunity was given to Arik to pay. I don’t think that happened, so, I think it is pretty straight forward. In law and in reality, those are mortgaged assets and the owners of the assets have every right to take their assets.

Aviation fuel is the single cost component of airlines and that takes significant chunk of their revenue. How have they been able to cope in the face of astronomical cost of Jet A1?

 

Well, I can’t give you that information accurately here, but suffice to say that aviation fuel is tied to the exchange rate. Our aviation fuel is imported, so, anything that is imported is affected by enumerations in dollar/naira exchange rate. If we say FX has gone up about 40 per cent, then it is safe to say prices of jet fuel have gone up too by   about 40 per cent.

The inability to provide airfield lighting for the 18L of the Murtala Muhammed Airport, Lagos, in the last 14 years may have cost you operators so much money, can you quantify these losses in naira?

There would be significant sums of savings. I can’t even begin to quantify. It is actually a huge drain on not just Arik, but all the other operators that have to do night operations.

 

That can be resolved by installing the runway lighting. Huge sums of money can be saved by providing the facility. Yes, an airplane cycle starts when you start the engine and you are burning fuel, the wear and tear on the engine. So, for every cycle, it doesn’t matter if that cycle is from here to Benin or from here to London or from here to the US, it is one cycle.

 

So, it costs money and that cost is the same, whether it is London or Dubai, it is one cycle. For instance, the engine, when it is brand new, you say it has 20,000 cycles of life and so you fly 1000 cycles every year that means that you expect those engines to run for 20 years at 20,000.

 

After that, it goes to zero. You cannot use those engines until it goes back to shop for overhaul and those materials that are time related are replaced. Those cost for us are much. So, that trip for us from the international airport, which takes 10 minutes or more across runway; if we calculate daily anytime after six you know that that is additional cost to the airline.

 

What do you think is preventing a quick fix of the runway that would have helped operators to save costs more than 15 years after the facility was last repaired?

 

We continue to engage the Federal Airports Authority of Nigeria (FAAN) on anything that helps the airlines to    cut costs, but we also note that FAAN themselves face challenges in respect to funding. I think the entire industry is in a situation were significant sums of money needs to be injected into the system to assist.

 

The U.S. airlines, even for the fact that they do not fly at full capacity, get government support in the area of funding. That is very important and critical. Airline business is critical to the nation.

 

Most airlines will not be profitable apart from the so- called low cost carriers, but when you take the entire network of services they provide as a portfolio, hotel chains, other support services on ground, ground handling and all that, we will get to see how vital they are to the whole chain of the economy.

 

They contribute significantly to the Gross Domestic Product (GDP) of any nation. That is why government should be mindful when looking at an airline, how the airline contributes to the economy. The COVID- 19 vaccine, I am sure, came by air. So many things, you can’t quantify the importance of air travel to nation building. There are so many service providers like SAHCOL, NAHCO, MMA2.

 

So, the nations that realised the importance of aviation do not take it for granted. Those nations that realize it ensure that the airlines are allowed to exist and take advantage of all these to boost tourism and other catalytic effects of aviation. If you go to Ethiopia, the country is centered on aviation. They built one of the biggest hotels in Africa as an airline; they’ve taken over the terminal fully.

 

You can see what they are doing; they are actually taking care of cargo transportation in and out of their country. They have a huge network. They may not necessarily have a robust domestic network like us here, but I think their global network is quite interesting.

 

Until government becomes aware of what the airlines contribute to the economy, until that is clear, that is when they will see why you need to keep the airlines alive

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