Exclusives
Exclusive: New airlines to emerge in Nigeria, as NCAA vets 23 more applications
While some new entrants have expressed interest to commence ownership of airlines, others have reached various stages in the acquisition of their Air Operators Certificates (AOC).
It appears that the Nigerian aviation sector has defied the norms, as about 23 airlines (investors) are currently seeking to start their operations in the most populous black nation.
This was disclosed by the Nigerian Civil Aviation Authority (NCAA) in an exclusive interview granted Nairametrics by its General Manager, Public Relations, Sam Adurogboye.
While some new entrants have expressed interest to commence ownership of airlines, Adurogboye disclosed that others have reached various stages in the acquisition of their Air Operators Certificates (AOC).
READ: Why new airlines find it difficult to get certified, fly in Nigeria – NCAA
Some of the airlines are NG Eagle and Green Africa Airways, which have reached an advanced stage in the acquisition of an AOC. Rano Air, Northeast Shuttle and a host of others have expressed interest too but are still being considered.
He said, “We are currently treating and vetting about 23 applications. More are still coming to operate in Nigeria because they know and believe that there are several opportunities in the sector. Most importantly, a lot of them have seen the way safety issues have been tackled in the sector recently. These are the factors that must have boosted investors’ confidence in Nigerian airspace.
It’s a good thing to desire to come onboard. The process is a black and white thing. What you need to do in one phase to go to second, second to third, you fulfil it and the team that is in charge work as a team. It is not by the Director-General at any particular time. It’s a team of engineers, airworthiness inspectors, medical. It’s a team and nobody can influence the other.”
READ: The man singlehandedly changing the aviation industry narrative
What they are saying
However, aviation experts appeared worried arguing that the nation does not need more airlines but big body aircraft, a friendly business environment and access to cheaper funds.
An Aviation Consultant, Muyiwa Lucas, told Nairametrics in a recent interview that what the nation needs are big body aircraft, as they can take more passengers and favourably compete with foreign counterparts, who seem to have an edge over them.
He said, “Currently Nigeria is experiencing low capacity. There are not enough aircraft seats to meet the demand of passengers. If airlines use bigger aircraft that can take more, it is cheaper than two or three airlines plying the same route and at the end of the day, they are not filled. So many people would want to fly now considering the security threats on the road; and air travel is also the fastest, safest and most reliable means of travel.”
READ: Airfares across Nigeria increases by 100%
Another hurdle that curbs growth in the industry is cheap credit. Capt. David Olubadewo, Managing Director, Starburst Aviation Limited and a Nigerian based in the UK, explained that most of the airlines and other industry stakeholders could not access cheaper loans because banks believe that the sector is too difficult to invest in.
“But that is wrong. It is not different from other sectors. We are all in it to make a profit at the end of the day. I don’t obtain loans from Nigerian banks, because I will end up with a 25% loss or more, but that is not happening in the UK where I pay far less interest rates.
If I take such a loan in Nigeria, it means I am -25 percent (interest rate) in red, and by the time you get to the top, you are owing millions. I cannot approach any of the banks to give me local money to do business in Nigeria. If I can go through that, you can imagine the experiences of the airlines.”
READ: Nigeria owes foreign airlines $53 million as proceeds from ticket sales – IATA
What you should know
Last March, Nairametrics reported on the stages airlines need to cross before they can secure their AOCs in Nigeria.
Phase 1 – pre-application phase:
The NCAA will appoint a certification team and process the pre-application statement of intent form (AC-OPS 001). Discussions on all regulatory requirements, the formal application and attachments and any other related issues will take place. This is usually a week’s process.
Phase 2 – It involves a formal application for intending entrant where documents and manuals (including the curriculum vitae of key management personnel) must be submitted for evaluation. The minimum timeframe for the formal application phase is two weeks.
Phase 3 – It is a document evaluation phase where the NCAA will review the applicant’s manuals and other related documents and attachments to ensure conformity with the applicable regulations and safe operating practices. The minimum time frame for the document evaluation phase is three months.
READ: Cargo handlers record higher revenues despite airline crunch
Adurogboye added that the processes is simple and straight forward enough and the requirements are not meant to deter any investor. Contrary to that, they are meant to show capacity for safety for the particular operations to be embarked on.
He stressed that new airlines only come on board once they have fulfilled all the requirements in the staging process stating that the most critical of those stages are stages three and handing over the AOC to the operator.
Exclusives
Corporate Nigeria spends N31.22 billion on travel expenses in 2020
According to data obtained by Nairametrics Research, travel expenses of major corporations in Nigeria dipped by 36.97% in 2020.
Corporate Nigeria represented by the largest listed companies on the Nigerian Stock Exchange experienced a reduction in business travel expenses in the year 2020.
According to data obtained from the audited financial statements of the top 30 companies listed on the Nigerian Stock Exchange (NSE) known as the NSE-30 and verified by Nairametrics Research, travel expenses dipped by 36.97% from N49.54 billion recorded in 2019 to N31.22 billion in 2020.
Travel expenses include flight tickers, hotel expenses, cost of renting and maintaining private jets, local interstate and intrastate transportation etc.
- Of the 30 companies considered, only 3 of them increased their travel expenses in 2020. Notably, Guinness increased its travel expenses by 283.1% from N261.4 million to N1 billion in the review period.
- Nascon Allied Industries and Presco Plc incurred a sum of N91.8 million and N2.02 billion in travel expenses, representing a 125.2% and 33.7% increase respectively.
- On the other hand, MTN Nigeria recorded the highest decline in travel expenses, reduced by 79.9% to stand at N964 million as against N4.79 billion recorded in 2019. Stanbic IBTC followed with a decline of 60.95% to stand at N676 million.
- It is worth noting, that some companies were not included in this study as they did not disclose their travel expenses during the period under review.
READ: Banks earn N216 billion in E-banking income amidst threat from challenger banks
Why the drop?
The drop in travel expenses was expected as the entire private sector experienced a lockdown for most parts of the year due to Covid-19. The Federal Government introduced movement restrictions on land, sea, and air commute in response to the spread of the Covid-19 virus.
- This resulted in the cancellation of business travel expenses across the commercial and political nerve centres of the country. Bearing the brunt of this cut in expenses were airlines, hotels, and the entire travel industry who suffered massive revenue losses.
- The travel industry has been one of the worst-hit sectors due to the COVID-19 outbreak with lockdowns, travel bans, restrictions, and quarantines, which have had a severe impact on business travel for corporate entities in Nigeria.
- High travel cost implications, hotel rates, and reduction of airline services also made companies resort to phasing out in-person meetings and business travel, as it is more affordable and productive to go digital.
- The deployment of technology has helped companies cut their travel expenses since part of the key reasons for business travel is for conferences, meeting suppliers and customers. Going forward, video calls show strong potential to replace in-person meetings, resulting in fewer business travels.
- Additionally, business travels that are meant for training and other learning activities can be done through e-learning.
- The consistency of corporate entities in adopting technology by going digital will likely continue to reduce business travel expenses of corporations in the country.
READ: Nigerian corporates spend N1 trillion on capital investment in 2020
Gains and losses
On the flip side, online virtual work from home tools such as Microsoft Teams and Zoom recorded massive revenue boost as the private sector and even government relied on them to connect with clients, employees and other stakeholders.
- Unfortunately, Nigerian businesses, particularly the tech sector failed to take advantage of the travails of the hospitality sector losing much of this revenue to the likes of Microsoft, Google, Netflix, and Zoom. Nevertheless, other Nigerian tech companies, especially in the entertainment, payment, savings and loans space all recorded a significant boost in topline revenues.
The top 5 spenders
The increase or drop in travel expenses for some of the companies under review suggests the approach management took in response to the Covid-19 lockdown. While some reacted by going completely remote as indicative of their numbers, others continued spending, perhaps due to an inefficient cost structure that could not be scaled down despite the imposed lockdown.
Access Bank (N7.15 billion)
Access Bank Plc spent a total of N7.15 billion on business travel expenses in 2020, representing a reduction of 31.9% compared to N10.5 billion recorded in the previous year.
- The tier-1 bank accounted for 22.9% of the total travel expenses incurred by the top 30 companies on the NSE.
- The bank’s total asset as of December 2020, stood at N8.67 trillion, representing the highest on the NSE.
UBA (N4.94 billion)
United Bank for Africa incurred a sum of N4.94 billion on business travels in the year 2020. Its travel expenses reduced by 30.1% compared to N7.06 billion recorded in 2019.
- Its expenses accounted for 15.8% of the total recorded by companies under consideration.
- UBA recorded a growth of 27.7% in profit after tax from N89.1 billion recorded in 2019 to N113.8 billion in 2020.
FBN Holdings (N3.51 billion)
FBN Holdings the parent company of First Bank of Nigeria, one of the major financial institutions in the country, spent a total of N3.51 billion on travel expenses in the year under review.
- The tier-1 bank reduced its business travel expenses by 48.24% from N6.78 billion recorded in 2019 to N3.51 billion.
- Also, FBN Holdings accounted for 11.2% of the total business travel expense of the companies under consideration.
- It is worth noting that FBN Holdings classified its travel expenses as passages and travels.
Dangote Cement (N2.11 billion)
The most capitalized company on the Nigerian Stock Exchange, valued at N3.7 trillion spent a total of N2.11 billion on business travel expenses in 2020.
- The foremost cement manufacturer in Nigeria recorded a 13.8% decline in travel expenses from N2.45 billion recorded in 2019 to stand at N2.11 billion in 2020.
Presco Plc (N2.02 billion)
Presco Plc, a fully-integrated agro-industrial establishment specializing in the cultivation, extraction, refining, and fractionation of crude palm oil into finished products, spent a total of N2.02 billion on travel expenses in 2020.
Its travel expenses in 2020, represent a 33.71% increase compared to N1.51 billion recorded in the previous year.
- It also accounted for 6.5% of the total travel expenses recorded by the companies under consideration.
Bubbling under
- Zenith Bank – N1.88 billion
- Seplat – N1.26 billion
- Guinness – N1 billion
- MTN Nigeria – N964 million
- Fidelity Bank – N964 million
Note: Fidelity Bank classified its expenses as travelling and accommodation, while MTN Nigeria as Trainings, travels and entertainment cost.
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