The huge cost of getting aircraft has become a big headache for many domestic operators. But access to cheaper aircraft could reduce operating costs for many carriers. This and other views are expressed by the managing director of Discovery Air, Mr. Tunde Babalola. Excerpts by IME AKPAN
What is the financial state of Discovery Air?
A few questions have been asked about Discovery Air that border on the state of affairs of the airline. The airline is one of the new airlines that the Nigerian Civil Aviation Authority (NCAA) issued Air Operator’s Certificate (AOC) about five months back. We went through a number of processes, one of them was the certification that led to the issuance of AOC. That took us about 18 months to go through and from day one, NCAA insisted on having the full complement of staff before they could issue an AOC.
From then, if I recall vividly, I think we had over 70 staff and the full complement of pilots, cabin crews, engineers, and all other support staff. If I recall as well, I think we were paying the sum of N39 million monthly as salary from inception without any form of revenue then and that we did for 18 months.
The AOC was issued in July and we started operations immediately with two aircraft, Boeing 737-300 and less than a month after, we had to send one of the aircraft for a C-C- check. We believe so much in safety; we cannot compromise safety. In the time past, some other airlines used to doctor their safety certificate, but we didn’t do that, we had to take our machine to ATC Lasher, one of the best Maintenance Repair and Overhaul (MRO), facility in England. There are other cheaper places we could have taken our machine to, but we chose to take it to ATC Lasher in the UK. ATC Lasher doesn’t come cheap; it has been certified by NCAA. We have signed a contract with them for three years to maintain all our machines and fleet.
Normally, when you go for a C-Check you spend an average of about $300,000 in other places like Turkey, Poland and some other countries, but on this particular one, we spent nothing less than $800,000.
There was an online medium, which wrote that the company is going under, we owe workers’ salaries and so on, I think they are not fair to us because they didn’t write from the position of informed. However, I believe the media is doing their job for the benefit of Nigerians. For them to say we are broke, if we were broke as a company, how would we have spent about N150m on a C-Check.
Also, it’s on record that we were one of the first airlines in the country that within three months of operation, we have been able to lift almost 85,000 passengers. We’ve been able to open new routes; Lagos-Uyo, Lagos- Port Harcourt and before now, we have been flying from Lagos to Abuja.
Come November 27, 2014, we are going to commence Owerri route; Enugu on December 1 and same week we are going to start Enugu-Abuja-Port Harcourt, Abuja-Enugu-Owerri, Abuja-Uyo. What we are doing right now is one-way and we would be doing both ways now. Abuja is now going to be our sub-hub while Lagos will continue to be our main hub. The routes that we are going now, we would be going to those routes from Abuja as well. That is what we are doing right now.
On regional routes, this should start latest first week in January 2015. Before you can get regional routes, you need to be certified again by NCAA, civil aviation authority of the country you are going to. That process is on and we are desirous of going to Dakar, Bangui, Libreville, Brazzaville and Malabo; all from Lagos. We want to do it in such a way that we would fly to all the Francophone countries. That’s our plan and we hope to get the certification done by first week of December.
With your current fleet, how do you intend to achieve the route expansion you just mentioned?
I don’t want to tell you the fleets that are coming in because of competition, but we have additional aircraft coming. I can tell you that we are increasing our fleet.
One of the challenges Nigerians are having is the utilization of your machines. You can have 50 machines and if they are not properly utilised, you won’t achieve anything and that has been the problem many of the airlines are having.
How many machines did Air Nigeria have when they were going to all routes? They had about 12 and they were all over the place. It indicated that somebody somewhere was planning the utilisation properly. At the moment, we have only two machines, but what we are planning to do is to maximise the usage of the machines and bring the third and the fourth one to complement our routes.
By regulation, we are allowed to use each machine for six landings within the speculated number of hours that each crew sector should work without infringing on the regulation because the regulation says a pilot and the cabin crew should not fly for more than certain hours in a month. This, we are aware.
However, you will find out that most of the machines are used during the day; Nigerians don’t fly at night and after the 7am to 7pm flight, the machines are just wasting away and machines are built to fly because it is when they are flying that you make your money. Whether you fly them or not, one day, the C-Check would be due and you will have to take it out. So, what we are doing at Discovery Air is to maximise the usage of the machines; we will use our normal 12 hours and use the other 12 hours on the regional routes.
With just two aircraft, in case of any incident, how do you cope and still satisfy your customers who have already booked?
I’m an engineer by training and I know engineering and practical drawings are two different things. But, let me say this, we have to be frank with ourselves. Our flying populace cannot sustain the number of aircraft per airline that we want to deploy and at the same time, when you are buying a brand new aircraft, you want to know the number of years you will use it. There are lots of economics about this that we need to understand.
Recently, I had a meeting with the Chairman of Air Peace and there is a synergy going on between the two of us, which Nigerians would be surprised about very soon with what we would come up with. It is no longer like in the past that you don’t want to have any relationship with other airlines; AZMAN, Air Peace and I have a relationship, which is good. If there is any snag, it is just a call away and we would sort it out.
Earlier, you said that you took your machine for a C-Check barely a month after commencement of operation, why was this so?
I don’t want to start putting blame on anybody; NCAA is my regulator, I would not say anything negative about my regulator. I’m in a business of making money, but there are processes you have to get through, which we did. We had our calculations, bought those machines and they were fully paid for and not on lease including the insurance.
When you are applying for your AOC and doing your demo, as I speak with you, other airlines like Okada want to return to operations and looking for their AOC. NCAA as an organization has a lot it is doing right now. When we were going through that process, AZMAN, Air Peace and a couple of others were also going through the same process, so, we were many in the hands of NCAA. You might tell them that you want to do your demo next week, they would tell you there was no space for you then and shift the date, which eventually extended the time we spent before we acquired the AOC and time was running on the machines as well.
NCAA is my regulator and I don’t have the authority to comment on my regulator and I won’t do that. At times, you might think you will finish your AOC process within six months and it takes you 18 months and with this, how much time do you have to go for a major check like the C-Check? That was what happened.
I think the Nigerian public should give it to us; we didn’t earn any income for 18 months and were paying salaries. And I can tell you we paid nothing less than N400 million in salaries over the period and shortly after that, we had to go for a C-Check, which cost us another N150 million. As I speak with you today, we do not have any exposure with any bank in Nigeria.
To be more specific, do you owe your staff and even the agencies in the sector?
Aviation lives on credit. Even British Airways as big as it is, if you got to Heathrow Airport in London, they would tell you they owe Aviance. So, it is not a big deal for us to owe, but what is important is whether you are a going concern and are you serving your debts? If a business is a going concern, there is no way you won’t owe. In accounting, there are two entries anyway; credit and debit.
Talking about salaries for the staff, a good business owner should not knowingly owe his staff. The salaries we are working on are those we owed before the issuance of AOC, which we are working on to make sure we pay and don’t forget within that period, we were not earning anything. The salary we owe is the one for the last three months before we got the AOC. However, we have been paying salaries regularly apart from those three months. We are just trying to amortise it and gradually we are paying the arrears that we owe. Yes we owe, but gradually we are paying it off; there is nothing to hide. However, aviation creates jobs for a lot of people and today, 97 per cent of our staff are Nigerians.
What is your take on the short lifespan for Nigerian carriers?
What I have seen in aviation is that there is no way the Nigerian economy or the flying public in the country can support a machine of $100 million. I didn’t buy brand new aircraft and that is why our own strategy is quite different. Our machines are in the neighbourhood of $7 million to $8 million. So, if I’m competing with the likes of Arik and others and my overhead, I learnt that an airline is paying a salary in the neighbourhood of N650m monthly. This is on how many passengers of N10, 000 each?
At the moment, a small percentage of Nigerians flies. How do we lure more people into the sector?
What I think the government is trying to do at the moment is to open more airports, which I think is a good move. But unfortunately, most of our airports do visual operations. For instance, you can’t go to Calabar Airport by 7pm and likewise some other airports in the country. Want I want to say here is that we are evolving. It’s a process for us as a country, but are we really patient to go through those processes? What the airline operators need is to build airlines that are sustainable.
Earlier, you talked about synergy between you and some other airlines, how far have you gone with this?
I want to say having a synergy with other airlines is a good development if it can be achieved and it is the way to go. As I told you earlier, on our own, we’ve started talks with other airlines and there is a likelihood of that to happen first quarter of 2015.
If you look at One World Alliance, it took them almost a year to come up with that structure because a lot of variables you have to consider before you go into a code share. You can’t be in bed with somebody you don’t love.