…Says country globally known for disrespecting agreements

By Dickson Omobola

This is the first of a two-part interview that Saturday Vanguard had with Chief Executive Officer of Belujane Konzult, Mr Chris Aligbe, a few days ago.

Aligbe, who discusses botched national carrier project, Nigeria Air, warns that If Nigeria misses the opportunity to develop a template that would better suit it with Ethiopian Airlines, ET, no legacy carrier will invest in Nigeria because “we are known globally as a country that has no respect for agreements. And we will be done for that.”

Background:

I am not speaking about ministers because the main issue will be overlooked. When you talk about individuals, the entire discussion becomes emotional and we lose track. So what is the crux of the matter? How can we pull up the Nigerian sub-airline sector? What is the focal point of aviation? It is the travelling public. If an aviation that cannot cater to the travelling public is being operated, you have not succeeded.

Historical context

In 1933, commercial aviation started and airlines were flying point-to-point. By 1947, post-war, the International Air Transport Association, IATA, brought the idea of market expansion. IATA brought in interlining and codeshare from 1947 up to 1990 when a new pattern was introduced – the formation of global alliances. There are three global alliances worldwide, Oneworld Alliance; Star Alliance and SkyTeam. The largest of them is Star Alliance with about 26 member airlines. Members have a total daily operation that is up to 2,400 destinations. When you are a member of that alliance, your network immediately expands. About seven or eight African airlines belong to these alliances – Kenya Airways, Ethiopian Airlines, South African Airways, Egypt Air, Air Maroc, Tunisair or Air Algeria.

This is at the top level. Many African airlines have alliances and codeshare partners, leading to market expansion. I always use the example of Africa World Airlines, AWA, a young and privately owned airline. But with that private ownership, they immediately moved to have shareholders. A Chinese company is a major shareholder and there is one other shareholder. That situation puts in place corporate governance to run the airline. AWA has 10 interline and codeshare partners; five are world-class airlines – Emirates, British Airways, Air France and many others. What it means is that AWA can sell its ticket into Air France. Except for Nigeria – Lagos and Abuja; AWA doesn’t operate outside Ghana. The focus is not Ghana as it were. And because they have codeshare and alliances, they have expanded their market. Small, purely domestic as the airline is, they have this number of codeshare partners because their operational integrity and schedule reliability are 92 per cent. Here in Nigeria, ours used to be at 62 per cent. In the last few years, it has declined. It is less than 62 per cent. Let me explain further.  TAAG Angola is an Angolan national carrier, not a private airline like AWA. TAAG Angola has 11 codeshare partners, including Emirates, Qatar, Air Algerie and Lufthansa. So, TAAG Angola can sell passengers into all these routes. With that, it widens its routes and makes money including foreign exchange. Lufthansa or Air Algerie can sell into TAAG Angola. Lufthansa lands in Nigeria, with passengers going to Angola, but it is checked into TAAG Angola seamlessly. In Nigeria, we are still operating the model of 1933 to 1947. All the airlines that have either operated or are in operation in Nigeria are operating that model (point-to-point). Nigeria Airways operated that model (point-to-point) until about 1976 when it developed many interline passengers. I recall because when I was going on a diplomatic posting to Dar es Salaam in Tanzania, I flew Nigeria Airways to Nairobi in Kenya, and stayed one day; by the next day, I flew Ethiopian Airlines to Dar es Salaam. I had the Ethiopian Airlines tickets already, so all I did was go to the counter, see my trip, check my load and off I went. This was in 1981. But by 1986, following the Structural Adjustment Programme, SAP, and devaluation of the Naira, Nigeria Airways did not have enough money to pay other airlines for interline agreements because IATA created what is called IATA Clearing House where all the bills an airline incurs on interlining is put in the Clearing House. At the end of the month, the airline sits down, reconciles and pays within a week.

However, Nigeria Airways was defaulting. By 1986, they expelled Nigeria Airways from the Clearing House. Once they expelled Nigeria Airways, it became a point-to-point operator. Immediately Nigeria Airways became a point-to-point operator, its market dropped. An airline cannot make money on a point-to-point operation. And since then, Nigerian airlines do not have interline or codeshare partners. It is one of the reasons they are not doing well. So, we have three levels – point-to-point, interlining and codeshare and global alliance – I have explained all. There is another level of operation which is the associate of an alliance partner – it is an airline that is an associate of an alliance partner. The airline is not a member of the alliance but an associate of an alliance member. This is when an alliance member invests in your airline. When KLM, a major leader in the Star Alliance, bought 29 per cent of Kenya Airways during their privatisation, Kenya Airways automatically became an associate of an alliance partner. Qatar Airways is investing in RwandAir. They have invested 49 per cent. Automatically, RwandAir is an associate of an alliance partner because that airline belongs to an alliance – Oneworld. What that means is that RwandAir can sell passengers into its alliance partner. If Qatar Airways has 140 destinations, it automatically gives RwandAir an additional 140 destinations in addition to its destinations. Suddenly, it expands and RwandAir’s network becomes tremendously large.

Linkage to Nigeria Air

If Nigeria Air had happened and Ethiopian Airlines, a member of the Star Alliance, invested in it; automatically, the market of Nigeria Air would expand in the first year even without operating one international flight. From here, even as a domestic airline, it can sell into its partner because it is an associate of an alliance partner. Through its associate which is an alliance partner, it reaches all the destinations. Star Alliance is the largest. It goes to over 2,000 destinations globally. Nigeria Air can sit down daily and sell to various destinations. It doesn’t matter if it is a domestic carrier. It doesn’t matter whether you want to go to China, Ukraine or the United States; it can give you a ticket through Ethiopian Airlines because it is an associate. That is the fourth operation. This fourth operation is higher than interline and codeshare partners.

More explanation

At the top, there are the global alliance members. Immediately below it, there are associates of alliance members. Below it, there are interline and codeshare partners. At the base of it is point-to-point which Nigerian airlines operate. A new one is coming up, but it hasn’t caught up so much. Fiji Airways is the only airline operating that for now. It is still under study. It is called Alliance Connect. It reaches an agreement with all the alliance members. It is not a member but can connect to One World, SkyTeam and Star Alliance. Although it gives tremendous access to markets, there are things about it from which an airline cannot benefit. Our airline operations are at the basal level. That is why, whether they like it or not, they can never make it.  None of them, none of the airlines, no matter what they do, can ever make it on a point-to-point basis. Never!

Schools of thought in airline operations

There are three schools of thought in airline operations. One is the national carrier which came from the beginning of airline operations. It is wholly owned by state governments, 100 per cent. In many cases, it was used to announce the existence of a new country. It is only in the United States of America that this idea of state ownership didn’t come on at the initial level, particularly because of capitalism, so to speak. There was the age of capitalism and socialism. And the US was the driver of capitalism. What they did in their case was that an individual does not own the airline. Delta and others have millions of American citizens that are shareholders because the airline is quoted on the New York Stock Exchange, NSE, and you buy. If you check the number, there are millions of Americans owning shares in them. They are not the kind of private airlines that you compare with what we have here. When they say America doesn’t have a national carrier, they do not know what they are talking about. What is a nation? When you say national carrier, it connotes sovereignty. Sovereignty belongs to the citizens. When government holds it, it is in the trust of the citizens. When government relinquishes control back to the citizens, the sovereignty is with the citizens. By 1989 or 1990, former Prime Minister of the United Kingdom, Margaret Thatcher, started something when she decided to privatise British Airways in the first global privatisation that happened. She appointed Lord King as the Chairman and Colin Marshall as the Managing Director to drive the privatisation. Colin Marshall was running Avis Car Hire at the airport. They completely took out all the shares held by government and sold them to the public. British Airways today is owned by the British public, the citizens. You may have some foreigners but mainly British citizens. That sovereignty has been transferred and given back to the owners because sovereignty belongs to the citizens of a country. With citizens’ ownership, the entire interest of the citizens is still in that airline. That is why it still has a national cover. Virgin does not have that kind of cover because it is owned by Richard Branson. That is the difference. If you touch British Airways, the British government will come down on you as different from when you touch Virgin. They will protect Virgin, but not with full diplomatic strength as they will protect British Airways. When Thatcher did this, everybody was watching. By 2000, a major study came in at IATA.

There was an IATA conference in Sydney in 2000. I was there. They concluded that full privatisation is not a sine qua non for profitability. Therefore, they decided that the state should have a role to play. Then there was a private airline in Australia. It was called Virgin Blues. It was started by Branson. The Australian government came in and took over, bought the shares of that airline, converted it and called it Virgin Australia. What you have today is Virgin Australia. It was as a result of the review of privatisation where they said the state has a role to play.

They sold it temporarily on an agreement to a US-based investment company, Bain Investment Capital. By next year, Bain Capital is going to put it on the stock. Up till today, many of the airlines that exist are 100 per cent owned by states, particularly in Asia and the big airlines in the Middle East. Singapore Airlines, Indonesia, Malaysia Airlines and Korean airlines. Then you come to the Middle East, all the Middle East airlines are full-fledged national carriers. Emirates, Qatar, Etihad, Turkish, Saudia and the new one that will start operation next year, Riyadh Air. It was unveiled at the same time Nigeria Air was unveiled. It was unveiled with a Boeing aircraft. Now it has acquired about 50 aircraft to start operation. They are already flying test flights around Saudi Arabia. But they are going to be an international airline and second-national carrier from Saudi Arabia – Saudia and Riyadh Air. All the people saying the idea of a national carrier is antiquated, let me say that it is not true. All the airlines in the last 30 years are full-fledged national carriers. In Africa, there are only three airlines where there is investment from outside, all of them are 100 per cent owned. RwandAir has joined those that have investments from outside the country. It is no longer 100 per cent. It was 100 per cent when it started.

When KLM went into privatisation, incidentally, KLM bought into Kenya Airways at the same time Nigeria Airways was also trying to privatise. At the time, Nigeria Airways’ privatisation document was declared better than Kenya Airways’ privatisation document. It was declared better by African Airlines in a conference held in Victoria Falls, Zimbabwe, in 1992 or 1993. It was declared that Nigeria Airways’ document was better because only two airlines tried to privatise in Africa. Today, Kenya Airways is the pride of Africa. After that conference in Sydney, many airlines in Europe started gradual privatisation. But all of them still hold government equity.

The Dutch government still has 11 per cent equity in KLM. The French government still has equity of 11 per cent in Air France. But Air France has even bought so much into KLM.

 Lufthansa has bought the general equity in SWISS, SABENA and Australian airlines. Lufthansa has bought 41 per cent of ITA. ITA is an Italian national carrier owned 100 per cent by the Italian government. It is a carrier that replaced Alitalia, which no longer exists. It is ITA that took over the entire thing. It has about 70 aircraft acquired from Alitalia. It has over 140 destinations. But, Lufthansa has taken 41 per cent of ITA. If you take a look at Kenya Airways, Royal Air Maroc and Rwanda, there are people buying into them and that has expanded their market. All of them are increasing their frequencies into Nigeria. Angola says Nigeria is a big market for them. How many Nigerians go to Angola? One of the prime routes of TAAG Angola is Brazil. It will empty Nigerian passengers going to Brazil. And by the time Nigeria is ready, the passengers would have been taken. They go there and become loyal customers that can’t be pulled out. Our market is gradually being emptied and we are sitting down here talking about individuals instead of our future.

The second school of thought is the national flag carriers and the third are the flag carriers. Flag carriers are privately owned airlines. Among the 10 best airlines, there is no private airline there. The first that you always find is Singapore Airlines, 100 per cent owned by the Singaporean government, they have a government-owned company that is holding 100 per cent equity for that airline.