Aviation
Ibom Air: Flying into turbulence
BY EMEKA EJERE
Last week, Akwa Ibom State-owned airline, Ibom Air, recorded another feat in its expansionary drive when it took delivery of another aircraft. By receiving the second of the two additional aircraft purchased in December 2019, the airline now deploys a fleet of five 90-seat Bombardier CRJ900 regional jets.
“After delays occasioned by the COVID-19 pandemic, Ibom Air is pleased to finally receive its fifth aircraft, the second of the two additional aircraft purchased in December 2019. The aircraft, with registration number 5N-BXO, arrived Lagos from Calgary, Canada at 00.05 am local time, Saturday morning, (August 1, 2020).
“With the arrival of this aircraft, our modern and efficient fleet grows to five aircrafts and Ibom Air continues to operate the youngest fleet amongst Nigeria’s airlines. This fleet strategy is in line with our vision to be a world-class African regional airline.” That was Ibom Air management announcing the latest addition to the state carrier. .
How government can establish and run a business that is fully autonomous with full corporate governance has been a major challenge in Nigeria. This is why many Nigerians are skeptical about the plan by the federal government to establish a national carrier that will be insulated from interference by politicians and top government officials whose behavior majorly accounted for the collapse of similar businesses in the past.
But there are claims that Akwa Ibom government is showing a good example with Ibom Air as the airline has shown so much promise with the right aircraft and the right managerial personnel.
“What is remarkable about the airline is that its day-to-day operations and decision making are fully insulated from the government of the state, which set it up and picked the best hands from every part of the country and beyond”, a source claims. But for how long can the story remain the same?
Ibom Air, a commercial airline owned by the Akwa Ibom government, launched its maiden flight on June 8, 2019 and joined the list of new airlines in Africa. On that day, the flight, a Bombardier CRJ 900 series with registration number 5N-BWM, took off by 12 pm for the Murtala Mohammed International Airport, Lagos. Thirty minutes later, a second flight took off for Nnamdi Azikiwe International Airport, Abuja. The airline started with three aircrafts, all six years old and only two routes – Uyo-Lagos and Uyo-Abuja.
Speaking at the airport ceremony on the day of the inaugural flight, Governor Udom Emmanuel said, “Today’s occasion is a water-shed moment for us as a people. Never in the history of this nation or indeed anywhere else in Africa that I can recall, has a state government gone into airline operations. Akwa Ibom state is, therefore, the first to achieve this, and we should all collectively give ourselves a pat on the back.”
The governor said the takeoff of Ibom Air was a testimony to his administration’s vision for rapid industrialization of the state. “Investors will continue to flock into our state, given the ease of traveling the launch of this airline will engender, the peace we enjoy and the hospitality of our people. We are all winners in this!”, Emmanuel said.
Charles Udoh, commissioner for Information in the state, was among the passengers in the Uyo-Lagos inaugural 45-minute flight. He said, “It wasn’t anything that I didn’t expect. If you look at the aviation state in Nigeria today, Ibom Air has the youngest fleet of aircraft in the Nigerian airspace. We are looking at aircraft that are just six years old. I am particularly excited because I have followed the progress from day one and see it come to fruition.”
However, Mr. Etim Etim, a banker and journalist from the state, believes that beyond the ecstasy of the launch flight, Ibom Air has a dark side that is quite troubling. Airline business the world over, he said, is very risky and difficult to operate profitably. His column titled “The dark side of Ibom Air”, published in the Guardian of July 1, 2019, barely one month after the inaugural flight read in part:
“The margins are thin, especially in the emerging markets where revenues are earned in local currency; but expenses like maintenance, spares, lease amortization, insurance premiums and so on are incurred in foreign currency, typically the dollar. You have to deal with exchange rate risks, in addition to fuel cost which usually takes over 85 per cent to 90 per cent of the operating expense.
“With only three Bombardier aircraft (each carries maximum of 80 passengers or thereabout) and charging an introductory fare of N15, 000 per passenger (about 40 per cent less than competition), Ibom Air’s profitability is far from sight.
“Why do you think Okada Air, Nigeria Airways, Chachangi Airlines, Bellview Airlines, Harka Airline, Triax Airlines, ADC Airlines, Al Barka Air, and so on are no more flying?
He observed that in terms of job creation, which is the most important factor in a government-owned business venture, Ibom Air is a non-starter, as the top management positions, for inexplicable reasons, are all occupied by non-Akwa Ibom people.
“Total new jobs created so far are not up to 50, for an investment which is conservatively estimated at N10 billion or more! For a development economist, what comes to mind is: couldn’t such a tidy sum have been invested in a better venture that would bring more benefits? The Central Bank Governor, Godwin Emefiele, recently announced that Nigeria spends $500m (N180 billion) yearly to import palm oil.
“If Governor Udom Emmanuel had invested half of what he used to set up the airline (or perhaps far less) to create and replant 1,000 hectares of oil palm estate across our state, Akwa Ibom would have benefitted far more from it than what Ibom Air would ever achieve in its life time. An oil palm estate of that size with corresponding investments in oil mills would employ over 2,000 persons and earn at least 10 per cent of the nation’s yearly import bill.”
However, Mr. Ayoola Olaoluwa, a Lagos resident who is abreast with developments within the airline is of the view that Ibom Air has a bright future as it is carefully avoiding the mistakes of other government-owned ventures in the past by involving the private sector in its management.
In a chat with BusinessHallmark, Olaoluwa said, “The case of Akwa Ibom is a bit different. The state is not making the mistakes of others in the past. While they own the planes, they gave it out to Dana Airlines to manage. And I learnt they are getting good return from the investment. What now happens to the income generated is another story entirely.”
But another enthusiastic observer who does not want his name mentioned was quick to remind Olaoluwa that Governor Emmanuel will soon leave office for another governor who may not be willing to key into the vision.
“After Udom, what happens when a Pharoah that doesn’t know Joseph comes? Econet matter too, Lagos, Delta, Akwa Ibom invested. Long term sustainability matters”, he cautioned.
Looking forward
Ibom Air is planning to add another domestic route in the coming weeks as management intensifies efforts to transform Nigeria’s under-exploited civil aviation market, Business Hallmark has learnt.
The airline was grounded alongside other airlines following the Covid-19 pandemic but flights resumed in July. Last month, Calabar, one of two new routes planned before the crisis, became the airline’s fourth scheduled destination.
According to chief operating officer George Uriesi, the airline’s next route will connect Lagos with another point in the south of the country. He declined to name the city but ruled out Port Harcourt due to the risk of cannibalizing demand in Uyo. Any of Onitsha, Benin, Enugu, Ibadan and Ilorin is likely to be the new destination.
“We are busy reviewing our business plan now and waiting to see what kind of traction we get,” Uriesi affirmed. “We intend to grow our fleet of CRJ900s to ten, and we will then change to another, bigger aircraft type. We were going to get to ten in three years, but with Covid-19 only God knows what’s going to happen.”
He said the addition of a larger aircraft type will drive expansion across West Africa and Central Africa – and “maybe up to East Africa eventually” – but long-haul flying is not in the business plan.
He revealed that before diversifying the fleet, Ibom Air will also launch cross-border operations with its existing aircraft. “We will start with some of the nearby destinations like Accra [in Ghana], Libreville in Gabon, Douala in Cameroon,” Uriesi said.
Admitting that corruption and poor management have plagued the sector for years, Uriesi said he wants to show there is another way.
“We are determined to put corporate governance up-front,” he stressed. “Everything is for the airline, and everything is done in the interests of the airline. We are appointing an international auditor to do our annual financial audits and we are going to be publishing our books in the newspaper, so we’re not hiding anything. We want to prove that this thing can be done properly and done well.”
However, local airlines are some of the worst hit businesses during the lockdown. To date, estimates have it that the sector has lost as much as N180 billion in total, with airlines alone accounting for N21 billion monthly. This is not a good development for a new entrant like Ibom Air.
