Merger, consolidation pipe dreams for Nigerian airlines
To create revenue and cost synergies, Nigerian carriers would need to work harder to realise corporate integration, operational harmonisation, and centralised administration and governance, writes, WOLE SHADARE
Different scenarios
Since 2000, the number of major airlines operating in the United States has shrunk. A series of mergers and acquisitions saw three powerhouse airlines emerge; Delta Air Lines, United Airlines, and American Airlines. Between them, these three airlines now have around half of the overall US domestic market to themselves. That’s a juicy slice of a big market pie.
Rather than shrinking for optimal performance through mergers, alliances, and other forms of consolidation, Nigerian carriers are growing amid scattered operational structures with no strong financial powers. They daily exhibit their weaknesses and fragmentation and have refused to stem the dangerous path. They bleed profusely. Consolidation is not given a look-in.
Nigerian and many other stakeholders heaved a sigh of relief when many of the country’s six airlines proposed an alliance. The carriers shelved their rivalry as they entered into a commercial alliance on mutual support in the area of operation.
Nigeria takes shot at consolidation
Dubbed the Spring Alliance, the partnership enables signatories to offer assistance to another carrier for efficient services to customers.
The membership includes Azman Air, Arik Air, Air Peace, Aero Contractors, United Nigeria, and Max Air.
Ibom Air and Dana Air, two airlines that have done so well for themselves by Nigeria’s aviation standard a few months ago entered into a codeshare agreement. Not much has been heard of the deal in what a few people believed may have collapsed and one that is ineffective.
It was expected to be a masterstroke for resolving incessant flight delays their passengers are subjected to. The deal was expected to give impetus to reshaping and redirecting the airline industry which is riddled with poor services and other associated vices.
A source close to the two airlines said they were at the stage of fine-tuning grey areas, stressing that the pact has not been jettisoned.
While Dana and Ibom Air showed serious commitment to birthing the first codeshare arrangement, it is not clear why there is a big delay in fine-tuning areas that need to be sorted out; an idea that could spur more airlines to embark on what would benefit the carriers, passengers and the entire aviation value chain.
The significant milestone afforded Dana and Ibom a business arrangement whereby both airlines jointly offer flights to common destinations while operating services to destinations that are not within each airline’s regular routes.
Anticipated game changer
The Spring Alliance would have been the game changer in the airline business in the country had the promoters matched their words with action. It would have been the largest single pool in local aviation, aiming to improve service delivery and reduce operation-induced flight delays.
All the idea seems to have died a natural death typical of the attitude of stakeholders in marshalling good ideas without the wherewithal to make them work to achieve the desired results.
Chairman of Air Peace, Mr. Allen Onyema while proposing the idea, said the Spring Alliance would be for the benefit of the passengers.
Onyema said: “In the aviation world, we have so many alliances that airlines key into. We have the Star Alliance; there is One World and several others. And airlines decide to key into those alliances for the benefit of both the passengers and the airlines themselves.”
“So, today in Nigeria, six airlines have decided to come together to form what we call the Spring Alliance. We decided to come together to do this for the benefit of the flying public that uses the opportunities provided by these airlines to fly.
“By this alliance, our passengers are protected whenever there is a problem with one airline. It is our response to the complaints of the flying public. So, this alliance will enable us to satisfy them.
Onyema’s idea was noble. It came out of his passion to seek aviation and airline business thrive with the way it is done in many other climes. Passion is one thing. Bringing this to fruition is what Nigerians have done for a long time longed for as this would ease the pain and burden of many travelers who have been caught in the gory experience of delayed or cancelled flights. It would be a win-win for all the carriers and help to reduce enormous pressure whenever they are not able to operate flights.
Competitive industry
The airline industry is one of the most competitive industries in the entire world. A large number of incumbents in this industry are making losses.
This is primarily because of their lack of efficiency. Since success in the airline industry is solely based on efficiency, many companies have explored unconventional options in order to increase their profitability.
One such option is a code-sharing agreement between airlines. A code-sharing arrangement, therefore, refers to a situation in which an airline is sharing its code with another.
Peep into Nigerian airlines
Nigerian airlines are local champions and not playing in the big league. They are not showing seriousness. The world is a global village; Nigerian airlines do not have an attractive network. While Air France interlined with defunct Bellview and Aero two decades ago, domestic airlines have shied away from it, as a result of many bottlenecks and challenges associated with the setup that experts believe are surmountable.
Air France at the peak of Aero Contractors’ operations had a good partnership where all its passengers from all over the world connected domestic flights with the Nigerian carrier to any route in the country it operated to.
The two airlines sold each other’s tickets through an arrangement that benefitted both parties. The French national carrier before then also had the same arrangement with the defunct Bellview Airlines and it was an instant success.
The inability to replicate that success among Nigerian airlines on the domestic market was what naysayers said could not work partly because of the desire by airlines to want to go it alone or the fact that many of the carriers are set up not to last but a vehicle for other ulterior motives.
Lack of commitment
For many years, the idea of bringing carriers together to save airlines so much pain as a result of flight delays and cancellations that are becoming the norm now in the Nigerian aviation industry had ended as a talk show with no visible plan of actualising it.
Chairman of the airline, Chief Obiora Okonkwo, said aviation stakeholders have realised the huge potential in Nigeria, but grossly untapped, and had chosen to do away with unhealthy rivalry and embrace the spirit of collaboration.
According to him, from the available records, about 10 million Nigerians travel by air regularly.
He added: “We have about 10 operators in Nigeria who are doing scheduled flights. It’s still nothing for 36 states and for 200 million people. It’s still a big market. Therefore, we have agreed among the operators that we should stop unhealthy competition but we should be more collaborative in our approach and our nature. We’ve all agreed that we should all look out and be our brother’s keeper.”
“I’m here to announce to you in advance, with all sense of joy and happiness that in the next couple of days, I will sit side by side with my brother and friend, Allen Onyeama to sign a groundbreaking agreement that will open up a new way of collaboration in the industry.
“In it, you will see Air Peace and United Nigeria working together as partners. If you buy an Air France ticket and then you check in to KLM, don’t you ask yourself why? Why should that not work in Nigeria?”
Not much has been heard about the partnership also as the two airlines are yet to concretise the deal or work out the modality to actualising it.
Clearing house bottleneck
A former Director-General of the Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren, who had always clamoured for domestic codeshare/interlining stated that the idea of interline would help to grow the sector and for the general comfort of passengers who are at the mercy of airlines whenever there are flight delays and cancellation without an alternative to passengers who are left stranded at airports.
Demuren flayed the slow process of interline/codeshare in Nigeria, stressing that this should have been done a long time ago in the interest of the sector.
He, however, stated that the airlines would need the ‘protection’ of the aviation regulatory body to give a bite to the proposed interline as well as act as an umbrella for the project.
Last line
For the Nigerian aviation industry, the collaboration that could ensure the stability of the carriers is lacking as experts in the aviation sector see code-share pacts among airlines as a panacea to the trouble of connectivity, low capacity, and serious flight delay currently experienced in the country’s aviation industry.
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