Okonkwo: The focus of any airline is to manage costs

The Chief Operating Officer of United Nigeria Airlines, Chief Osita Okonkwo speaks to WOLE SHADARE on the challenges faced by airlines which have made them seek better ways of remaining in business

How have your operations been in the last two years?

On February 12th, 2021 we did our inaugural flight and it was a flight that took us from Lagos to Enugu. That happened just a few days after we obtained our AOC. That period was towards the COVID-19 period. The aviation industry had just been opened for business. It was like, will it happen or will it not happen but we did that on that day. Looking back two years after is like a journey. Lessons have been learned and what we have done is build some of these lessons into our plans for the future. The space we are in is one that is very difficult, second very competitive, third very uncertain.

 

Osita Okonkwo

How did you navigate the costs, especially rising fuel costs and other costs?

If you look at the cost structure of every operation, first of all, you have the aircraft come which is in most cases measured in hourly bases or circle bases for the engine, mainframe, and any other things you have in the aircraft. You have to know that every component has a diminishing value. You have an engine of 20, 000, 30,000 circles, or whatever. It reaches a certain point and you have to go for some checks on whether it’s the nozzle, the carbon seal is in order, and so many other things. The first thing you do when you start this operation is to know that you have engine reserves, maintenance reserves, landing gears, and others. They all have life. Everything is like a clock. You can’t escape maintenance. If you acquire that discipline of providing that when it comes to your C-check, you don’t have issues with sending it. You just wait until that time. Aircraft cost is one big chunk of it which you have to manage. The second component is the operating cost which is basically fuel. Consumables, spare parts handling charges, all related to particular operations. When we started, fuel was N200 plus to N300. As of December 2021, we were buying fuel at N350. Suddenly, it rose to N500, and that was when AON started shouting. Then, it is around N790 and N800 now. You know that 99 percent of input into an aircraft is forex. What we have seen is escalating cost of operation. It is escalating at a very rapid rate. There was a reaction on the fare side on the fare side from N23, 000, N30, 000 it moved to N50,000, N70,,000. Now what we are seeing is that because of the economic situation in the country, nobody is flying at N70,000. So airlines have reacted irrespective of what people say that they were colluding to fix prices. This is market force-driven and survival driven. Now you can see that you get tickets for N40,000. but I can assure you that people are underwriting those costs. The good thing is that if you are looking at the long term, you try as much as possible to keep moving, hoping that it will balance. The airline is not a one-year business, it is a long-term business. The focus of any airline is to manage costs.

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What happened to the spring alliance idea of the airlines?

Spring Alliance has been very helpful. It is not like everybody chooses that but if it happens that you don’t have enough time to reorganize your flight or to inform passengers, you can call our partner airlines to help you. There is an agreement, they will carry you and the settlement will be done later. I think the numbers are not really important but the spirit and the impact it is having are very important. We have such an agreement with all the people in the alliance.

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What is the fleet capacity of United Nigeria Airlines?

We are still operating our four CRJs owned by us and we supplement with leasing from time to time during the peak period. We have plans to expand our fleet. It is being slowed down because of the current situation of forex. We had contracts with manufacturers and lessors but it has not been fully operationalised because of a lack of access to forex. This year we are going to increase the tempo a little bit and make sure that by the end of the second quarter, we will bring in the new fleet we have already committed

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Wole Shadare