Thursday 9 May 2013

Feature: Of Private Jet Owners And Nigeria’s Aviation Industry

Aviation Nigeria

In recent years, an assortment of executive jets, helicopters and other private aircraft have appeared at airports across Nigeria. But the causes and consequences of this aviation trend are not quite as obvious as they might seem. Nigeria’s commercial airlines generally remain in a parlous state, while the country’s airline sector is perhaps among Africa’s most underdeveloped. Last year’s Dana Air crash in Lagos, which killed 163 people, forced the Nigerian Civil Aviation Authority (NCAA) to suspend Dana’s operating licence. Just a few months later, Air Nigeria, a larger airline owned by billionaire Jimoh Ibrahim, collapsed under an unsustainable debt burden.

Between them, the two airlines handled about a third of Nigeria’s commercial air traffic, so their disappearance decimated seat capacity throughout the country. Indeed, by December 2012, annualised capacity on Nigeria’s most important air route, the Lagos-Abuja shuttle, was down by 36 percent – one million seats – compared to a year earlier. Capacity to Port Harcourt, a major oil city, fell by 26 percent. In response, Arik Air, Nigeria’s largest surviving carrier, raised its network-wide fares by an average of 50 percent.

This was a private jet operator’s dream. With airlines suddenly unable to satisfy demand, the private jet companies were able to bulk up their fleets and routes. The large number of multinationals in Nigeria – many of whom operate in relatively remote locations when drilling for oil and gas – meant that there was a ready market.

It was hardly surprising that Switzerland’s ExecuJet Aviation Group, which manages the world’s largest fleet of private jets, last year chose Lagos as the location for its first West African facility, over several other potential locations in Ghana and Cote d’Ivoire. “In Nigeria, companies are looking for solutions to get them to places, which are now inaccessible by commercial airlines,” says Ettore Poggi, the company’s Head of African Operations.

Globally, ExecuJet manages more than 150 private jets, from Global Expresses (built by Bombardier) to Legacies (built by Embraer). Owned by wealthy private individuals or companies, the jets are chartered out when not in use, usually for many thousands of dollars per hour. A three-hour round trip flight on a Global Express 6000, for instance, might cost $22,000 (N3.46 million). In a Bombardier Challenger, a oneway trip from Lagos to Dakar would be around $37,000 (N5.8 million) – versus $1,100 (N173,000) for a business-class airline ticket on the same route.

Though the vastly more expensive option, private aviation has numerous advantages in a country like Nigeria. Naturally, the experience is luxurious: private jets typically boast reclining armchairs, minibars, retractable televisions and even beds. “They like our beautiful cabins and the service we provide,” remarks Poggi. The private terminals now appearing in Lagos are wellappointed, so that passengers can shower, eat and relax prior to departure. And most importantly, in a country where scheduled airline flights are so often delayed, private jet users can choose when they want to leave, where they want to fly, and even how quickly they want to get there. Says Poggi: “For time-pressed businesspeople it’s the perfect product.” Whether corporate or private, typical customers buy flight time in pre-purchased blocks of 100 hours, which guarantees them a jet on-demand, at any time of their choosing, anywhere in the world.

Behind the scenes, operators such as ExecuJet take care of everything from the pilots to the flight planning, and also perform the necessary maintenance work – which takes much of the hassle out of jet ownership. Indeed, ExecuJet’s Lagos base has been certified by both Bombardier and Gulfstream as a line maintenance facility, one of only a handful in the whole of Africa. “Just fly,” says the company’s slogan, “we take care of the details.” Those ‘details’ are a big part of business aviation’s appeal to the oil and gas multinationals operating within Nigeria. Unlike the country’s commercial airlines, which are licensed by the NCAA, most private jet operators are licensed by European agencies and are therefore required to operate to European safety and maintenance standards, which satisfies the multinationals’ auditors.

With the private jet market growing apace in the region, ExecuJet is not alone in trying to get a piece of the action. Rivals like VistaJet, also headquartered in Switzerland, are also building their brands. Within four months of establishing its West Africa office in 2010, VistaJet operated 1,200 hours of flights for seven major clients. The company then took the unprecedented decision to deploy three dedicated aircraft to Lagos and Abuja, which are maintained by a team of expatriate engineers seconded from Bombardier. VistaJet founder, Thomas Flohr, says that he envisages Nigeria becoming one of the company’s biggest markets.

VistaJet’s success in Nigeria was specifically mentioned by Flohr as a factor in his recent decision to place the largest private jet order in history, which added 20 planes to his company’s fleet. “From a commodity location somewhere in Siberia, to fly to Abuja, how do you do that without a private jet?” he asked. “People talk about the BRIC [Brazil, Russia, India, China] emerging markets, but I would like to extend that to BRINC. I would like to insert an ‘N’ there because we see Nigeria as a tremendous growth market.”

VistaJet’s achievements in Nigeria rest partly on its partnership with local businessman, Kola Aluko, who is also a member of the company’s advisory board. Aluko claims to have tailored VistaJet’s operation to the Nigerian market’s cultural expectations. “The catering we offer here, for example, is very different from what you have elsewhere, and the behaviour of the crew means they’re respectful to the passengers in a way that’s based on West African customs and Nigerian traditions,” he said.

Other private jet operators to open Nigerian offices in recent years include Britain’s Hangar8, for which Lagos is one of only five global bases.

Many of Nigeria’s wealthiest people have eschewed ad-hoc charters arranged through thirdparty operators like ExecuJet, VistaJet and Hangar8, and instead purchased their own aircraft. In the five years leading up to 2012, 120 private jets worth a total of $6.5 billion were imported into Nigeria, bringing the country’s private jet fleet to about 200 aircraft – almost 10 times the number of planes operated by Arik Air. Recent buyers have been companies including Global Fleet Group, Zenon Oil and Azikel Group, which has stationed its jet in Port Harcourt in an effort to promote that city’s aviation expertise.

But it’s not only businesses that are buying planes: pastors and politicians are among the buyers, too. Last year, the government of Rivers State sanctioned the purchase of a $46 million Bombardier Challenger. Other popular choices include Gulfstreams, Falcons and Legacies. Beyond the cost of the aircraft themselves, annual upkeep, crew and maintenance can cost as much as $1 million per year.

Robert Habjanic, a sales director for Bombardier in Africa, reports that Nigeria is now his firm’s second-largest market, after China.

Sources at the ultra-exclusive Jet Business, a private jet dealership on London’s Hyde Park Corner, say that Nigerians are among their most prolific customers. The firm’s premises contain a full-sized replica of a jet interior, as well as a floor-toceiling computer screen on which clients can design their own aircraft upholstery.

Nicky Oblie, a Ghanaian-born business aviation consultant who focuses on the West Africa region, is enthusiastic about Nigeria’s potential. “There are a lot of rich people and businessmen with limited time on their hands, who can’t find flights on commercial airlines or who don’t want to be tied to an airline’s inflexible schedule,” he says. “So they fly privately. Now that the oil and gas companies are moving into Ghana and Sierra Leone, there’s a real opportunity here for Nigeria to establish a lead in this market. If private jets arrive in Nigeria, auxiliary businesses like maintenance shops will arrive too. Nigeria can become the region’s principal player.”

As Oblie points out, this is already happening. Private jets need regular maintenance, so several Nigerian-owned support facilities have opened in Lagos. One of them, Evergreen Apple, is headquartered near Lagos’ bustling Ikorodu Road and was the first such company to open a fixed operating base at Lagos Airport. The base measure 15,000 square metres and offers an accredited maintenance facility, in partnership with an American engineering firm. As well as building the skills of local engineers, the base makes Lagos an attractive destination for private jets from across the region, which no longer need to go as far as South Africa, Dubai or Europe for scheduled maintenance. Today, private jets from Ghana, Cameroon, Congo, Sierra Leone and Cote d’Ivoire can all be seen on the apron at Lagos Airport.

But Nigeria’s federal government has misgivings. Little treasury revenue has been raised from the $6.5 billion spent on private jets by the Nigerian elite, as most planes were purchased through shell companies based in offshore tax havens. The proliferation of private jets has also unquestionably weakened the commercial aviation sector, which the government is keen to reinvigorate but whose profitability depends on lucrative business traffic. In January, the Special Assistant to the Ministry of Aviation revealed that the government had temporarily banned private jet imports, pending a ministerial review. Affected parties may include Dazair, Skypower Express, and Bishop David Oyedepo of the Living Faith Church, all of whom currently have private jets on order. More significantly, the ban is likely to affect Nigeria’s growing band of auxiliary service outfits, like Evergreen Apple, which expects to see income dip as a result. “We’re extremely disappointed. We think the ban is totally unjustified,” said one source at the company, on condition of anonymity. “Aviation maintenance and safety is an area in which Nigeria has traditionally lagged its neighbours, so the government should be encouraging our work, not damaging it by banning our customers.”

Even so, Oblie sees the latest developments as another boon for the private jet operators who charter out their own jets. They remain unaffected by the government’s manoeuvre since technically they do not ‘import’ their aircraft. “Companies like VistaJet can expect to see meteoric growth,” he says. “They can target the mining, drilling and oil prospecting companies and also branch out regionally to other countries where airlines perhaps aren’t quite as reliable as passengers might like them to be.”

Indeed, private jets are proliferating across Africa. Afrijet, a Libreville-based group founded in 2004 by Gabonese private investors, offers private jet charters around central Africa, while Greece’s Gainjet proposes a concerted push for market share in the east. Together with ExecuJet and 16 other suppliers, they formed the African Business Aviation Association (AFBAA) in 1012, in order to create a unified industry voice. In an interview, AFBAA’s newly appointed chairman, Tarek Ragheb, described the continent as a vast, untapped business aviation market. “There are few railways, there are few roads and certainly the infrastructure is poor. The best way to get around is through the air, and the best way for an entrepreneur, government official or businessman to get around is through private jets,” he said. AFBAA has plans for an annual conference circuit that would tour Africa, modelled on the events that NBAA and EBACE, business aviation associations for North America and Europe respectively, organise in their own continents.

But of all Africa’s business aviation markets, none are as big as Nigeria’s. The country has surpassed South Africa as foreign operators race to establish premises in Lagos, and as wealthy Nigerians continue to order more aircraft. Growth is unlikely to slow soon. Auxiliary operations like maintenance and training facilities should continue to thrive and with luck, Nigeria’s federal government will also succeed in extracting more revenue from this booming trade. Meanwhile, Nigeria’s highest flyers will continue to fly high.


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