Olorunyomi: Government Must Collaborate to Grow Aviation Industry

Chief Executive Officer, Copterjet International Limited, Captain ToluwaVictor Olorunyomi, in this interview, said collaborative efforts between government and the private sector would expand airport infrastructure, boost services and bring to fruition, state-of-the-art airport facilities. Chinedu Eze presents the excerpts:

Now that government is in the process of giving out some major airport facilities for concession, how will your company come in?
We can come in different ways. This is a private public partnership initiative that the government is putting in place, which is where we stand. And so we are open to opportunities in that area in terms of local capacity development support and also infrastructure mobilisation of investment capital and upscale of these assets. Because travel has changed since the advent of COVID-19 and there is a need for infrastructure planning now.

If you get to major airports in the Western world now, you don’t see regular check-in process; it is all automated check-in system. So it means some of our infrastructure needs to be upgraded. So, we are available to deploy our strategies in place to ensure that we contribute our own quota in that regards. And then in terms of knowledge support, project management and consulting and advisory as well, we also have necessary competencies to drive that. What we have done is to build a wider collaborative structure, global collaborative framework, such that we can review, look at the extent of a project and draw on the necessary strategic partnership and collaboration that we have globally to undertake the kind of project that needs to be undertaken. So for the concession, definitely we are positioned to be able to harness the opportunity in regard, which is not limited to just asset management. It could be training development, advisory consulting, infrastructure upgrade, expansion and growth. There so many things that still needs to be done in terms of infrastructure.

In terms of skills acquisition, there is real challenge in the industry. Is your company also focusing on that in terms of training?
Our focused training is not as an approved training organization, as per the Nigerian Civil Aviation Authority (NCAA) giving us certification for that, but in terms of consulting competencies, yes we have. And if there is a need to look into that, as opportunities emerge in that direction we will set the necessary mechanism in place to offer that services. But in terms of capacity, we do have capacity locally, but of course, it’s important that we continue to develop that local capacity to meet the global competencies. So things are changing by the day. I talked about smart airport system and all of that, which means there will be new infrastructure being deployed, some new information technology infrastructure and security infrastructure in the airport system. So all of these things require trainings and retraining. So we can come in that regards to offer some specialised and focused training solution and also provide necessary synergy that is needed to attain that level of standard.

Given the scenario that played up sometime ago, where some airlines reneged on leasing agreements, how will you facilitate easy leasing for Nigerian airlines?
Thank you. I think that is one of the areas that we also provide services, aircraft and leasing programmes. So, what we have done is to look at the problem with some of these airlines that have been able to meet their leasing obligations. Reneging on such agreements does not provide good national industry reputation. So we are coming to correct those anomalies, which is to ensure that there is proper financing to match with the correct business framework. So because you get it wrong from the beginning, there is one thing to want to set up an airline but there is another thing to have the right blend of financing framework and business model. So we are coming to serve and provide financial gatekeeping services to financial institutions and some of those leasing firms to ensure that we able to perfect the leasing process.

We will be able to ensure that we guide these airlines with the right leasing framework and also appraised their model to ensure that it fits into the right financing and leasing arrangement that is in place. This is because if they stack up and then they don’t have these correct structures in place, it is only a matter of time, they will go down and that has been the trend.

So for us, we want to see that trajectory changing with us coming into the industry by ensuring that there is correct financing march with the right operational framework to achieve business sustainability. That is when the airline can thrive and remain sustainable and the leasing firm too can be happy that they are getting a return for their investment. Because the infrastructure gap is huge in the market and we need them. And this is a form of infusing foreign direct investment into the industry. They may not come directly in terms of cash but they could come, in terms of asset and financing. So we need that because the airlines cannot cope with the cost of capital here locally.

So they need that foreign backing. We are here to provide the platform, the link between the global leasing entity and then the operators as well; and also the financial institutions, banks, and insurance companies, private equity firms. So, we are fully here on ground. At some point, we look at the market dynamics and the foreign exchange stability and at some point, maybe some of these assets needs to be domesticated for ease of accessibility, for the airline to quickly take off with or if they need to have an operational expansion quickly in the time that there are so much air traffic volume and then they want to key into that. So they can easily work and say, oh we want to meet temporary capacity growth in the short time or in the medium term.

Do you share the view that, if Nigerian airlines are able to access aircraft using dry leasing, they will operate more profitability compared to buying their own airplanes?
It depends on the business model, but it can work. It is always a very prudent approach to start by way of leasing, because it provides easy entry and easy exit. So it is a very good strategy. However, at some point depending on operational requirements and what is the objective, the medium-term and long-term objective of the operator is, and the viability, they might be looking at newer aircraft.

This is because leasing comes with its pros and cons as well. New aircraft, you have less maintenance challenges and all of that. You have manufacturer’s spares backing for maintenance programs and all of that. So as much as new aircraft costs much to acquire, but overall in terms of operating costs, it might be more prudent. But of course, for a fresh airline that is just coming up, it cannot afford to deploy such magnitude of capital into aircraft acquisition. So it needs to build a robust cash flow, the most prudent way to go into it would be via leasing. But that leasing arrangement needs to be well, cleverly negotiated, then potentially structured to ensure that the right match of arrangement with the airline’s operational framework.

Currently Nigerian airlines suffer under capacity and that explains the reason for higher airfares. Based on the services you offer, what advice do you have for Nigerian carriers?
A number of things contribute to the reason why airfares are high. So many things will be looked at, aviation fuel, foreign exchange because these spare parts, they bring them in and then it cost the airline so much to get forex to meet their maintenance needs. So, so many things are involved. And now that takes us a bit into the infrastructure part. We are looking at driving initiative as part of our core services. In infrastructure we are also looking at the area of large investment in MRO (maintenance, repair and overhaul) facility in Nigeria and in Africa to meet the African marketplace and Nigerian market place. So that it can reduce pressure on the foreign exchange demand for the airlines and they can achieve their maintenance locally and they can achieve that robust maintenance program, access them without much exposure.

So we coming in to help airlines to review their processes and if there is a need for temporary or short to medium term credit injection into their system, to also enable them to establish that framework, make that arrangements in place. We can restructure their leasing arrangements, we can look at other programs that can match them to be able to grow and harness the capacity gap that is there in the industry. So, that is enough revenue line for them, which they are not optimising.

With our buckets of services they are sure to be able with us, as a very reputable and experienced, knowledgeable business development partner. We can help the airlines optimise, if there is a need for expansion, some might need to shrink why some needs to really expand. So, the airlines have not been looking at mergers and acquisition.

It might be also a way to go as well too. Because it depends, you look at why you went into the business? If it is not just to fulfill social gratification by having an airline, if it is for business prosperity, owners and entrepreneurs need to begin to look at the direction of mergers and acquisitions that can enable them to grow their balance sheet, strengthen their working capital, and then put them in a position to be able to harness cheaper alternative kind of financing. Because nobody is going release money to a struggling airline, without a reputation to pay back.

But if the necessary consolidation is in place, they will be better positioned. So there are wide arrays of programs that we have developed to ensure that the industry remains strong, much stronger post COVID19 and then position the industry on the part of growth. So we are coming to partner with all stakeholders. That is why our emergence statement was a collaborative framework. So we are calling on global, local collaboration between governments, private entities to jointly work to drive the industry for economic prosperity. As we all know, aviation is an economic catalyst, and it is needed if we really want to get the economy to the part of quick recovery.

You said you were looking at establishing a Maintenance, Repair and Overhaul (MRO) centre locally to help the airlines. Will you be willing to partner with a ready known local airline to build MRO?
Oh, definitely, we are open up to sustainable partnership in the area of local capacity development infrastructure, new infrastructure in MROs. We are open to joint venture arrangement with people that have shared values with us. That is why we don’t see anybody as a competitor because our objective, vision, is to be the leader in the development and transformation of aviation business in Nigerian and Africa. So anyone who is on that part is our partner.

Because the objective we know, we cannot do it alone, we cannot achieve it alone. So we need collective efforts, all hands on deck. So if there are serious entities out there who are willing to look into the direction, we will look at it and look at the prospects and then definitely work to collaboratively see that coming to reality. And even if it is from the government side, why not, as long as it provides infrastructure support for the operators. So even if we cannot build the carrier itself, if it is the maintenance hand that we can work collaboratively to develop to support the local operators and then it provides incentives for them. And then it would definitely help them to grow.

In the area of asset management and development, what exactly do you do?
Asset management could either be in terms of aircraft equipment, it could be real asset, which could be airports and then it could be other infrastructure that supports the aviation industry. So, it is on the broad scale, it could also be privately owned assets that could be put on under that to manage, matching the right maintenance programs. Because there is a whole lot of things involved.

I mean if you want go own an aircraft now, there is a whole lot of processes and procedures, and all that needs to be done from pre-acquisition, to post acquisition, regulatory requirement, ensuring the crane, ensuring maintenance programs, our plan, fuelling. There are so many logistical details that involve and to keep the aircraft airworthy. So managing and over seeing that to ensure that all of these intricacies are put in place and undertaking for smooth, safe, flying condition for the private owners. A private owner may not be willing to buy an asset, or does not have the necessary capacity to keep the asset running.

In the area of business aviation, (private jet charter), what services can you provide in that area?
Okay, we can help facilitate that as well, while we can also help individuals, entities to also have access to their own assets at the least cost possible. Also help them to design fractional ownership structure and a fractional leasing structure as well. So there are various approaches depending on the budgets of the individual. So we can match our various travel needs to the individual or entities’ budget. We have series of programmes to cater for different levels.