Nigerian
airlines, and indeed Africans, which had for a long time, refused to
appreciate the trend of mergers and acquisitions are missing out on the
benefits of such policy, aviation stakeholders have said.The
stakeholders who listed the benefits of such voluntary decisions to
include but not limited to growth and expansion; increase in market
share; economies of scale and cost reduction; increases credit
worthiness and bargaining power.
Other
benefits are enhanced image and market perception; enhancing of the
chance of the merger to take on bigger markets; helping to face
competition; enhancing research and development capabilities, among
others.
Aduke
Atiba, executive director of Landover Company Limited, at a one-day
Aviation Summit organised by Sabre Travel Networks, posited that the
growth of Nigeria’s economy does not reflect in the number of airlines
in the nation’s domestic market adding that as long as they ignore
global trends in aviation, the problem in the sector may continue to
skyrocket.
“In
the past ten years, there has been an average of 10 domestic airlines
in operation at any particular time, with average fleet capacity of
about 10. Today, there are only about 7 licensed airlines operating in
Nigeria, these aircraft owned by Nigerian airlines put together do not
add up to the fleet of individual airlines in the US, Europe or Asia,”
she said.
She
explained that mergers in the US started since 1930 with Western Air
Express and there have been more than 45 mergers in the US since then,
adding however, that Africa is yet to appreciate this trend.
“Kenya
Airways/Precision Air; Kenya Airways has 49 percent of Precision Air;
Ethiopian (ET)/ASKY; ET has 40 percent stake in ASKY and Ethiopian/Air
Malawi: ET has 49 percent stake in Air Malawi. Nigeria also has no
record of mergers till date. Closest examples of cooperation is the
interline agreements, an attempt among now defunct airlines.”
Atiba
however noted that two major reasons why airlines on the continent have
not been able to merge are the lack of trust for one another and fear
of competition.
According
to her, the airlines also have to meet some of the prerequisites for
mergers adding that many of them currently cannot boast of such.
“There must be desire and ability to collaborate or share; inherent transparency and trust; there must sound business model and sound management and discipline.
“The
airlines must have strong customer appreciation or be customer-centric
as well as have strong governmental/regional support, mergers,
consolidation, cooperation and synergies are yet to be realised. They
may be ideal given global trends. However, myriad of pre-conditions must
be met to ensure they work effectively,” she added.
Also
speaking, Gabriel Olowo, president of Sabre Networks, convener of the
event, in his speech at the aviation event with the theme, “A dozen
world airliners by 2050,” said that despite the fact that mergers and
consolidation have gained ground in the global aviation industry,
airlines in the continent are still foot-dragging on the concept, which
they said commenced in United States of America, USA, in 1930.
He emphasised that Nigerian and African airlines face serious trouble if they do not embrace mergers and consolidation.
He
explained that the revenues of the three biggest airlines in the
continent, Kenyan Airways, Ethiopian and South African Airways, which he
put at over $3bn is just about 35 percent of the annual revenue of
Emirates Airlines.
He
added that all efforts to ensure mergers and consolidation among the
continent’s carrier had failed in the past, but stated that mergers or
consolidation could not be achieved by government coercion.
He
also lamented the precarious situation of the Nigerian airlines, saying
that there are only 57 aircraft in the fleet of the carriers in the
country while an airline like South African Airways had over 67 aircraft
in its fleet.
“Nigerian
airlines are at the bottom level of success. The six airlines that we
have in operations are in the lowest rung of the ladder in terms of
revenue, service delivery and good business model.
“Business climate is shifting from the West to Africa. When that shift comes, the continent’s carrier may be caught napping.”
Article accredited to: Business day
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