ROUTES AFRICA: Nigeria to Use Aero as Model for Country's Future Strategy

The Nigerian Government is planning to use long-running air carrier Aero Contractors as the business model for future growth in the country’s aviation sector and use it as a case study for other carriers to follow. The state entity, now known simply as Aero, was formed in 1959 and operates a mix of helicopter and fixed wing domestic and international scheduled passenger services, as well as air charter and third party aircraft operations, largely in support of Nigeria's extensive oil and gas industry.

The business is currently mid way through a major restructuring programme after Asset Management Corporation of Nigeria (AMCON), an arm of the Federal Government of Nigeria, acquired a 60 per cent shareholding in the business from its former outright shareholder, the Ibru family.

“AMCON is looking to revitalize and restructure different organisations across Nigeria and we are the first of the airline’s they have approached as in their eyes the assets of Aero are worth preserving after 52 years of existence,” Hugh Fraser, Chief Executive Officer of Aero confirmed to The HUB during the recent Routes Africa forum in Kampala, Uganda.

The Britain was recently appointed to the position after holding the role of Chief Operating Officer at the Egyptian operation of low-cost carrier Air Arabia. Prior to that he had held the Chief Executive Officer’s position at Air Uganda and had been Commercial Director at Kenya Airways, affording him an excellent view on the aviation business in Africa.

“I am there to help with the restructuring and turnaround programme and lead it moving forward,” explained Fraser. “From what I can see Nigeria still has massive opportunities in forms of aviation from commercial airlines via helicopters to private jets and Aero is in all of those sectors so it is well placed for development.”

If you were to go back five to ten years Aero was one of the dominant carriers across West Africa serving multiple city pairs but its network has been reduced to mainly serving the Nigerian domestic market with Accra, Ghana and Douala, Cameroon its only international destinations. “The opportunities are still there for the carrier,” explained Fraser, “because sadly there have been too many failures in aviation in the region.”

At this early stage in the restructuring it is unclear what involvement the Nigerian Government will take in the overall management of Aero and if they will seek to be involved on a day-to-day basis or leave the management team with a free-hand in the running of the business. But, Fraser is concerned that other issues could derail the project to return Aero to profitability.

“One of the major issues is we are not entirely in control of infrastructure. The costs of using airports within Nigeria and West Africa vary enormously and there are indications that some of them are going to put their prices up dramatically and these cost factors are not within our control,” he said. Although the carrier has “fairly unrestricted access to most of the markets in the area,” Fraser said the fact that some airports in West Africa have very, very high taxes will play a key role in the development of the carrier. “Those charges are a factor that affects the viability of operations in the region,” he said.

Fraser has only been in the position as CEO of Aero for one month but he is already looking at the carrier’s fleet composition as part of the revised business plan. “It is really early days but at the moment I am looking at the ownership of the aircraft, the leases that we have and how expensive it would be to replace our current fleet,” he said. “We own about one third of our aircraft. They are Boeing 737-500s and -400s - past generation aircraft - so we have plans eventually once funding comes through to change and modernize our fleet.”

Alongside the 737s, Aero also operates two Bombardier Dash 8-Q400s and Fraser believes that the carrier should focus at aircraft around the 100-seat configuration to support its new strategy. Although the domestic market remains core to the carrier’s activities, Aero has “ambitions to become a regional carrier” according to Fraser and adding to its current routes to Cameroon and Ghana from Lagos. To serve such routes the market demand is for “smaller aircraft with multiple frequencies,” said Fraser. “To open secondary routes we would ideally need aircraft between 50-seats and 130-seats,” he added.

The Nigerian market is constantly adapting with new entrants and failures and air service management company fastjet recently revealed plans to expand into Nigeria in partnership with start-up carrier Red1 Airways. Does Fraser feel threatened? “No, I never ever fear new entrants,” he said. “It is still early days with fastjet and we will not get a full view of its proposed operational plans until we know what aircraft type it will deploy.” And if the carrier sticks with the model developed in Tanzania it would restrict its operations in Nigeria, said Fraser. “The Airbus A319 is a fairly large aircraft to be profitable on the network within Nigeria and where they could operate would be fairly constrained,” he added.

The revitalised Aero will hope to further stimulate air travel in Nigeria, a market that has tremendous opportunities for development. According to Fraser just three to five per cent of the country’s total population of 135 million passengers (unofficial estimates suggest the population could be as high as 170 million) currently fly and safe and reliable air services can help finally enable more citizens to take to the air in the future.

In our exclusive video interview from Routes Africa, Hugh Fraser, explains how Aero becoming registered under IATA's Operational Safety Audit (IOSA) programme will support its future operational plans.

https://www.facebook.com/RoutesonlineUBM/videos/10201422601629055/