Private sector driven aviation industry myth or ethos


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A view of the roles of players in the aviation industry with special focus on the Nigerian aviation sector.

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Private sector driven aviation industry myth or ethos

  1. 1. Travels | Aviation | Consultancy | TrainingPrivate Sector Driven Aviation Industry: Myth Or Ethos ‘Tayo Orisadare
  2. 2. On A Warm Note Welcome to all participantsThanks to the organisers for this opportunity
  3. 3. In Retrospect• The aviation industry • Then serious decline due enjoyed rapid growth military rule following the boom of • Unfriendly business the ’70s environment• Profit driven • Mal-administration• Growth in the number of • Growing cost operators • Still history is incomplete• Increase in passenger • Why? traffic
  4. 4. Remember this? • Either on her tail? • On your ticket wallet? • On the road? • In your home? • In your heart…
  5. 5. “WT”• Founded in 1958, independent corporation (from WAAC) in 1968• Hq. in Lagos• Fully govt. Owned• About 21 routes• Service halted since 1998, refused entry into UK in 2001
  6. 6. Like Others• Mismanagement• Corruption• High Debt Profile• Legal Suits (Fagbenle Attorneys On Behalf Of 400 NYC Stranded Pax)• Wrong Business Approach And Priorities…
  7. 7. Those Vices• Personalised rewards• Mediocrity rather than professionalism• Dwindling commitment• National cake syndrome• Federal character• Down it went
  8. 8. and so our pride…
  9. 9. became our pain Because it’s ours?
  10. 10. Is Aviation Jinxed? SEARCH YOURSELVES NO!
  11. 11. Financial Services• AFRIBANK• Privatised in 1993• Through share flotation• First bank• Privatised in 1989• Through share flotation
  12. 12. Hospitality• Durbar hotel• Kaduna• Privatised in 1981• Core investor• Deferred public offer
  13. 13. PETROLEUM• African Petroleum• Privatised between 1989-2001• Share flotation• Core investor• UNIPETROL• Privatised between 1989-2001• Share flotation and core investor
  14. 14. Transport• Nigerdock• Privatised in 2001• Core investor• Global energy ltd
  15. 15. A Nigerian Thing? SEARCH YOURSELVES NO!
  16. 16. • Barred from flying into us on 28 July, 2004 due safety reasons • Board was sacked on 13 august, 2004 and ticket• Ghana airways sales stopped• Established, 04 July, 1958 • Replaced with GIA a• Hq in KIA govt-private sector partnership• Started ops 15 July, 1958• Plagued with maintenance problems• Domestic ops stopped in Sept., 1991
  17. 17. Beyond our borders SEARCH YOURSELVES NO!
  18. 18. SwissAir Hunter Strategy • Former national airline • Formed 1931 • Flew for 71 years • “Flying Bank” due financial stability • Swiss national symbol and icon
  19. 19. Hunter Strategy• Heavy expansion in the • High financing and ’90s hence cashflow crisis• Buying small airlines • 9/11 instead of forming • October 2, 2001 entire alliances Swissair fleet was• Acquired 49.5% of grounded Sabena • Two large bridge loans• Bought into Air Liberte, from Swiss fed came to Air Littoral, Volare, Air the rescue Europe, SAA, Tap • March 31, 2002 Crossair Portugal etc took over most of their assets
  20. 20. ALAS!• Assets not taken over were liquidated by Kurt Hoss liquidators, Zurich• Cross air was renamed Swiss international airlines.
  21. 21. Their albatross• Directors were predominantly politicians• Conflicts of interest• Hunter strategy• Payment despite insolvency• Federal aid and politicians
  22. 22. The BAA Story!• 1960: MOD controlled all • 1986: Airport Act was commercial aviation passed and the authority• 1965: Airport authority bill dissolved and passed to a introduced by the then new coy called baa labour minister (British • 1987: BAA was floated on Airport Authority was the Stock Exchange with established) for flexibility capitalisation of £1,225m and profit reflecting profitability• 1966: BAA assumes • BAA acquired ownership and responsibility Southampton Airport for Heathrow, Gatwick, • Sold Prestwick in 1992 and Stanstead and Prestwick won 15-year retail and Airports catering contract for• By 1971-5 BAA acquired Pittsburgh Airport, USA Edinburgh, Aberdeen and • 1994: won ten year contract Glasgow airports to manage Indianapolis airport, USA
  23. 23. BAA…• 1997: Won 10-year contract • 2002: Awarded a ten year to manage Harrisburg contract extension for the airport, USA Airmall at Pittsburgh Airport• 1998: Opened £450m • 2003: invested in UK Heathrow Express Rail Link National Air Traffic Services and a long term lease of provider (NATS) group Launceston Airport as part • 2004: Awarded a ten-year of APAC consortium retail management• 2000: £200m Airport Hotels contract at partnership was set up. Baltimore/Washington Int’l Govt. also announces BAA Airport retainership of London • Acquired Budapest Airport Airports following A and announce 50:50 competition review property joint venture with• 2001: Acquired TBI’s Morley Fund Management investment in Australian Airports : Perth, Darwin…
  24. 24. BAA…• Following all of these achievements• Grupo Ferrovial declared interest in acquiring baa in Feb., 2006• By June 2006, the Ferrovial Consortium receives valid acceptances from 83% of BAA’s issued share and the offer is declared unconditional.• Ferrovial takes control of baa• July, 2006: Stephen Nelson succeeds Mike Clasper as CEO• Aug., 2006: BAA de-lists from the LSE
  25. 25. The Effect In ‘06• UK pax traffic up by 2.0% to 1,44.6m AS AGAINST (141.7m)• Revenue up 7.4% to £2,232M (£2,078m)• Operating profit up 8.1% to £710m (£657m)• UK Airports net retail income grew 4.8% TO £616m (£588m)• Net retail income per passenger rose 2.9% to £4.28 (£4.16)
  26. 26. Go Private? SEARCH YOURSELVES NO!
  27. 27. From Home…• Aero was formed in • Stake increased to 1959 as a subsidiary 60% in 1976 in of Schreiner airways anticipation of B.V, Netherlands Nigerian• Charter ops for oil indigenization companies decree (planning)• 1973, Oteri holdings • Had Schreiner as bought 40% stake Managing Partners
  28. 28. .• Only commenced schedule operations in August 2000 due increasing demands for air transportation• Manageable fleet• Good maintenance facility and records
  29. 29. Evolution
  30. 30. ...and Abroad• Commenced operations on June 22, 1984 with a single leased b747-200 in Gatwick• Became profitable during the first year
  31. 31. VS Contd…• Timed start up to • August 2002, first take advantage of airline to use A340- full summer’s season 600 with Rolls Royce• Sold 49% to Trent 500s Singapore Airlines in • VS carried 3.8m pax december,1999 in 2002 • Increased to 4.5m in 2005
  32. 32. Still VS• VS moved to Heathrow following the abolition of “London air traffic distribution rules of April 1977…. (Govt)• Led to BA’s “DIRTY TRICKS” regime• Relationship with BA improved following the appointment of Rod Eddington as CEO• VS now has a fleet of B747s and A340s with order placed for 06 A380s due to be delivered from 2008
  33. 33. VS Fact Sheet• Founded 22 June, 1984 • Total Pax: Over 50m• 51% virgin group and • Annual pax: 4.6m in 2005 49% Singapore Airlines • Av. Fleet age: 5-7yrs• 27 long haul routes • Virgin Nigeria: 49%• 8900 employees owned by VS• 34 aircrafts• Turnover y/e 2006 £1912m• Profits y/e 2006 £41.6m
  34. 34. Not all gloomy• Diplomatic• Patriotism• Economic (FOREX)• Balance of trade
  35. 35. Is it all bad news? SEARCH YOURSELVES NO!
  36. 36. The SAA Experience• Founded 1934 – Acquired Union Airways• Owned by South African Railways & Harbours Administration (now Transnet)• Headquartered in Airways Park, OR Thambo Int’l• Fleet – 56 + 20 on order• History spanning 78 years
  37. 37. • Many expansion and fleet renewal drives• Apartheid induced sanctions – Longer routes, aircraft /crew lease, office attacks, bans etc.• Post apartheid (1990-96) – flights resume, new routes, codeshares, interline, inflight greetings in destination language, stake in SA Express• Rebranding (1997-2005) – new image, livery, name change, online ticket sales, Voyager04/04/13
  38. 38. The Success Story Tarries• Joined Star Alliance – April, 2006• Talks of restructuring SAA/Transnet – financial• May ‘07, 18month comprehensive restructuring was launched – profitability• Business into seven subsidiaries – target R2.7bn, R2.5bn saved• 30 int’l destinations in 26 countries• Revenue @ R26.4m• Load factor @ 73%04/04/13
  39. 39. Impacts Unfair competition
  40. 40. Forever in our minds
  41. 41. Why Private Sector?• Business is business• Profitability not charity• Performance• Result oriented• Accountability to shareholders• Maximization of limited resources• Professionals not politicians• Corporate interest above personal• Effective monitoring and control
  42. 42. Challenges• Inflation• Financing• High lending rate• Airport obsolete equipments• Corruption• Airport facilities
  43. 43. Role of Govt. • Enabling environment • Policy • Diplomacy (BASA) • Regulatory (NCAA) • Facility (FAAN) • Standards • Arbitrator
  44. 44. The synergy isEXPEDIENT
  45. 45. Our Solution• Private sector to drive the process true and through• Waivers from govt. on aviation related transactions• Better control on financing and lending rate by govt including inflation• Aviation professionals capacity development to fill the impending vacuum• Scholarship by govt. and blue chip companies (oil coys)• Sustained fight of corruption and corrupt practises
  46. 46. >>>• Government intervention in flying schools (NCAT)• Favourable economic and political policies• Organise workshops, symposia and seminars• Step up regulatory activities• Provide effective and efficient airport facilities or concession where necessary
  47. 47. Together; We Can Avoid Loss of life and properties
  48. 48. Thank You