The Need to Establish a State Owned Airline

1. The Need to establish a state owned Airline in Kano State

2. Introduction
Air travel demand is directly connected to the GDP growth of a country. An increase
in GDP tends to increase disposable income which is habitually used for luxurious
goods, including holiday travel. Furthermore, GDP growth may also increase
international business travel to further stimulate economic growth.
With the demand for air travel on the rise across the globe, now is an excellent time
to launch an airline business. However, the success in this industry requires a careful
planning and painstaking execution. Starting from mapping out a well-crafted
strategies, set goals and a robust roadmap for the airline’s future, we have covered
the essential elements like passenger traffic projections, detailed market research,
cost effectiveness and customer experience. Furthermore, various cost drivers such
as aircraft characteristic & utilization, fleet composition, market positioning, route
design, and operational practices amongst others are painstakingly detailed. This
will help to avoid the usual mistakes made by previous start-up cases that evolved,
operated and later collapsed. Starting an airline is one step but to make it successful
is another kettle of fish. We understand more often than not that plans and reality
do not match, therefore, we have carried out a detailed market study of the
Nigerian aviation ecosystem.

3. The Benefits of using Kano as a Regional Hub
From time immemorial, there has never been a direct flight from a commercial city
like Kano that deserves the status of an economic hub of the northern Nigeria to
any of these regional countries like Ghana, Cameroon, Benin Republic, Ivory Coast,
Mali and the rest West African countries. In a similar vein, it will not be possible to
access flights from any of these countries directly to Kano. Everyone who travels by
plane from Kano to and fro any of these countries will have to stopover in Lagos
and connect to another flight to their desired destination. The definition of a
“stopover” is to leave the plane on which you have been travelling with at an
international airport after covering some distance in order to board another plane
that will take you on to your final destination. Frequent flyers will have to run
through terminal buildings in the hope of catching their connecting flight, they are
also those who have been distracted and are rushing to reach their departure gate
before boarding closes. Then there is the other extreme; those passengers forced
to wait around for hours because their connecting flight is delayed. The need to
make transfer of passengers into another aircraft or bring in other passengers to
join the departing aircraft from Lagos also imposes additional uncertainty, time and
inconveniency cost on travelers, such as an improved probability of lost luggage

4. and the need to make a second set of connections. Furthermore, when multiple
connections are involved, there is always some chance that the first flight might get
delayed and arrive late, possibly causing the traveler to miss the second,
connecting flight. Knowing I need to catch a connecting flight always seems to add
additional stress to the first flight. The biggest disadvantage is the huge financial
burden on the traveler. A trip from Kano to any of these countries would have taken
a shorter travel time if it was a direct flight than stopping over in Lagos and as a
result of this compulsory longer route, the ticket cost for Kano passengers gets
doubled.
Furthermore, with a nonstop flight, once it takes off, the next stop is the final
destination. Also, knowing that the checked in bags won’t have to make a
connection with less handling involved also gives additional peace of mind.
Nonstop flights will help airline operators to save huge running cost in carrying out
daily routine maintenance checks. There is reduction in staff strength since the
maintenance crew will be stationed in just two locations (Departure airport & the
Landing airport). On the contrary, stop over flights or indirect flights result in
corresponding increase in running cost since every aircraft must undergo routine
checks by the maintenance crew before any take-off. As a consequence,

5. maintenance engineers must be stationed in all the stop over airports to carry out
these routine checks.
However, without a connection, there is no waiting around for the intermediate
flight to board making the overall trip duration less. The nonstop flight is shorter,
since it goes directly from the origin airport to the destination airport, without any
intermediate stops or any connections between the two cities; it is generally the
shortest path. By flying the shortest flight distance, that typically also means the
shortest flight time leading to fuel economy. For a trip from Kano to Ghana, 2 hours
will be spent in the air alone (flight time from Kano to Lagos+ flight time from Lagos
to Ghana) in addition to the additional delay in transferring passengers and
luggage’s from one aircraft to another coupled with additional delay in security
checks. Alternatively, a nonstop from Kano to Accra will take just one hour, saving
over 50 percent fuel cost. Interestingly, aviation fuel gulps up over 65% percent of
the running cost of airlines.
In conclusion, creating a direct route from Kano to all these regions will yield lots
of financial benefits to the airline and also ease the burdens of travelers. Tens of
thousands of passengers are airlifted from Kano to these regions on quarterly bases
and they are made to go through lots of herculean tasks transiting through Lagos.

6. The local airline operators are forced to navigate this triangular path because
they are using big jets (Boeing 737, 747, A320 etc.), in other to save cost of
operation, they have to use Lagos as their hub so as to airlift passengers coming
from other states. Passengers are receiving the detrimental consequences of these
operational delays. To correct this anomaly, the Bombardier CRJ200 (a 50 seated
capacity jet) is just the right-sized aircraft fitted for nonstop short trips between
Kano and all these regions. It allows the airline to maximize operational efficiency
and profitability by optimizing capacity to demand since it will be carrying full
capacity. It also allows exceptional operating economics and gives customers
unmatched operational flexibility and tremendous cost savings potential for the
operators
The Current Nigerian Aviation Environment
The air transport services in Nigeria have been growing since mid-80 and early 90’s
with deregulation and emergence of domestic airlines. Expectedly, this growth
came as a result of a corresponding increase in Gross Domestic Products (GDP) over
the years. The contribution of air transport in Nigeria is expected to grow by 5%
annually in the next 20 years. The 2023 report from International Air Transport
Association (IATA) stated that the Nigerian air transport industry, including airlines

7. and its supply chain, are estimated to support US $600 million of GDP in Nigeria.
Spending by foreign tourists supports a further US $1.1 billion of the country's GDP,
totaling to US $1.7 billion. In actual fact, in total, 0.4 percent of the country’s GDP
is supported by inputs to the air transport sector and foreign tourists arriving by
air. According to the report from Nigeria Civil Aviation Authority (NCAA), we
currently have twenty (20) airports and many regulated airstrips and heliports and
23 active domestic. Nigeria being Africa's most populous country is an important
destination for over 22 foreign carriers.
History of Airlines in Nigeria
The earliest airline operations in Nigeria dates back to the colonial era, with the
establishment of services by airlines such as Imperial Airways (later British Overseas
Airways Corporation, BOAC) in the 1930s. These services were primarily focused on
connecting Nigeria with its colonial ruler, Britain, and other parts of the British
Empire.
Before gaining independence in 1960, Nigeria saw increased interest in developing
its own airlines to enhance domestic and international connectivity. In 1958, the
Nigerian Airways was established as the national carrier. It played a crucial role in

8. providing air travel services both domestically and internationally. Between1970-
1980s, the Nigerian government’s “Nigeria Air Policy” aimed to promote domestic
airline operations, leading to the emergence of new carriers. Airlines like Okada Air,
Kabo Air, and ADC Airlines began operating domestic routes. By mid-1990s, due to
financial difficulties, the Nigerian government initiated the privatization of Nigeria
Airways. Regrettably, this resulted in its eventual liquidation in 2003 due to
financial and operational challenges.
Between 2000s – 2012s, the Nigerian aviation industry faced various challenges,
including safety concerns, regulatory issues, and infrastructural limitations. Despite
these challenges, airlines like Arik Air, Azman Air, Dana Air and Max Air
etc. continued to expand their operations both domestically and internationally.
Few years later, private airlines such as Air Peace, United Nigerian Airlines, Ibom
Air, Green Africa Airways etc. emerged and have contributed to increased
competition and growth.
The Unreciprocated Bilateral Air Service Agreements in Nigeria
Operating an airline and aircraft does not mean that one can operate any route via
any route they want. For international routes, traffic rights are subject to bilateral

9. air service agreement signed between countries. Traffic rights include frequency,
the size of aircraft and other conditions, therefore, no carrier can operate flights
outside of agreed traffic rights agreed in Bilateral Air Service Agreement (BASA).
Information obtained from the Nigerian Civil Aviation Authority (NCAA) showed
that Bilateral Air Services Agreement (BASA) with different countries in the world
had brought the number to 92. A BASA is an air transport agreement between two
countries and it liberalizes commercial civil aviation services between the
concerned nations by allowing designated airlines to operate commercial flights,
covering transportation of passengers and cargoes. Apart from agreements with
countries outside the continent, Nigeria also has an open skies treaty known as the
Single African Air Transport Market with about 27 other member states of the
African Union as well as other potential signatories.
Currently, 25 foreign airlines operate flights into Nigeria; some daily, from multiple
destinations. While only two Nigerian airlines operates internationally (Air Peace &
Max Air which goes to Saudi Arabia during Hajj operations) and one or two others
that operate on regional routes. Aviation analyst and Chief Executive Officer,

10. Belujane Konsult, Mr Chris Aligbe, said many of the agreements had not been
reciprocated since they were signed.
Aligbe said, “Only one has been opening routes but how many BASAs can one
airline reciprocate? As a matter of fact, we need formidable airlines, at least three
of such because our market is open to foreign and regional airlines to scoop from,
and we can’t respond. The only way we can do that is to have formidable airlines.
Nigerian Market Fleet Analysis
The Nigerian commercial market is mostly operated by Boeing 737, 787 & 777,
Airbus A320, A220, A340 and Embraer 135, 145, 190, 170 &195, Dornier 238,
McDonnell Douglas MD-83 & 82, ATR 72 & 42, Bombardier DHC, and Bombardier
CRJ aircrafts. The terms that we look at while choosing an aircraft are fuel
efficiency, range potential, capacity, fleet commonality and availability in the
market. For the short-haul routes, the narrow body aircrafts such as the Airbus
A220, 320, the Embraer’s, Boeing 737, CRJ 200 fit best while the wild body jets like
Boeing 787 & 777, A350 are capable for the long-haul routes.

11. Aircraft Lease.
Aircrafts are leased because of the advantages in costs and availability. Buying an
aircraft is not just expensive but involves a long waiting period before it arrives
from the manufacturer. When leasing the aircraft, we investigate aircrafts with low
flying hours so that less maintenance and checks will be done compared to buying
an older aircraft. Airlines lease aircraft from other airlines or leasing companies for
two main reasons: to operate aircraft without the financial burden of buying them,
as well as to provide temporary increase in capacity. It can either be wet lease or
dry lease. With dry leases, legal ownership remains with the lessor while the lessee
operates the aircraft using its own crew. Also with dry leases, the lessee is
responsible for ground staff and other workers. Furthermore, the lessee must put
the aircraft on its own air operator certificate. Typically, a dry lease runs two years
or longer. Since the lessee provides the crew, it has complete control of the flying
experience. Sometimes, a regional airline can dry-lease a plane from a major airline.
The regional airline controls flight crews, maintenance, and other operational tasks.
Moreover, the regional may operate the aircraft under the major airline’s name.
The lessee must contend with crew training, maintenance costs, union contracts,
staffing at regional airports.

12. On the other hand, with wet leases, the lessor provides the aircraft and the crew.
Also, the lessor is responsible for insurance, maintenance, and the air operator
certificate. Therefore, the lessor controls operations and the flight experience. The
lessee doesn’t hire, insure, or manage the crew. The risk of wet leases is that
inferior service or an older plane can make passengers unhappy. The lessee is
responsible for fuel, airport fees, taxes, and duties. Typically, wet leases are
common during the peak traffic months, heavy maintenance schedules, or when
initiating new routes. Another advantage of wet leases is that it may allow you to
fly into countries where you are banned from operating.
Generally, aircrafts are leased because of the advantages in costs and availability.
Buying an aircraft is not just expensive but involves a long waiting period before it
arrives from the manufacturer. It takes between 1000 to 3000 man-hours to
manufacture and deliver these aircrafts.
Why it is advisable to lease
This is often the main topic to consider before setting up an airline. It can be a very
difficult choice but in general, it is recommended to lease the aircraft when starting
an airline. Buying it can be a heavy capital investment for a start-up and often chew

13. up the capital intended for operations. Unless the starter has a large sum of money
enough to purchase and support all the operations, it is recommended to lease the
aircraft before buying any. There are reasons listed below: Lease allows the
operator to change type of aircraft if aircraft is found to be not suitable for the
intended operation. Secondly, many airlines at first lease aircrafts, operate them for
a while and when they are satisfied with their optimal suitability and operational
efficiency, they will decide to buy. It is a way to ensure the aircraft they are going to
buy is suitable and profitable under their circumstances. It can be considered as a
trial before purchase. Except for lease rental deposit, lease payments, and
maintenance reserves, the rest of the fund can be dedicated for operation giving
more time for a start-up airline to sustain. For instance, there was a UK based airline
which had gone bankrupt soon after it started its services. It bought two B767-200’s
powered by PW JT9D engines. B767-200 with PW JT9D engines on are well known
for the high cost of maintenance and overhaul. It bought them ‘as is where is’ basis
and engine maintenance cost seem to have not been considered when it made its
decision on buying 2 B767200 powered by PW JT9D engines. Due to the cost of
engine maintenance, only 1 aircraft entered service while the other didn’t enter the
service. Purchasing aircraft sucked up most of its start-up capital which forced it to
cease its operation just over 2 months after it started operation.

14. It is also noteworthy to mention that in the event where there is sufficient capital
to purchase the aircraft and operate then it is recommended not to purchase the
aircraft in the name of the airline. It is recommended to establish a special purpose
vehicle to purchase the aircraft and give it to the airline in the form of a lease. This
is a kind of protective measure. The aircraft as an asset remains with the special
purpose vehicle established by the airline operator even if the airline has gone
underground. The use of special purpose vehicles is a common practice in the
aviation industry and it will help founders to salvage some of their investments. It is
recommended to take proper pre-purchase process such as inspections on the
airframe, engines (including borescope inspection) and valuation from a reputable
firm specialized in aircraft valuation. In addition to this, it is also recommended to
calculate the cost of repair if it is a second-hand aircraft. Many airline operators
bought aircrafts without considering the true cost of acquisition to be fit and in a
ready condition. Purchasing the aircraft based on ‘as is where is’ comes with the
risks. Proper inspections even if it will cost money is paramount since avoiding it
may incur higher costs if there are more things to repair or replace after purchasing
it. Once the purchase is made, making claims will not be possible since a certificate
of technical acceptance has been signed which is a part of the purchase process and
issuing such certificate means one has accepted the conditions of the aircraft in

15. good faith. As such, professional help made up of in-house team of technical experts
must be sought to inspect and advise on the right choice.
Air transport demand forecast in Nigeria
An empirical study of air transport demand forecast in Nigeria was carried out by
three scholars (Nwaogbe, O. R., Monday, A., & Wokili-Yakubu, H.) (2023) from the
Department of Transport and Nautical Science, Nigeria Maritime University,
Okerenkoko, Delta State, Nigeria. The study aimed to estimate the air travel
demand forecast for domestic passengers' travels in Nigeria from 2002- 2016. Data
was sourced from the Central Bank of Nigeria, the National Bureau of Statistics, and
the Federal Airport Authority of Nigeria. The study utilized a multiple regression
model using a Stata-Graphic software solver to analyze the data. From the analysis,
the result showed that there was a significant relationship between the
explanatory variable (passengers) and un-explanatory variables National
Disposable Income, Population, Average Airfare, Gross Domestic Product,
Exchange Rate, Total Expenditure, and Crude oil price with demand for domestic
air travel of passenger. The Hypothesis testing revealed that National Disposable
Income and Airfare had a strong statistically significant relationship with the

16. demand for domestic air travel. More so, a statistically significant relationship
exists between National Disposable Income, Average airfare, and Crude oil price.
Furthermore, a forecast of the number of passengers and average airfare was
carried out using ARIMA (1,0,0) model, which made available the future predicted
values for the number of passenger movements and average airfare for the next
10-12 years to come. Thus, the study recommended that stakeholders in the air
transport sector should work towards improving the capacity and infrastructure to
accommodate the growth of air travel demand for domestic air travel in Nigeria.
Policy implications were made on regulating the sector by having a good pricing
policy to control the air fare for the industry.
In conclusion, this study forecasts the domestic passenger air travel demand in
Nigeria from 2017 to 2028, based on the data from 2002 to 2016. The analysis
shows a statistically significant relationship between the demand and seven
explanatory variables. Three of these variables - National Disposable Income,
Average Airfares, and Crude Oil Price - have a very significant impact on the
demand, according to the hypothesis test. Higher values of these variables lead to
higher demand for domestic air travel in Nigeria. The study recommends that the
aviation industry should upgrade the country’s air transportation infrastructure to
cope with the increasing demand for domestic flights. The study also predicts that

17. a large number of passengers will travel by air transport in the next 12 years. The
study also forecasts that the average flight fare for domestic travel in Nigeria will
be high from 2017 to 2028 due to the sharp increase in crude oil and aviation fuel
prices. The cost of air travel in the country is rising because aviation fuel is imported
rather than refined domestically. The study projects the number of passengers and
the average flight fare for the next 12 years. Based on these projections, the study
advises the government to develop or expand the aviation industry infrastructure
and terminal capabilities to accommodate the growing demand for domestic air
travel in the country. The study urges domestic airline operators to improve their
operations and services to meet the increasing demand for domestic air travel in
the country.

18. Air Traffic Condition across all Nigerian Airports.
At the end of 2021, 15.23 million passengers travelled through Nigeria’s domestic
and international airports. This is according to the latest Air Transportation Data
released by the National Bureau of Statistics (NBS).
According to the report, the number of passengers who travelled through domestic
and international airports in Nigeria in 2020 was 10.48 million. When this is

19. compared with the figure recorded in 2021, the numbers increased by 45.32%. Of
the 15.23 million travelers in 2021, 13.01 million were domestic passengers, while
2.22 million were international passengers. This represents a growth of 43.41% and
57.61%, respectively when compared to the previous year.
Further analysis of the 2021 data shows 6.53 million domestic arrivals, while
departures stood at 6.47 million. International passenger arrivals and departures
stood at 1.11 million and 171.26 thousand, respectively.
A review of the data by airports shows that the domestic wing of the Nnamdi
Azikiwe International Airport, Abuja recorded the highest number of domestic
travellers, 4.76 million passengers. The Murtala Muhammed International Airport,
Lagos came next with 4.09 million passengers. Port Harcourt, Owerri, and Kano
Airports recorded 900,728; 583,464; and 545,739 passengers, respectively.

21. For international travellers, 1.60 million travellers used the Murtala Muhammed
International Airport, Lagos, the highest recorded in the year. The Abuja Airport
followed with 565,062. This shows that both airports accounted for 97.36% of the
total 2.22 million international passengers recorded in 2021.
Port Harcourt, Kano, Enugu, Maiduguri, and Katsina international airports
accounted for just 2.64% of the travellers.
Overall, there was a significant increase in the total number of domestic and
international passengers who passed through Nigerian airports in 2021, showing a

22. gradual pickup of the aviation sector after the coronavirus (COVID-19) hit in 2020
which resulted in travel restrictions globally for the most of 2020.

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48. AIRPORTS Q1 2021 Q2 2021 Q3 2021 Q4 2021 FULL YEAR 2021
ARR DEP ARR DEP ARR DEP ARR DEP ARR DEP
LAGOS 404,939 359,937 433,881
427,43
9 571,425 539,878 673,323 682,890 2,083,568
2
,010,14
4
ABUJA 469,599 462,810 506,374
510,50
7 672,419 658,479 714,818 763,837 2,363,210
2
,395,63
3
PHC 80,225 84,788 94,135 96,071 119,135 118,205 164,365 143,804 457,860 442,868
KANO 56,021 56,660 55,127 54,471 72,713 74,040 90,311 86,406 274,172 271,577
ENUGU 48,283 55,088 60,615 62,808 66,243 66,440 80,714 68,322 255,855 252,658
KADUNA 9,915 88,83 5,203 5,174 10,113 9,856 11,858 12,153 37,089
36
,021
CALABAR 17,162 17,647 20,802 21,111 27,270 27,948 33,211 32,847 98,445
99
,553

49. SOKOTO 12,442 12,670 15,449 15,132 17,142 18,429 23,803 22,444 68,836
68
,675
BENIN 39,241 40,707 43,843 44,959 55,876 57,482 77,543 73,366 216,503 216,514
MAIDUGUR
I 21,892 22,024 20,600 19,777 27,095 25,135 31,999 29,376 101,586
96
,312
JOS 5,840 1,621 6,438 6,391 8,141 8,097 8,021 7,971 28,440
28
,580
OWERRI 63,258 74,634 65,044 69,952 71,236 71,825 90,459 77,056 289,997 293,467
YOLA 17,692 18,517 17,907 18,032 24,709 25,876 27,304 25,662 87,612
88
,087
ILORIN 9,882 6,978 8,194 8,106 22,949 23,241 32,448 33,503 73,473
74
,636
IBADAN 4,983 4,684 5,982 5,823 6,919 7,110 7,893 7,778 25,777
25
,395
MINNA - - - - -

50. DOMESTIC PASSENGER MOVEMENT 2021
-
AKURE 10,029 10,042 11,721 12,648 13,155 14,384 20,751 20,895 55,656
57
,969
KATSINA 2,947 2,844 3,687 3,295 4,331 4,159 4,696 4,354 15,661
14
,652
TOTAL
1,274,35
0
1,247,79
7
1,375,00
2 1,381,696
1,790,87
1
1,750,58
4
2,093,51
7
2,092,66
4
6,533,74
0
6
,472,74
1