In this interview with FUNMI FABUNMI and LILIAN UKAGWU, Bankole Bernard, group managing director/CEO of Finchglow Holdings and chairman of the airlines and passengers joint committee of the International Air Transport Association, explains why foreign airlines’ funds have been trapped and how the government can fix the problem, Entrepreneurng report.
What do you think about foreign airlines’ stock funds, which IATA recently reported have increased to $743 million?
This is a bad circumstance. I will consider certain things, a misplacement of importance. In business, we are given options. Foreign airlines should use foreign currency instead of local currency if the Bilateral Air Service Agreement (BASA) specifies that they make sales in local currency.
As reputational harm has a significant negative impact and is one of the reasons airlines like Emirates and Etihad Airways have left the market when there may have been more, we should be able to fulfill that commitment. They don’t want their money to get stuck somewhere. As a result, they will move to another lucrative market. If we had been engaging in proper dialogue, this would not have been possible.
If you opt to charge them a premium and claim that you do not have the money to pay them at the official rate, they will be able to sell their tickets for more money and return their money to them. Yet, it would be immoral and dishonest of us as a country if you did not give them dollars at the official rate and they were unable to bring their money home. Also, it hurts our nation’s reputation.
Using common sense is therefore the key to this, yet many people are unwilling to think. I can assure you that the problem of trapped monies will be resolved as quickly as possible and will reach zero now that we have begun to sell tickets at a rate of N551 to a dollar. Currently, the least expensive way to get to London is roughly N1 million.
Every business is subject to the rule of supply and demand. When people feel threatened by the fact that their money cannot be repatriated, they start to reduce inventories to make money.
If supply exceeded demand, the price would crash. There are two methods to sell in the airline industry: either you sell volume or you make yield. When you sell a few but still make money, this is known as yield rather than volume.
Agro-cargo airports are being built by some state governments. Do you believe this can continue
Another priority has been misplaced in this case. An investment project is an agro-cargo airport. When you start a capital project, it is simpler to build your reputation and earn money. As people would be asking them what they did, none of them wants to take over any legacy projects that their predecessors left unfinished.
But, if people set their priorities correctly, nothing is wrong. You cannot reside in a state where agriculture is prioritized and all interstate routes are substandard. You cannot claim that agriculture is vital to you while living in a state where all the schools are made of mushrooms and where teachers’ wages are not paid. The government must set the proper priorities. The idea is exquisite.
What impact has the current cashless rule had on your travel agency’s operations?
I’m eagerly anticipating the statistics that the Nigerian Bureau of Statistics will make public. Whether we like it or not, the economy has tanked, and I’m interested in what they will offer. We can see that the economy is rapidly declining. It felt like everything was grounded, so I wouldn’t be surprised if we lost more than 50%. Even online financial transactions were halted due to the lack of currency, which led the governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, to apologize to Nigerians.
The government did not give us the whole truth about what happened, but I do hope that someone will one day have the guts to come forward and do so. It was on purpose that the money wasn’t made available. The pain won’t be too awful if cash wasn’t working but the financial transfer was successful.
How well do you think the departing administration performed in the aviation sector?
You can always evaluate the performance of the government more easily from the other side of the chair. The Nigerian president has contributed. The Maintenance, Repair, and Overhaul (MRO) facility is what you and I are discussing today, but was it there eight years ago? In the Nigerian College of Aviation Technology (NCAT), Zaria, there have been significant advancements. The college bought a lot of simulators during this time. Also, no commercial airline has been involved in an air crash in the previous eight years.
For us, it is extremely simple to take it for granted. We are speaking of cargo airports around the nation in those same eight years. Let’s not forget that their establishment had approval from someone. The establishment of cargo airports would not be possible if the government did not support the notion.
To prevent a situation where international airlines’ funds are stranded, should tickets be sold in foreign currencies?
What we refer to as aircraft business is a business choice. There is what we refer to as a commercial decision if we have BASA. When circumstances like these arise and you still want to pursue your business objectives in the market, you must make a commercial judgment.
They won’t stop coming, so you won’t have a choice. A corporation like Emirates left because of that. When you look at the ticket’s breakdown, you’ll see that it includes both fees and taxes—even though fees are charged in dollars even though they shouldn’t be. Hence, there are means by which we can accomplish these goals. Simply put, we haven’t adopted the proper mindset.
We should always operate ethically in business. They are valued in dollars because we are straining them to the limit and making it challenging for them to perform. Once more, they are worried that if they leave your country’s boundaries, they might lose their money.
Because the aviation sector is so sensitive, professionalism is one of the things you need to guarantee. When you discuss professionalism and mention scattered mushroom schools, it implies that it will have an impact on the workforce we will have in the sector.
The rest of the world won’t be drawn to our personnel. We must establish a favorable industry where standards are quite high and there are flying schools that are authorized to operate. The Nigerian Civil Aviation Authority inspects these schools, so if they receive a license to operate, they will perform as promised.
Do people worry that additional airlines would leave the country as a result of the problem with trapped funds?
If it persists, they will eventually be forced to withdraw if they can no longer handle the animosity. Hence, the decision is up to you. They will remain if you keep your atmosphere welcoming.
Despite being financially stuck, foreign airlines raised their prices. What effect do you believe this would have on the sector?
They are here to conduct business and earn a profit, not to be charitable. There is what they refer to as the cost of funds when their funds are stuck. Who pays the price? There are two ways that airlines can generate money, so if the funds are locked up and they have to deal in dollars, they must opt for yield rather than volume. Either they prioritize volume or yield.
In conclusion, when their money is trapped and stays trapped, they will switch to a company strategy based on yield rather than volume. Yield denotes that they will offer their goods at a higher price to recoup their costs. If you sold a ticket for N500,000 and managed to sell 10, but if you sold that same ticket for N1,000,000 and managed to sell only five, you were still able to cover your costs. It makes perfect sense. There is no absolute law governing it.
Source: Punch
