Market Analysis: Arik Air Based Research Proposal

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(Dunn, 2009)

Arumemi-Ikhide believes that Arik can succeed due to a combination of the opportunity -- helped by economic and air transport reforms in Nigeria -- and the capability to deliver a high quality product." (Dunn, 2009) Also stated by Arumemi-Ikhide is that this "will be a key in differentiating it in the international market and providing feeder traffic. That will be the lifeline for the international network. That's what sets up apart from our rivals." (Dunn, 2009)

Martin Russell states in the report entitled: "Arik Air: The Future of African Aviation" that both the "internal opinion of African air travel and that of onlookers overseas was bleak before the arrival of Nigeria's newest treasure, Arik Air." (2008) Russell states that the aviation industry is African is "hampered by somewhat less predictable weather and frequent storms" resulting in aviation in African being "far from predictable with temperamental skies that readily unleash the horrors of sheet lightening and torrential rains that would alarm even the most sophisticated of pilots. " (Russell, 2008) The report goes on to state:

"Just in time, as African aviation was almost going backwards in sophistication and progress, that exemplary airline did turn up. On Monday the 30th of October 2006, Arik Air launched commercial operations with their brand new fleet of gleaming Bombardier CRJ-900 aircraft. Arik immediately addressed the issues that were relentlessly obstructing aviation's safety standards on the continent -- the effectiveness of maintenance and aircraft engineering -- and made them a priority, unlike practically all other African airlines (according to the wealth of AIPB reports published in the last few years). (Russell, 2008)

Russell (2008) reports that Arik Airlines struck a deal with Lufthansa, "one of the most prestigious European airlines, Lufthansa, that ensured a sound, experienced body of engineers would be handling Arik's gleaming fleet. A five-year deal was signed with Lufthansa Technik that promised "total technical support" covering two 737-300's, three CRJ-200's and three CRJ-900 aircraft. Lufthansa Technik has also indicated that it intends to continue the existing servicing plan beyond its original five-year commitment."

The growth of Arik Air is stated to have been "...accelerated after the demise and liquidation of Nigeria's previous national carrier, Nigerian Airways. Arik Air took hold of internal operations in Nigeria, and offered high quality, efficient service throughout the nation. On December 4th 2007, Arik Air was even invited to become the national carrier of the Republic of Niger, an offer that was accepted.

Russell (2008) reports that Arik Air's growth has been both "rapid and consistent" and that Arik Airlines has "...proved to be the antidote to the events on May 4th 2002, and although the airline is still very much in its infancy, there are no signs of things slowing down -- in fact they are moving at a startling pace, with recent developments suggesting they are in need of more aircraft to aid their swelling operations"

It is reported that Arik is a prized customer of Boeing and that a delegation, recently and led by the Chairman of Arik Airlines "...flew to Seattle for the purchase of two Boeing 777-200LR, three Boeing 777-300LR, seven Boeing 737-900, and five Boeing 737-800/900 aircraft. Additionally, Arik Air signed for the acquisition of three Boeing 747-800 planes. A significant step for both Arik Air and Boeing, Mr. Scott Carson, CEO of Boeing Commercial Airplanes said, "The future is bright for aviation in Africa and Boeing is proud of its relationship with Arik." (Russell, 2008) Russell states that Arik Air has not only "...provided a high quality, safe and reliable series of far reaching operations across Africa, but it has also achieved great things on the ground for aviation. Arik Air is determined to reach as many destinations within Nigeria as they can, in order to ensure the steady socio-economic growth of Nigeria, and Arik also looks to build the biggest hangar in West Africa with the support of Boeing, Lufthansa Technik, and financial institutions affiliated with the airline, such as Zenith and Intercontinental Bank. These initiatives, combined with Arik's flight training school in Nigeria, have unending benefits for the progress of African aviation. Arik is also trying to upgrade the existing facilities (designed at for classic airliners), and make airports and the aviation infrastructure more hospitable to a new, safer, and more economical way of flying that Arik Air can most certainly pioneer.

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" (Russell, 2008)

IV. Infrastructure and Associated Challenges Identified

There are presently 22 airports in Nigeria with paved runways and of these four are international airports. These airports are operated by the Federal Government through its regulatory body, the Federal Airports Authority of Nigeria. There are infrastructure challenges to the Nigerian airlines however it is reported that the Nigerian government is committed to bring about an improvement in the aviation infrastructure which is in a poor state of repair and which has been marked as the greatest challenge to the airlines industry in Nigeria second only to that of the high costs of fuel.

V. Market Statistics

It was reported in March 2009 that Nigerian air traffic has increased approximately 31% "in spite of the economic slowdown." Statistics stated by the Federal Airports Authority of Nigeria (FAAN) include that 10,993,647 passengers passed through Nigerian airports in 2008 as compared to the 2007 total of 8,409,944. It is also reported that domestic passenger traffic for 2008 was 6,754,291 with the total number of international passengers standing at 4,239,356. (TradeInvest Nigeria, 2009) Also stated in the statistics are the following:

(1) Katsina airport received 4,665 passengers during 2008, up 280% from 1,228 in 2007.

(2) Passengers at Jos Airport increased 115% from 22,844 in 2007 to 49,057 in 2008.

(3) Abuja's international terminal received 517,049 passengers in 2008, a 96% increase from 263,953 during 2007.

(4) The domestic wing of Murtala Muhammed Airport, Lagos recorded a 40% increase while the international wing only received 8% more visitors during 2008. According to the statistics 2,794,919 passengers went through the airport on domestic routes in 2008, while 2,2341,778 international passengers passed through. (TradeInvest Nigeria, 2009)

VI. Competition

It was reported in the Nigeria Daily News on the 31st day of August 2009 that the Federal Government in Nigeria "continues to grapple with dwindling revenue, occasioned by the global economic meltdown..." And that Nigeria is "losing about N100 billion in revenue to foreign airlines annually." (Adekola, Nigeria Daily News, 2009) The reports states that the foreign carriers "have been capitalizing on the loopholes created by the negligence of the Ministry of Aviation to gain so much economic power through the many frequencies they enjoy, courtesy of the Bilateral Air Services Agreement (BASA) often granted to them to the disadvantage of the country." (Nigeria Daily News, 2009)

The report states that the airlines "have been found to be contributing heavily to the impoverishment of the country's economy through the yearly capital flight, largely due to the government's policy which has not been protecting the Nigerian carriers against the predatory operations of these foreign carriers." (Adekola, Nigeria Daily News, 2009) One airline chief who asked not to be named in the report stated that the Federal Government has been giving the foreign airlines "undue advantage by granting them more frequencies and multiple entries into the country's prime airports in Kagos, Kano, Abuja and Port Harcourt." (Adekola, Nigeria Daily News, 2009)

The airline chief stated: "This development has robbed us of passengers registered and revenues." (Adekola, Nigeria Daily News, 2009) The report states that the government of Nigeria "...has always hidden behind the excuse that the foreign carriers cannot be denied access to the frequencies based on the agreement it entered with the mega carriers' home countries." (Adekola, Nigeria Daily News, 2009) It is stated that the investigations of the Nigerian Tribune "...confirmed that the British carrier, British Airways, of all the foreign airlines operating in Nigeria, recorded the highest profit of N30,581,805,080, through the tickets sold in the country in 2008." (Adekola, Nigeria Daily News, 2009)

A report of the Central Bank of Nigeria in regards to the tickets sold by foreign airlines in Nigeria which included the three Nigerian carriers Bellview, Arik and Virgin Nigeria -- "...showed that the British Airways took away the lion share, closely followed by Dubai-based carrier, Emirates, with the sale of tickets worth N15,084,214,100." (Nigeria Daily News, 2009) The Dutch carrier, KLM is stated to have "...smiled to its home country with N9,261,354,045 and while Air France went away with N8,986,212,297, the German carrier, Lufthansa, recorded N7,561,417,320 in the same year." (Adekola, Nigeria Daily News, 2009)

Finally it is stated that the CBN report provided confirmation to the belief that "the foreign carriers are milking.....

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