Virgin Nigeria admits competition forced long-haul withdrawal

By Victoria Moores

Virgin Nigeria is attributing its withdrawal from long-haul operations to an influx of foreign carriers which have depressed fares on the Lagos-London market, prompting it instead to expand its short-haul network.

Chief executive Conrad Clifford says the Nigerian Government has handed out a flurry of new fifth- and sixth-freedom rights to Middle Eastern carriers, which have been attracted by the African market during the current downturn.

"They keep handing them out, so what can you do?" he questions. "Western and domestic Africa is still fine, so everyone is piling in on long-haul because the market is still buoyant."

The number of frequencies granted to Middle Eastern carriers has nearly doubled, from 29 in 2007 to 55 in 2008, says Clifford, increasing competition on the key Lagos-London market.

"While we were able to survive on principally the economy market, we found that prices reduced as there was more capacity on the market via intermediary points," he says.

"The only response is more modern aircraft, which would enable us to make a success out of the front end. That's going to take time and, in the interim, we are going to cut our losses."

Clifford says under-capitalised Virgin Nigeria was unable to source its own long-haul aircraft, driving it to serve London Gatwick and Johannesburg with wet-leased Boeing 767s. This further increased its cost base and, while Johannesburg was not as badly affected, he says a single route would have been uneconomical.

Virgin Nigeria will withdraw from long-haul operations on 27 January, handing the aircraft back to the lessor. Clifford says: "You need to work the front end and we can't do that with our existing aircraft. We want new aircraft. We will operate them ourselves."

The Nigerian carrier's return to the long-haul market will depend on new aircraft prices and availability. "It also depends on lie-flat beds. You have to have lie-flat beds," Clifford stresses.

In the interim, Virgin Nigeria will focus on developing its domestic and regional networks, which he refers to as "the engine" of the company. This strategy will support the eventual long-haul relaunch.

"Our projections are that this coming year will be completely profitable, because of the profitability of the short-haul network. It was always long-haul dragging us down."

Last September Virgin Nigeria, which operates five Boeing 737-500s, took delivery of its first Embraer 190. It has another two 190s on order, plus seven Embraer 170s which will start arriving on 1 June. Virgin Nigeria also has options on six more 190s and purchase rights on eight 190/195s.

Clifford labels the 190 as "a superb aircraft" and says the economics are "staggering". He adds that the 170s, configured with seven business and 60 economy seats, will enable Virgin Nigeria to able to offer higher frequencies compared with its 737s, which have 16 business and 100 economy seats.

Virgin Nigeria will use the additional capacity to boost frequencies and add new domestic and regional destinations. "The 170's 67-seat twin-class configuration is perfect for secondary destinations, so we're looking into secondary cities within Nigeria and all major cities in west and central Africa," says Clifford.

He adds that the new routes will be rolled out from mid-year, identifying the planned additions as the Nigerian cities of Enugu, Yola, Maiduguri and Jos, as well as regional links to Sierra Leone's capital, Freetown, and the Gambian capital of Banjul.

Clifford says the airline will decide on whether to firm its Embraer options by mid-next year, depending on financing.

© Reed Business Information 2009