+’My father maltreated me, and that gave me the push to succeed’
Barrister Jimoh Ibrahim, fondly called Araba (a traditional chieftaincy title) or GMD (Group Managing Director) by his employees, is an interesting mogul. Simple and down-to-earth, with an indepth knowledge of many subjects, especially the sectors he has investments, he has the daring-do we appreciate.
46 this year, the Igbotako (Ondo state) born billionaire was ecstatic on Wednesday, May 16,2012,when Air Nigeria prepared for its inaugural Lagos-London flight. By next morning (Thursday, May 17),as the A330-200 plane landed in Gatwick Airport, passengers erupted in cheers and applause. And Jimoh Ibrahim beamed and smiled.
That day, his dream of landing a national carrier in our green and white colours came to pass. And he couldn’t be happier.
Later that night, at Thistle Hotel, Marble Arch, in central London (a few metres from the famous Oxford Street), a dinner to mark the momentous occasion was staged in an ornate hall.
After the dinner, attended by many executives from his group of companies, scores of professionals and journalists, Barrister Jimoh Ibrahim effused his joy at achieving one of his dreams…
When you took over Virgin Nigeria, it was dying, and in debt –and had cancelled their international operations. Now, two years after, Air Nigeria is doing well, back on international operations: what’s the magic?
God first. God has been on our side. And secondly, a lot of efforts was put in place due to the diagnose review. We also had many sleepless nights.
We had about 48 volumes of diagnoses –about what went wrong in Virgin Nigeria. We diagnosed every department. And we now found out what the problem was. We had about 38 of my colleagues who were deployed to carry out the diagnosis report.
There was a clear case of financial distress leading to administrative distress –but not yet affecting the technical side. Administrative distress which led to salaries not being paid. Flight cancellations and delays arising from financial distress which was a real issue because there was no money to fund the operations, and the debt burden was huge. About N60 billion. The assets was also in negative.
The company was insolvent, and it was a very critical moment. I didn’t expect less from Sir Richard Branson: he had to walk out of Virgin Nigeria. Let me reveal to you today, I bought Richard Branson’s shares for $1.
Yes. Because I told him, look you have an insolvent airline. You have no reason to put any value on your shares. There’s no goodwill. The Nigerian shareholders were not the one running the airline. But Branson was in executive position. The Nigerian shareholders were not the ones that took the loans…
When we finished the diagnosis review, we then identified the problems. The problems were not technical, so we didn’t touch engineering. We believed that if we improved on the financial distress, gradually engineering will wake up. So will all the other departments. And it would translate to an infusion that will see the airlines through in its critical moment.
So, what we did was to first restructure the debts. And then use our group’s support for the airline. We used the group’s balance sheet. One of the most difficult things I did in my life was to do an asset-debenture of the group, to be able to survive the financial distress of Air Nigeria. We then had to refinance the loan of UBA, via Afri-Exim.
We got to zero per cent on the loan. But all asset debenture means that all of our assets was at stake. But the interesting thing is that six months down the line, we freed the assets, such that none of our asset was encumbered.
We took away the loan from our balance sheet, and resold it to Bank of Industry. By then the lien had gone down drastically, on a very good term and longer number of years. So that Air Nigeria could fulfill its obligations. We injected capital, and things began to look better.
The other area was human resources. We had discrepancies among the staff. Some staff that were employed with the same qualifications the same day; one collects N120,000, and the other N1.2m. We had issues on our hands. One was working for the salary of another one for 10 years…Morale was down. We had to look into this issue and diagnosed it.
We also discovered that the office of the CEO had too many responsibilities. Virtually all the departments in the airline was duplicated in the CEO’s office. That is, CEO had a marketing person, engineering, technical, legal, internal control, finance –all these departments in his office. When a company is going to die, CEO’s will duplicate offices in his office. These were departments established by structure to make them function. There’s no need for the CEO to duplicate those departments or else the duplication will suppress the departments set out for proper running of the organizations. So, we removed all the duplications from the CEO’s office. We returned the powers to those departments, and strengthened them.
We also went to the area of contracts. We diagnosed contracts. If you wanted to place an advert in newspaper by Air Nigeria, they first go through a consultant, who charged 30 per cent of the value. And when placing it in any newspaper, charges another 20 per cent. There is another 30 per cent cost to the designing of the advert.
We then asked, what are the people in PR department doing? You have people who can design adverts; you give it to someone who takes 30 per cent of the cost of the advert. And they still collect commission from the newspaper. We thought that wasn’t okay.
39 contracts were signed in that area alone. We allowed some of the contracts tenure to expire, and we didn’t renew. There were lots of them in the diagnosis reports. And London School of Economics is already understudying what we did in Air Nigeria. Harvard Business School has requested me to upload the diagnosis reports to them. They are trying to do some case studies.
We didn’t touch engineering, because we thought we should contract it to Lufthansa Tech. That was a brilliant move. We decided to allow Lufthansa Tech to be servicing the planes. They maintain the planes.
The other departments like finance, accounts, legal. We touched all those. In the legal department, we had lots of briefs from lawyers. Some cases had to be settled out of court. Delays, loss of baggage, and all that. We reconciled with the customers. If a customer lost a baggage of $200, and took a lawyer, why should we take a lawyer for N2 million? We called and settled out of court.
We did a lot of these resolutions to clean up the airline, and we finished the review in two years, and moved to the growth strategy which started on May 1.
Let’s quickly go to the inaugural flight on May 16. How did you feel to see yourself coming back and flying Lagos-London route once again?
I granted an interview to one of you years back when we bought the airline, that my desire is to land a Nigerian indigenous plane at the tarmac in Britain and say, Good morning London. That was achieved yesterday. It’s quite interesting…You can imagine, getting the green, white, green 17 years after Nigeria Airways left London, and we are back here.
It is glory to God, and we are quite happy. It is something that I cannot explain. But I was on board, and I had a nice time.
Before you took over Virgin Nigeria, the team that came in said the strategy was to make the airline a regional player. That was why they suspended the international route. But now you seem to prefer to play on the international scene than in the regional.
If you make it regional, it is a zero strategy. How can you make an airline regional when it is not growing locally? That is zero strategy. And it will die.
If you are doing connectivity, which means you are flying Lagos-Sao Tome. These are two different foreign countries. There is foreign jurisdiction. For an airline that is sick, you are taking it through this process, it is bad. It is multiple operations in the body of the airline, and it would die.
Again, when Richard Branson left, he left about seven planes. It came down to four. So, how can you take four aircraft to regional operations, and do domestic flights. Two out of the four planes engines have been grounded for 18 months in local terminal. They were packed in MM2.
So, how do you use two planes? Is it one local, and the other regional?
Secondly, this two is the minimum required to keep your IOC. The moment you lose one, NCAA will ground you, your IOC is lost. That is the certificate that makes you to operate, and it is gone.
When we came in, we had two aircraft. We were at the dangerous line, because if one goes down, (Harold) Demuren will remove your IOC the next day. So, what we did was to take the two planes, fly them to the maintenance hangar, remove the engine quickly and lease two brand new engines and put them. And returned the planes to Lagos, to increase our fleet from two to four. And from four to six –we bought two aircraft immediately to increase to 6. When we got to 6, we were out of Demuren’s problem. That at least, we would not lose our licensee of operation. Because if we continued with the two, then maybe one day one will be affected by bird strike, and that will be the end of our IOC. That will be the end of our investment because Demuren does not compromise safety.
Let’s talk about the opportunities available in the Lagos-London route. Why is it attractive to you?
Lagos-London is so significant because of the ties between Nigeria and Britain.
Then, the number of Nigerians living in UK are about five million. If ten per cent of them will travel in a year, that is 500,000. My aircraft can only ferry 300 passengers. So, that is a good market to develop.
If I have more than 10 per cent in a year (of that population), that is good. That’s how we look at the metrics.
Now, if you have 20 per cent of Nigerians travelling, that is a million passengers. A million people travelling with three airlines, that is not enough. So, you need to provide service that will make you the preferred choice on the route. Now, how do we go about it? We need the best aircraft on the route. So, we brought the A330-200 which is the best. You were in the flight yesterday, there was no turbulence. The aircraft could withstand it. The cabin crew was superb…
That’s how to look at the market. If you bring in any aircraft that is a fuel guzzler, it will finish your revenue in one day. You are back to zero. But this aircraft deployed to the route is appropriate. And we can also feed the route from the West African routes that we operate.
You wet leased the plane from Egypt Air, why the choice of Egypt Air?
You can wet least from anywhere in the world. We had many offers. We picked Egypt Air because of their technical knowhow. Egypt Air has been in business for 30 years. It was 80 years old last year, and with over 120 aircraft. To sustain that for 80 years in Africa should be commended. There are lessons to learn from Egypt Air.
Egypt Air is a privileged member of Star Alliance which has about eight airlines in the world. And Egypt Air is the only one from Africa. They have a good track record in terms of maintenance. In terms of wet lease, we had two options. Take a $90 million loan and buy a brand new aircraft. Or wet least for about $2 or $3 million. And you pay an interest of $2 or $3million on the interest of $90 million you are borrowing from the bank which is actually the cost of your rental.
You can wet lease for five years, and in five years, I throw the aircraft back to the lessor, that I want a brand new plane to lease. If he disagrees, I give him his aircraft. But if you buy, it is your asset, you cannot throw it away. You have to stay with it. And when the aircraft is out of generation, you are in trouble. It is not a good strategy to buy.
After London, where is next? What are your plans?
Paris. We will be inviting you in June, by God’s grace. I hope you will have the time to fly with us between Lagos-Rome-Paris.
How about the South African route?
It will start on June 17. We will go to Johannesburg. Then fly three days every week…Lagos-Rome-Paris is four times a week. But we have seven times approval, so we do that to consolidate our operations –and we go daily within a month.
What will you describe as Air Nigeria’s competitive advantage over the other airlines?
The type of aircraft we use, A330-200. Fantastic airplane. You cannot compare it to 777 or 767, A340. Those are heavy, and real fuel guzzlers.
Now, A330-200 is fuel efficient, customer-friendly, very roomy (even in the economy). Then, the service on board. We brought in Harrods. The cup you use is Harrods, the tea, the toiletries. Everything is from Harrods. The service is qualitative.
The ground staff operation in London is contracted to professionals in England. The one in Lagos will be handled by our staff (who have experience in the last ten years).
The Rome-Paris leg will also be contracted to professionals.
What will you describe as the opportunities in the future on these routes –Lagos-London, Rome, Paris and Johannesburg?
That’s a very good one for Nigeria. Why we were excited –yesterday, you say British Airways, Air France, and now you saw Air Nigeria. Go to Jo’burg, you see the same thing. That says a lot about Nigeria.
Now, if you deploy your aircraft there, it is image carrier, apart from the revenue. It helps to build the image of our country.
Like I said, in two years, I will return the airline to Nigerians, put it to the public, sell our group’s shares, keep reasonable percentage and allow shareholders. So, that all of us can hold it.
At AGM you can ask questions. The fact that I have majority shares does not mean I am not accountable to the minority. We want that to happen so that the airline will belong to all of us.
Why did you decide to retire in five years’ time? A long time ago you said you’d retire at 45…
I said I was going to retire at 45, which was when we bought Air Nigeria. So, for national interest I stayed on. If we didn’t invest in Air Nigeria, what would I be doing if I’d retired?
We set up the Energy Bank before I was 45. Energy Bank is doing well in Ghana. It is doing about $300 million in balance sheet today. It has five branches, and going to 10 this year. The total number of branches we want in Ghana are about 20. We are looking at about $700 million dollars next year. For a single bank. Last year they made a profit of $5 million. This year, it is projected to be about $15 million. They grow on profit.
NICON is doing very well. About N57 billion in assets. The hotel is fine.
So, I could retire in five years. Put the company on the market, and have my peace.
What will you be doing when you retire?
Go to the university to lecture. I will be in Igbotako (Ondo). I am actually building my retirement home in Igbotako right now. We are also building the only university in Sao Tome. These two projects are the key things in my heart. And then Air Nigeria. After that, I should be able to retire.
I will be in the university lecturing, and in Igbotako resting.
A lot of people describe aviation as very challenging, that it is a difficult business with not a lot of money (profit)?
It’s not every business that has profit. You are in the media, is the media profitable? The risk you take, people run after you, threaten your life, your children’s. Even the soft sell, how long have you been in it? Before you can make it to this level.
If you were in a bank, you would have reached this level long ago. You are doing it because of the passion, because you have interest in it. Not because you want to make all the billions in the world. But it would translate to the billions in time.
It is challenging, and I love challenges. So, when two of us meet, it is cool. The way we stand is not about profit, I am doing Air Nigeria because of the interest of our nation.
How has Air Nigeria leveraged in being part of the group?
Now, the group is helping Air Nigeria. What we do is focus on any company in our group that is weak, we focus our resources and energy on it.
For instance, the Energy Bank in Sao Tome is granting Air Nigeria $20m for the international operations. The one in Ghana wants to do $10m. That’s about $30m. If you lease the plane, $30m is adequate.
Within the group, which of the companies do you find most challenging?
Challenging? All of them are very challenging, I must tell you the truth. Is it the media that is not challenging?
Which of them is closest to your heart?
Everyone. Sometimes, the company may not be close to your heart, but the MD is.
For instance, in National Mirror, I have never seen their account since they started. I don’t know their bank, I’ve never seen their money. But it is difficult for me to ask, because of the MD (Steve Ayorinde). I can’t ask him any questions when it comes to finance. We are in second year of operations, I’ve never asked him once…
Sometimes the MD is close to your heart, you see him like a brother, you can’t ask questions.
Jegede in Nicon Insurance single-handedly paid N1 billion in pension without approval from me. We believe he won’t do anything funny.
Some of the MDs are already part of us…
And I don’t really need much money to live. My needs are not that very expensive. And I think I have some already. I am not a burden to any MD. I wouldn’t call you to say bring me money. But the sister company can call. If there’s need to buy newsprint, he can borrow money from Energy Bank –and return. The MDs can meet and discuss. An MD that needs $1 million urgently can call any of the MDs in the group and get it. the GMD needs not know about this.
If it is a big amount of money, I may be involved. In terms of the MD structuring the repayment programme so that he won’t pull us down.
Air Nigeria today needs a lot of fund. When I know that I don’t want only our bank doing it, I came in with my personal funds. I injected through international operations $20 million, so if they get another $30, $40m added to it, that’s about $50, $60m…They should be able to operate with about five, six aircraft. So, why should there be any problem?
Look at Kinfe (Kassahye), he’s from Ethiopia, and he’s the MD of Air Nigeria. So, is he going to steal? Look at our MD in Nigeria Re, she (Mrs.Chioma Chukwuma) has been there for 32 years. She has been in that company for 32 years. So, what is she going to steal? It is now becoming more interesting, as a group with family relationships. If we know an MD is weak in certain areas, we assist him. We make provisions for them.
Our MD in Mirror lives in Magodo, I’ve offered him a house in Falomo to move in. If I’m not comfortable with that, he moves to VGC. For security of his life. He should be able to enjoy himself.
The other time, I saw him with a car from Punch, and he used the car for about a year. One day we called him and gave him a Prado jeep. That doesn’t mean he won’t get another one next year.
If I have five, six cars, I should be able to give him one. He’s working for the Group.
A young man from Igbotako, did you believe you will get this far?
Yes, I did. Because I was very, very ambitious. I was a very ambitious child. I remember I told my teacher several times that if I get a degree, and it didn’t bring money, I will tear it. I was very ambitious, I wanted to make it in life because I came from a very poverty-ridden establishment. My father had seven wives with about 45 children. My mother had a very bad time. I was badly maltreated. Every other child was in boarding house, I was left behind. I was a day student. I would leave school and go to the farm. From there, I would go and fetch blocks from the site. My step brothers were in the boarding house enjoying themselves. I took garri to them in the boarding school. It was draconian treatment.
I vowed that I would break that cycle of poverty. I was very insistent that I would make it in life. I won’t steal.
I remember Ijalaye who told me in the university when I was graduating –if you find something legal, pursue with your life. If it is illegal, don’t do it. And that was what I did.
If I’m standing on my right and you challenge me, I will destroy you ,no matter who you may be. I will do everything till I die to fight you to finish. If it is illegal, I won’t go there because I know nobody will support me.
That has guided me.
*This story was first published in ENCOMIUM Weekly on Tuesday, May 29, 2012